Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) for Valero Energy Corporation. Our management evaluated the effectiveness of Valero’s internal control over financial reporting as of December 31, 2024. In its evaluation, management used the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management believes that as of December 31, 2024, 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 68 of this report.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Valero Energy Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Valero Energy Corporation and subsidiaries (the Company) as of December 31, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

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 judgments. 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, 2024, the Company has gross unrecognized tax benefits, excluding related interest and penalties, of $316 million. The Company’s tax positions are subject to examination by local taxing authorities and resolution of such examinations may span multiple years. Due to the complexities inherent in the interpretation of income tax laws in domestic and foreign 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. Complex auditor judgment was required in evaluating the Company’s interpretation of income tax laws and assessing the Company’s determination of the ultimate resolution of its income tax positions.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s income tax process. This included 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 and communications with applicable taxing authorities
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.

/s/ KPMG LLP

We have served as the Company’s auditor since 2004.

San Antonio, Texas

February 26, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Valero Energy Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Valero Energy Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 26, 2025 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the

assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

San Antonio, Texas

February 26, 2025

VALERO ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions of dollars, except par value)


	December 31,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	4,657	$	5,424

Receivables, net	10,708		12,525
Inventories	7,761		7,583
Prepaid expenses and other	611		689
Total current assets	23,737		26,221
Property, plant, and equipment, at cost	52,368		51,668
Accumulated depreciation	(23,054)		(21,459)
Property, plant, and equipment, net	29,314		30,209
Deferred charges and other assets, net	7,092		6,626
Total assets	$	60,143	$	63,056
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	743	$	1,406
Accounts payable	12,092		12,567
Accrued expenses	1,130		1,240
Taxes other than income taxes payable	1,360		1,452
Income taxes payable	170		137
Total current liabilities	15,495		16,802
Debt and finance lease obligations, less current portion	9,720		10,118
Deferred income tax liabilities	5,267		5,349
Other long-term liabilities	2,140		2,263
Commitments and contingencies
Equity:
Valero Energy Corporation stockholders’ equity:
Common stock, $0.01 par value; 1,200,000,000 shares authorized; 673,501,593 and 673,501,593 shares issued	7		7
Additional paid-in capital	6,939		6,901
Treasury stock, at cost; 358,637,890 and 340,199,677 common shares	(28,178)		(25,322)
Retained earnings	47,016		45,630
Accumulated other comprehensive loss	(1,272)		(870)
Total Valero Energy Corporation stockholders’ equity	24,512		26,346
Noncontrolling interests	3,009		2,178
Total equity	27,521		28,524
Total liabilities and equity	$	60,143	$	63,056

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(millions of dollars, except per share amounts)


	Year Ended December 31,
	2024		2023		2022
Revenues (a)	$	129,881	$	144,766	$	176,383
Cost of sales:
Cost of materials and other	116,516		123,087		150,770

Operating expenses (excluding depreciation and amortization expense reflected below)	5,831		6,089		6,389
Depreciation and amortization expense	2,729		2,658		2,428
Total cost of sales	125,076		131,834		159,587
Asset impairment loss	—		—		61
Other operating expenses	44		33		66
General and administrative expenses (excluding depreciation and amortization expense reflected below)	961		998		934
Depreciation and amortization expense	45		43		45
Operating income	3,755		11,858		15,690
Other income, net	499		502		179
Interest and debt expense, net of capitalized interest	(556)		(592)		(562)
Income before income tax expense	3,698		11,768		15,307
Income tax expense	692		2,619		3,428


Net income	3,006		9,149		11,879
Less: Net income attributable to noncontrolling interests	236		314		351
Net income attributable to Valero Energy Corporation stockholders	$	2,770	$	8,835	$	11,528








Earnings per common share	$	8.58	$	24.93	$	29.05
Weighted-average common shares outstanding (in millions)	322		353		395




Earnings per common share – assuming dilution	$	8.58	$	24.92	$	29.04
Weighted-average common shares outstanding – assuming dilution (in millions)	322		353		396
__________________________
Supplemental information:
(a) Includes excise taxes on sales by certain of our foreign operations	$	5,907	$	5,765	$	5,194

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions of dollars)


	Year Ended December 31,
	2024		2023		2022
Net income	$	3,006	$	9,149	$	11,879
Other comprehensive income (loss):
Foreign currency translation adjustment	(546)		433		(613)
Net gain on pension and other postretirement benefits	207		30		335
Net gain (loss) on cash flow hedges	(87)		90		(6)

Other comprehensive income (loss) before income tax expense	(426)		553		(284)
Income tax expense related to items of other comprehensive income (loss)	21		18		70
Other comprehensive income (loss)	(447)		535		(354)
Comprehensive income	2,559		9,684		11,525
Less: Comprehensive income attributable to noncontrolling interests	191		360		348
Comprehensive income attributable to Valero Energy Corporation stockholders	$	2,368	$	9,324	$	11,177

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(millions of dollars, except per share amounts)


	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of December 31, 2021	$	7	$	6,827	$	(15,677)	$	28,281	$	(1,008)	$	18,430	$	1,387	$	19,817
Net income	—		—		—		11,528		—		11,528		351		11,879
Dividends on common stock ($3.92 per share)	—		—		—		(1,562)		—		(1,562)		—		(1,562)
Stock-based compensation expense	—		89		—		—		—		89		—		89
Transactions in connection with stock-based compensation plans	—		(53)		57		—		—		4		—		4
Purchases of common stock for treasury	—		—		(4,577)		—		—		(4,577)		—		(4,577)
Contributions from noncontrolling interests	—		—		—		—		—		—		265		265
Distributions to noncontrolling interests	—		—		—		—		—		—		(93)		(93)

Other comprehensive loss	—		—		—		—		(351)		(351)		(3)		(354)
Balance as of December 31, 2022	7		6,863		(20,197)		38,247		(1,359)		23,561		1,907		25,468
Net income	—		—		—		8,835		—		8,835		314		9,149
Dividends on common stock ($4.08 per share)	—		—		—		(1,452)		—		(1,452)		—		(1,452)
Stock-based compensation expense	—		94		—		—		—		94		—		94
Transactions in connection with stock-based compensation plans	—		(56)		63		—		—		7		—		7
Purchases of common stock for treasury	—		—		(5,188)		—		—		(5,188)		—		(5,188)
Contributions from noncontrolling interests	—		—		—		—		—		—		75		75
Distributions to noncontrolling interests	—		—		—		—		—		—		(164)		(164)

Other comprehensive income	—		—		—		—		489		489		46		535
Balance as of December 31, 2023	7		6,901		(25,322)		45,630		(870)		26,346		2,178		28,524
Net income	—		—		—		2,770		—		2,770		236		3,006
Dividends on common stock ($4.28 per share)	—		—		—		(1,384)		—		(1,384)		—		(1,384)
Stock-based compensation expense	—		89		—		—		—		89		—		89
Transactions in connection with stock-based compensation plans	—		(51)		52		—		—		1		—		1
Purchases of common stock for treasury	—		—		(2,908)		—		—		(2,908)		—		(2,908)
Contributions from noncontrolling interests	—		—		—		—		—		—		90		90
Distributions to noncontrolling interests	—		—		—		—		—		—		(182)		(182)
Conversion of IEnova Revolver debt to equity (see Notes 9 and 12)	—		—		—		—		—		—		732		732

Other comprehensive loss	—		—		—		—		(402)		(402)		(45)		(447)
Balance as of December 31, 2024	$	7	$	6,939	$	(28,178)	$	47,016	$	(1,272)	$	24,512	$	3,009	$	27,521

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)


	Year Ended December 31,
	2024		2023		2022
Cash flows from operating activities:
Net income	$	3,006	$	9,149	$	11,879
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	2,774		2,701		2,473
Gain on early retirement of debt, net	—		(11)		(14)

Asset impairment loss	—		—		61

Deferred income tax expense (benefit)	(87)		103		50
Changes in current assets and current liabilities	795		(2,326)		(1,626)
Changes in deferred charges and credits and other operating activities, net	195		(387)		(249)
Net cash provided by operating activities	6,683		9,229		12,574
Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))	(649)		(665)		(788)
Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)	(250)		(235)		(853)
Other VIEs	(8)		(11)		(40)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(1,079)		(946)		(1,030)
Deferred turnaround and catalyst cost expenditures of DGD	(71)		(59)		(26)



Purchases of available-for-sale (AFS) debt securities	(29)		(276)		(100)
Proceeds from sales and maturities of AFS debt securities	81		314		5
Proceeds from sale of assets	—		—		32
Investments in nonconsolidated joint ventures	—		—		(1)
Other investing activities, net	24		13		(4)
Net cash used in investing activities	(1,981)		(1,865)		(2,805)
Cash flows from financing activities:
Proceeds from debt issuance and borrowings (excluding VIEs)	6,700		1,750		2,239
Proceeds from debt borrowings of VIEs:
DGD	410		550		809
Other VIEs	27		120		105
Repayments of debt and finance lease obligations (excluding VIEs)	(7,086)		(2,125)		(5,067)
Repayments of debt and finance lease obligations of VIEs:
DGD	(686)		(480)		(823)
Other VIEs	(13)		(77)		(73)
Premiums paid on early retirement of debt	—		(5)		(56)
Purchases of common stock for treasury	(2,875)		(5,136)		(4,577)
Payment of excise tax on purchases of common stock for treasury	(49)		—		—
Common stock dividend payments	(1,384)		(1,452)		(1,562)
Contributions from noncontrolling interests	90		75		265
Distributions to noncontrolling interests	(182)		(164)		(93)
Other financing activities, net	(1)		3		(16)
Net cash used in financing activities	(5,049)		(6,941)		(8,849)
Effect of foreign exchange rate changes on cash	(248)		139		(180)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(595)		562		740
Cash and cash equivalents at beginning of year	5,424		4,862		4,122
Cash, cash equivalents, and restricted cash at end of year (a)	$	4,829	$	5,424	$	4,862

(a)Restricted cash is included in prepaid expenses and other in our consolidated balance sheets.

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

The terms “Valero,” “we,” “our,” and “us,” as used in this report, may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole. The term “DGD,” as used in this report, may refer to Diamond Green Diesel Holdings LLC, its wholly owned consolidated subsidiary, or both of them taken as a whole.

We are a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, and we sell our products primarily in the United States (U.S.), Canada, the United Kingdom (U.K.), Ireland, and Latin America. We own 15 petroleum refineries located in the U.S., Canada, and the U.K. with a combined throughput capacity of approximately 3.2 million barrels per day. We are a joint venture member in DGD, which produces low-carbon fuels at two plants located in the Gulf Coast region of the U.S. with a combined production capacity of approximately 1.2 billion gallons per year. We also own 12 ethanol plants located in the Mid-Continent region of the U.S. with a combined production capacity of approximately 1.7 billion gallons per year.

Basis of Presentation

General

These consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (GAAP) and with the rules and regulations of the U.S. Securities and Exchange Commission (SEC).

Significant Accounting Policies

Principles of Consolidation

These financial statements include those of Valero, our wholly owned subsidiaries, and VIEs in which we have a controlling financial interest. The VIEs that we consolidate are described in Note 12. The ownership interests held by others in the VIEs are recorded as noncontrolling interests. Intercompany items and transactions have been eliminated in consolidation. Investments in less than wholly owned entities where we have significant influence are accounted for using the equity method.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Cash Equivalents

Our cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and have a maturity of three months or less when acquired.

Investments in Debt Securities

Investments in debt securities that have stated maturities of three months or less from the date of acquisition are classified as cash equivalents, and those with stated maturities of greater than three months

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

but less than one year are classified as short-term investments, which are reflected in prepaid expenses and other in our balance sheets. Our investments in debt securities are classified as AFS and are subsequently measured and carried at fair value in our balance sheets with changes in fair value reported in other comprehensive income until realized. The cost of a security sold is determined using the first-in, first-out method.

Receivables

Trade receivables are carried at amortized cost, which is the original invoice amount adjusted for cash collections, write-offs, and foreign exchange. We maintain an allowance for credit losses, which is adjusted based on management’s assessment of our customers’ historical collection experience, known or expected credit risks, and industry and economic conditions.

Inventories

The cost of (i) refinery feedstocks and refined petroleum products and blendstocks, (ii) renewable diesel feedstocks (i.e., waste and renewable feedstocks, predominantly animal fats, used cooking oils, vegetable oils, and inedible distillers corn oils (DCOs)) and products, and (iii) ethanol feedstocks and products is determined under the last-in, first-out (LIFO) method using the dollar-value LIFO approach, with any increments valued based on average purchase prices during the year. Our LIFO inventories are carried at the lower of cost or market. The cost of products purchased for resale and the cost of materials and supplies are determined principally under the weighted-average cost method. Our non-LIFO inventories are carried at the lower of cost or net realizable value.

In determining the market value of our inventories, we assume that feedstocks are converted into products, which requires us to make estimates regarding the products expected to be produced from those feedstocks and the conversion costs required to convert those feedstocks into products. We also estimate the usual and customary transportation costs required to move the inventory from our plants to the appropriate points of sale. We then apply an estimated selling price to our inventories. If the aggregate market value of our LIFO inventories or the aggregate net realizable value of our non-LIFO inventories is less than the related aggregate cost, we recognize a loss for the difference in our statements of income. To the extent the aggregate market value of our LIFO inventories subsequently increases, we recognize an increase to the value of our inventories (not to exceed cost) and a gain in our statements of income.

Property, Plant, and Equipment

The cost of property, plant, and equipment (property assets) purchased or constructed, including betterments of property assets, is capitalized. However, the cost of repairs to and normal maintenance of property assets is expensed as incurred. Betterments of property assets are those that extend the useful life, increase the capacity or improve the operating efficiency of the asset, or improve the safety of our operations. The cost of property assets constructed includes interest and certain overhead costs allocable to the construction activities.

Our operations are highly capital intensive. Each of our refineries and plants comprises a large base of property assets, consisting of a series of interconnected, highly integrated and interdependent crude oil and other feedstock processing facilities and supporting infrastructure (Units) and other property assets that support our business. Improvements consist of the addition of new Units and other property assets and betterments of those Units and assets. We plan for these improvements by developing a multi-year capital investment program that is updated and revised based on changing internal and external factors.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Depreciation of crude oil processing and waste and renewable feedstocks processing facilities is recorded on a straight-line basis over the estimated useful lives of these assets primarily using the composite method of depreciation. We maintain a separate composite group of property assets for each of our refineries and our renewable diesel plants. We estimate the useful life of each group based on an evaluation of the property assets comprising the group, and such evaluations consist of, but are not limited to, the physical inspection of the assets to determine their condition, consideration of the manner in which the assets are maintained, assessment of the need to replace assets, and evaluation of the manner in which improvements impact the useful life of the group. The estimated useful lives of our composite groups range primarily from 20 to 30 years.

Under the composite method of depreciation, the cost of an improvement is added to the composite group to which it relates and is depreciated over that group’s estimated useful life. We design improvements to our crude oil processing and waste and renewable feedstocks processing facilities in accordance with engineering specifications, design standards, and practices we believe to be accepted in our industry, and these improvements have design lives consistent with our estimated useful lives. Therefore, we believe the use of the group life to depreciate the cost of improvements made to the group is reasonable because the estimated useful life of each improvement is consistent with that of the group.

Also under the composite method of depreciation, the historical cost of a minor property asset (net of salvage value) that is retired or replaced is charged to accumulated depreciation and no gain or loss is recognized. However, a gain or loss is recognized for a major property asset that is retired, replaced, sold, or for an abnormal disposition of a property asset (primarily involuntary conversions). Gains and losses are reflected in depreciation and amortization expense, unless such amounts are reported separately due to materiality.

Depreciation of our corn processing facilities, administrative buildings, and other assets is recorded on a straight-line basis over the estimated useful lives of the related assets using the component method of depreciation. The estimated useful life of our corn processing facilities is 20 years.

Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the related asset. Finance lease right-of-use assets are amortized as discussed below under “Leases.”

Deferred Charges and Other Assets

“Deferred charges and other assets, net” primarily include the following:

turnaround costs, which are incurred in connection with planned major maintenance activities at our refineries, renewable diesel plants, and ethanol plants, are deferred when incurred and amortized on a straight-line basis over the period of time estimated to lapse until the next turnaround occurs;
fixed-bed catalyst costs, representing the cost of catalyst that is changed out at periodic intervals when the quality of the catalyst has deteriorated beyond its prescribed function, are deferred when incurred and amortized on a straight-line basis over the estimated useful life of the specific catalyst;

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

operating lease right-of-use assets, which are amortized as discussed below under “Leases”;
investments in nonconsolidated joint ventures;
purchased compliance credits, which are described below under “Costs of Renewable and Low-Carbon Fuel Programs”;
goodwill;
intangible assets, which are amortized over their estimated useful lives; and
noncurrent income taxes receivable.

Leases

We evaluate if a contract is or contains a lease at inception of the contract. If we determine that a contract is or contains a lease, we recognize a right-of-use (ROU) asset and lease liability at the commencement date of the lease based on the present value of lease payments over the lease term. The present value of the lease payments is determined by using the implicit rate when readily determinable. If not readily determinable, our centrally managed treasury group provides an incremental borrowing rate based on quoted interest rates obtained from financial institutions. The rate used is for a term similar to the duration of the lease based on information available at the commencement date. Lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise those options.

We recognize ROU assets and lease liabilities for leasing arrangements with terms greater than one year. Except for the marine transportation asset class, we account for lease and nonlease components in a contract as a single lease component for all classes of underlying assets. Our marine transportation contracts include nonlease components, such as maintenance and crew costs. We allocate the consideration in these contracts based on pricing information provided by the third-party broker.

Expense for an operating lease is recognized as a single lease cost on a straight-line basis over the lease term and is reflected in the appropriate income statement line item based on the leased asset’s function. Amortization expense of a finance lease ROU asset is recognized on a straight-line basis over the lesser of the useful life of the leased asset or the lease term. However, if the lessor transfers ownership of the finance lease ROU asset to us at the end of the lease term, the finance lease ROU asset is amortized over the useful life of the leased asset. Amortization expense is reflected in depreciation and amortization expense. Interest expense is incurred based on the carrying value of the lease liability and is reflected in “interest and debt expense, net of capitalized interest.”

Impairment of Assets

Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. A long-lived asset is not deemed recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not deemed recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on discounted estimated net cash flows or other appropriate methods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We evaluate our equity method investments for impairment when there is evidence that we may not be able to recover the carrying amount of our investments or the investee is unable to sustain an earnings capacity that justifies the carrying amount. A loss in the value of an investment that is other than a temporary decline is recognized based on the difference between the estimated current fair value of the investment and its carrying amount.

Goodwill is not amortized, but is tested for impairment annually on October 1st and in interim periods when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill is below its carrying amount. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

Asset Retirement Obligations

We record a liability, which is referred to as an asset retirement obligation, at fair value for the estimated cost to retire a tangible long-lived asset at the time we incur that liability, which is generally when the asset is purchased, constructed, or leased. We record the liability when we have a legal obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the liability can be made. If a reasonable estimate cannot be made at the time the liability is incurred, we record the liability when sufficient information is available to estimate the liability’s fair value.

We have obligations with respect to certain of our assets at our refineries and plants to clean and/or dispose of various component parts of the assets at the time they are retired. However, these component parts can be used for extended and indeterminate periods of time as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain all our assets and continue making improvements to those assets based on technological advances. As a result, we believe that assets at our refineries and plants have indeterminate lives for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we would retire such assets cannot reasonably be estimated at this time. We will recognize a liability at such time when sufficient information exists to estimate a date or range of potential settlement dates that is needed to employ a present value technique to estimate fair value.

Environmental Matters

Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan of action. Amounts recorded for environmental liabilities have not been reduced by possible recoveries from third parties and have not been measured on a discounted basis.

Legal Contingencies

We are subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. We accrue losses associated with legal claims when such losses are probable and reasonably estimable. If we determine that a loss is probable and cannot estimate a specific amount for that loss but can estimate a range of loss, the best estimate within the range is accrued. If no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. Estimates are adjusted as additional

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred.

Foreign Currency Translation

Generally, our foreign subsidiaries use their local currency as their functional currency. Balance sheet amounts are translated into U.S. dollars using exchange rates in effect as of the balance sheet date. Income statement amounts are translated into U.S. dollars using the exchange rates in effect at the time the underlying transactions occur. Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive loss.

Revenue Recognition

Our revenues are primarily generated from contracts with customers. We generate revenue from contracts with customers from the sale of products by our Refining, Renewable Diesel, and Ethanol segments. Revenues are recognized when we satisfy our performance obligation to transfer products to our customers, which typically occurs at a point in time upon shipment or delivery of the products, and for an amount that reflects the transaction price that is allocated to the performance obligation.

The customer is able to direct the use of, and obtain substantially all of the benefits from, the products at the point of shipment or delivery. As a result, we consider control to have transferred upon shipment or delivery because we have a present right to payment at that time, the customer has legal title to the asset, we have transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

Our contracts with customers state the final terms of the sale, including the description, quantity, and price for goods sold. Payment terms for our customers vary by type of customer and method of delivery; however, the payment is typically due in full within two to ten days from the date of invoice. In the normal course of business, we generally do not accept product returns.

The transaction price is the consideration that we expect to be entitled to in exchange for our products. The transaction price for substantially all of our contracts is generally based on commodity market pricing (i.e., variable consideration). As such, this market pricing may be constrained (i.e., not estimable) at the inception of the contract but will be recognized based on the applicable market pricing, which will be known upon transfer of the goods to the customer. Some of our contracts also contain variable consideration in the form of sales incentives to our customers, such as discounts and rebates. For contracts that include variable consideration, we estimate the factors that determine the variable consideration in order to establish the transaction price.

We have elected to exclude from the measurement of the transaction price all taxes assessed by government authorities that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer (e.g., sales tax, use tax, value-added tax, etc.). We continue to include in the transaction price excise taxes that are imposed on certain inventories in our foreign operations. The amount of such taxes is provided in supplemental information in a footnote to the statements of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There are instances where we provide shipping services in relation to the goods sold to our customer. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are included in cost of materials and other. We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities rather than as a promised service, and we have included these activities in cost of materials and other.

We enter into certain purchase and sale arrangements with the same counterparty that are deemed to be made in contemplation of one another. We combine these transactions and present the net effect in cost of materials and other. We also enter into refined petroleum product exchange transactions to fulfill sales contracts with our customers by accessing refined petroleum products in markets where we do not operate our own refineries. These refined petroleum product exchanges are accounted for as exchanges of nonmonetary assets, and no revenues are recorded on these transactions.

Cost Classifications

Cost of materials and other primarily includes the cost of materials that are a component of our products sold. These costs include (i) the direct cost of materials (such as crude oil and other refinery feedstocks, refined petroleum products and blendstocks, renewable diesel feedstocks and products, and ethanol feedstocks and products) that are a component of our products sold; (ii) costs related to the delivery (such as shipping and handling costs) of products sold; (iii) costs related to our obligations to comply with the Renewable and Low-Carbon Fuel Programs defined below under “Costs of Renewable and Low-Carbon Fuel Programs”; (iv) the blender’s tax credit recognized on qualified fuel mixtures; (v) gains and losses on our commodity derivative instruments; and (vi) certain excise taxes.

Operating expenses (excluding depreciation and amortization expense) include costs to operate our refineries (and associated logistics assets), renewable diesel plants, and ethanol plants. These costs primarily include employee-related expenses, energy and utility costs, catalysts and chemical costs, and repair and maintenance expenses.

Depreciation and amortization expense associated with our operations is separately presented in our statements of income as a component of cost of sales and general and administrative expenses and is disclosed by reportable segment in Note 17.

Other operating expenses include costs, if any, incurred by our reportable segments that are not associated with our cost of sales.

Costs of Renewable and Low-Carbon Fuel Programs

We purchase credits to comply with various government and regulatory blending programs, such as the U.S. Environmental Protection Agency’s Renewable Fuel Standard, California Low Carbon Fuel Standard, Canada Clean Fuel Regulations, U.K. Renewable Transport Fuel Obligation, and similar programs in other jurisdictions in which we operate (collectively, the Renewable and Low-Carbon Fuel Programs). We purchase compliance credits (primarily Renewable Identification Numbers (RINs)) to comply with government regulations that require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree that we are unable to blend

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

renewable and low-carbon fuels at the required quotas, we must purchase compliance credits to meet our obligations.

The costs of purchased compliance credits are charged to cost of materials and other when such credits are needed to satisfy our compliance obligations. To the extent we have not purchased enough credits nor entered into fixed-price purchase contracts to satisfy our obligations as of the balance sheet date, we charge cost of materials and other for such deficiency based on the market prices of the credits as of the balance sheet date, and we record a liability for our obligation to purchase those credits. See Note 19 for disclosure of our fair value liability. If the number of purchased credits exceeds our obligation as of the balance sheet date, we record a prepaid asset equal to the amount paid for those excess credits.

Stock-Based Compensation

Compensation expense for our share-based compensation plans is based on the fair value of the awards granted and is recognized on a straight-line basis over the shorter of (i) the requisite service period of each award or (ii) the period from the grant date to the date retirement eligibility is achieved if that date is expected to occur during the vesting period established in the award.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred amounts are measured using enacted tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by unrecognized tax benefits, if such items may be available to offset the unrecognized tax benefit. Income tax effects are released from accumulated other comprehensive loss to retained earnings, when applicable, on an individual item basis as those items are reclassified into income.

We have elected to classify any interest expense and penalties related to the underpayment of income taxes in income tax expense.

We have elected to treat the global intangible low-taxed income (GILTI) tax as a period expense.

Earnings per Common Share

Earnings per common share is computed by dividing net income attributable to Valero stockholders by the weighted-average number of common shares outstanding for the year. Participating securities are included in the computation of basic earnings per share using the two-class method. Earnings per common share – assuming dilution is computed by dividing net income attributable to Valero stockholders by the weighted-average number of common shares outstanding for the year increased by the effect of dilutive securities. Earnings per common share – assuming dilution is also determined using the two-class method, unless the treasury stock method is more dilutive. Potentially dilutive securities are excluded from the computation of earnings per common share – assuming dilution when the effect of including such shares would be antidilutive.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Derivatives and Hedging

All derivative instruments, not designated as normal purchases or sales, are recognized in our balance sheets as either assets or liabilities measured at their fair values with changes in fair value recognized currently in income or in other comprehensive income as appropriate. The cash flow effects of all of our derivative instruments are reflected in operating activities in our statements of cash flows.

Accounting Pronouncements Recently Adopted

ASU 2023-07

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve interim and annual disclosures about a public entity’s reportable segments primarily through improved disclosures about significant segment expenses and other segment related items. We adopted this ASU effective January 1, 2024 and it did not affect our financial position or our results of operations, but did result in additional disclosures.

ASU 2023-09

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve annual income tax disclosures of a public business entity by requiring further disaggregation of information in the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU also includes certain other amendments intended to improve the effectiveness of annual income tax disclosures. We adopted this ASU effective January 1, 2025 and it did not affect our financial position or our results of operations, but will result in additional annual disclosures.

Accounting Pronouncement Not Yet Adopted

ASU 2024-03

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting—Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, to improve interim and annual disclosures about a public business entity’s expenses by requiring more detailed information in the notes to the financial statements about certain expense categories, including purchases of inventory, employee compensation, depreciation, amortization, and selling expenses. We expect to adopt this ASU effective January 1, 2027 and the adoption will not affect our financial position or our results of operations, but will result in additional disclosures.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. UNCERTAINTY

In recent years, the State of California has adopted legislation that has subjected our refining and marketing operations to potential increased operational restrictions and new reporting requirements. Significant legislation that has impacted or could impact our operations includes, but is not limited to, the following:

In September 2022, California adopted Senate Bill No. 1322 (SB 1322), which requires refineries in California to report monthly on the volume and cost of the crude oil they buy, the quantity and price of the wholesale gasoline they sell, and the gross gasoline margin per barrel, among other information. The provisions of SB 1322 were effective January 2023.
In March 2023, California adopted Senate Bill No. 2 (such statute, together with any regulations contemplated or issued thereunder, SBx 1-2), which, among other things, (i) authorized the establishment of a maximum gross gasoline refining margin (max margin) and the imposition of a financial penalty for profits above a max margin, (ii) significantly expanded the reporting obligations under SB 1322 and the Petroleum Industry Information Reporting Act of 1980, which include reporting requirements to the California Energy Commission (CEC) for all participants in the petroleum industry supply chain in California, and (iii) authorized the CEC to regulate the timing and other aspects of refinery turnaround and maintenance activities in certain instances. The provisions of SBx 1-2 became effective June 26, 2023.
In May 2024, the CEC issued resolutions adopting emergency regulations implementing new and expanded refining margin, refinery maintenance, and marine import reporting requirements, all of which became effective in June 2024. It remains uncertain as to what extent any regulations will address the remaining reporting requirements under SBx 1-2.
In October 2024, California adopted Assembly Bill No. 1 (ABx 2-1), which among other things, (i) authorizes the CEC to require that refiners maintain minimum levels of inventories of refined transportation fuels, including any feedstocks and blending components for those fuels, and (ii) provides certain requirements for CEC regulations governing the timing of refinery turnarounds and maintenance under existing SBx 1-2 authority, including that the refiner first make resupply plans or other arrangements to the satisfaction of the CEC’s executive director.

We continue to review and analyze the provisions of SBx 1-2 and related legislation, the possible impacts to our refining and marketing operations, and potential impacts on consumers in California. Any adverse effects on our operations or financial performance in California could indicate that the carrying value of our assets in California is not recoverable, which would result in an impairment loss that could be material. In addition, if the circumstances that trigger an impairment loss result in a reduction in the estimated useful lives of the assets, we may be required to recognize an asset retirement obligation that could be material. Other jurisdictions are contemplating similarly focused legislation or actions.

The ultimate timing and impacts of SBx 1-2 and any other similarly focused legislation or actions are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, legal challenges, and potential changes in law, regulation, or policy, and it is not currently

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

possible to predict the ultimate effects of these matters and developments on our financial position, results of operations, and liquidity. Consequently, we have continued to evaluate strategic alternatives for our operations in California. As a result, we updated our evaluation of potential impairment and determined that there continued to be no impairment as of December 31, 2024. Future developments from our evaluation of strategic alternatives could significantly impact our asset impairment assumptions and result in an impairment loss that could be material.

3. RECEIVABLES

Receivables consisted of the following (in millions):


	December 31,
	2024		2023
Receivables from contracts with customers	$	5,812	$	7,209
Receivables from certain purchase and sale arrangements	3,939		3,857
Receivables before allowance for credit losses	9,751		11,066
Allowance for credit losses	(20)		(28)
Receivables after allowance for credit losses	9,731		11,038
Income taxes receivable	272		409
Other receivables	705		1,078
Receivables, net	$	10,708	$	12,525

4. INVENTORIES

Inventories consisted of the following (in millions):


	December 31,
	2024		2023
Refinery feedstocks	$	2,167	$	2,223
Refined petroleum products and blendstocks	4,016		3,790
Renewable diesel feedstocks and products	872		913
Ethanol feedstocks and products	342		313
Materials and supplies	364		344


Inventories	$	7,761	$	7,583

As of December 31, 2024 and 2023, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by $4.0 billion and $4.4 billion, respectively. Our non-LIFO inventories accounted for $1.3 billion and $1.5 billion of our total inventories as of December 31, 2024 and 2023, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. LEASES

General

We have entered into long-term leasing arrangements for the right to use various classes of underlying assets as follows:

Pipelines, Terminals, and Tanks includes facilities and equipment used in the storage, transportation, production, and sale of our feedstocks and products;
Marine Transportation includes time charters for ocean-going tankers and coastal vessels;
Rail Transportation includes railcars and related storage facilities; and
Other includes machinery, equipment, and various facilities used in our operations; facilities and equipment related to industrial gases and power used in our operations; land and rights-of-way associated with our refineries, plants, and pipelines and other logistics assets, as well as office facilities; and equipment primarily used at our corporate offices, such as printers and copiers.

In addition to fixed lease payments, some arrangements contain provisions for variable lease payments. Certain leases for pipelines, terminals, and tanks provide for variable lease payments based on, among other things, throughput volumes in excess of a base amount. Certain marine transportation leases contain provisions for payments that are contingent on usage. Additionally, if the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered variable lease payments. In all instances, variable lease payments are recognized in the period in which the obligation for those payments is incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Lease Costs and Other Supplemental Information

Our total lease cost comprises costs that are included in our statements of income, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost was as follows (in millions):


	Pipelines, Terminals, and Tanks			Transportation					Other		Total
			Marine			Rail
Year ended December 31, 2024
Finance lease cost:
Amortization of ROU assets	$	247		$	—		$	3	$	33	$	283
Interest on lease liabilities	107			—			—		9		116
Operating lease cost	167			210			89		42		508
Variable lease cost	114			36			—		10		160
Short-term lease cost	27			196			3		134		360
Sublease income	—			(33)			—		(2)		(35)
Total lease cost	$	662		$	409		$	95	$	226	$	1,392

Year ended December 31, 2023
Finance lease cost:
Amortization of ROU assets	$	213		$	—		$	3	$	30	$	246
Interest on lease liabilities	101			—			1		5		107
Operating lease cost	166			127			80		45		418
Variable lease cost	114			61			—		8		183
Short-term lease cost	18			125			2		112		257
Sublease income	—			(29)			—		(2)		(31)
Total lease cost	$	612		$	284		$	86	$	198	$	1,180

Year ended December 31, 2022
Finance lease cost:
Amortization of ROU assets	$	183		$	—		$	3	$	32	$	218
Interest on lease liabilities	78			—			1		5		84
Operating lease cost	171			102			68		38		379
Variable lease cost	79			50			—		9		138
Short-term lease cost	15			82			3		57		157
Sublease income	—			(27)			—		(2)		(29)
Total lease cost	$	526		$	207		$	75	$	139	$	947

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):


	December 31, 2024						December 31, 2023
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net	$	—		$	2,218		$	—		$	2,195
Deferred charges and other assets, net	1,098			—			1,136			—
Total ROU assets, net	$	1,098		$	2,218		$	1,136		$	2,195

Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations	$	—		$	244		$	—		$	209
Accrued expenses	378			—			360			—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion	—			2,134			—			2,097
Other long-term liabilities	699			—			753			—
Total lease liabilities	$	1,077		$	2,378		$	1,113		$	2,306

Other supplemental information
Weighted-average remaining lease term	6.2 years			13.2 years			6.9 years			14.3 years
Weighted-average discount rate	5.9		%	4.9		%	5.7		%	4.8		%

Supplemental cash flow information related to our operating and finance leases is presented in Note 18.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Maturity Analyses

As of December 31, 2024, the remaining minimum lease payments due under our long-term leases were as follows (in millions):


	Operating Leases		Finance Leases
2025	$	417	$	353
2026	288		325
2027	155		294
2028	91		292
2029	60		263
Thereafter	337		1,836
Total undiscounted lease payments	1,348		3,363
Less: Amount associated with discounting	271		985
Total lease liabilities	$	1,077	$	2,378

6. PROPERTY, PLANT, AND EQUIPMENT

Summary by Major Class

Major classes of property, plant, and equipment, including assets held under finance leases, consisted of the following (in millions):


	December 31,
	2024		2023
Land	$	500	$	505
Crude oil processing facilities	34,089		34,043
Transportation and terminaling facilities	6,013		5,978
Waste and renewable feedstocks processing facilities	3,616		3,243
Corn processing facilities	1,058		1,069
Administrative buildings	1,147		1,137
Finance lease ROU assets (see Note 5)	3,348		3,062
Other	1,993		1,942
Construction in progress	604		689
Property, plant, and equipment, at cost	52,368		51,668
Accumulated depreciation	(23,054)		(21,459)
Property, plant, and equipment, net	$	29,314	$	30,209

Depreciation expense for the years ended December 31, 2024, 2023, and 2022 was $1.9 billion, $1.9 billion, and $1.7 billion, respectively.

Asset Impairment

Our ethanol plant located in Lakota, Iowa (Lakota ethanol plant) was previously configured to produce a higher-grade ethanol product, as opposed to fuel-grade ethanol, suitable for hand sanitizer blending or industrial purposes that had a higher market value than fuel-grade ethanol. During 2022, demand for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

higher-grade ethanol declined and had a negative impact on the profitability of the plant. As a result, we tested the recoverability of the carrying value of the Lakota ethanol plant and concluded that it was impaired. Therefore, we reduced the carrying value of the plant to its estimated fair value and recognized an asset impairment loss of $61 million for the year ended December 31, 2022. See Note 19 for disclosure related to the method used to determine fair value. During the third quarter of 2023, the Lakota ethanol plant resumed production of fuel-grade ethanol.

Sale of Ethanol Plant

In June 2022, we sold our ethanol plant in Jefferson, Wisconsin (Jefferson ethanol plant) for $32 million, which resulted in a gain of $23 million that is included in depreciation and amortization expense for the year ended December 31, 2022.

7. DEFERRED CHARGES AND OTHER ASSETS

“Deferred charges and other assets, net” consisted of the following (in millions):


	December 31,
	2024		2023
Deferred turnaround and catalyst costs, net	$	2,689	$	2,382
Operating lease ROU assets, net (see Note 5)	1,098		1,136
Investments in nonconsolidated joint ventures	695		713
Purchased compliance credits	488		612
Goodwill	260		260
Intangible assets, net	151		183
Income taxes receivable	317		56
Other	1,394		1,284
Deferred charges and other assets, net	$	7,092	$	6,626

Amortization expense for deferred turnaround and catalyst costs and intangible assets was $852 million, $821 million, and $745 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The entire balance of goodwill is related to our Refining segment. See Note 17 for information on our reportable segments.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES

Accrued expenses and other long-term liabilities consisted of the following (in millions):


	Accrued Expenses				Other Long-Term Liabilities
	December 31,				December 31,
	2024		2023		2024		2023
Operating lease liabilities (see Note 5)	$	378	$	360	$	699	$	753
Liability for unrecognized tax benefits	—		—		429		238
Defined benefit plan liabilities (see Note 13)	73		55		423		476
Repatriation tax liability (see Note 15) (a)	—		—		—		167
Environmental liabilities	45		23		261		294
Wage and other employee-related liabilities	307		392		102		90
Accrued interest expense	68		83		—		—
Contract liabilities from contracts with customers (see Note 17)	82		40		—		—
Blending program obligations (see Note 19)	78		83		—		—

Other accrued liabilities	99		204		226		245
Accrued expenses and other long-term liabilities	$	1,130	$	1,240	$	2,140	$	2,263

(a)The current portion of repatriation tax liability is included in income taxes payable. As of December 31, 2024 and 2023, the current portion of repatriation tax liability was $167 million and $134 million, respectively.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DEBT AND FINANCE LEASE OBLIGATIONS

Debt, at stated values, and finance lease obligations consisted of the following (in millions):


	Final Maturity		December 31,
		2024			2023
Credit facilities:
Valero Revolver	2027		$	—		$	—
Accounts Receivable Sales Facility	2025		—			—
DGD Revolver	2026		—			250
DGD Loan Agreement	2026		—			—
IEnova Revolver	2028		58			766
Public debt:
Valero Senior Notes
1.200%	2024		—			167
2.850%	2025		251			251
3.65%	2025		189			189
3.400%	2026		426			426
2.150%	2027		564			564
4.350%	2028		591			591
4.000%	2029		439			439
8.75%	2030		200			200
2.800%	2031		462			462
7.5%	2032		729			729
6.625%	2037		1,380			1,380
6.75%	2037		24			24
10.500%	2039		113			113
4.90%	2045		621			621
3.650%	2051		829			829
4.000%	2052		508			508
7.45%	2097		70			70
Valero Energy Partners LP (VLP) Senior Notes
4.375%	2026		146			146
4.500%	2028		456			456
Debenture, 7.65%	2026		100			100

Other debt	2024		—			14
Net unamortized debt issuance costs and other			(71)			(77)
Total debt			8,085			9,218
Finance lease obligations (see Note 5)			2,378			2,306
Total debt and finance lease obligations			10,463			11,524
Less: Current portion			743			1,406
Debt and finance lease obligations, less current portion			$	9,720		$	10,118

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Facilities

Valero Revolver

We have a $4 billion revolving credit facility (the Valero Revolver) that matures in November 2027. We have the option to increase the aggregate commitments under the Valero Revolver to $5.5 billion, subject to certain conditions. The Valero Revolver also provides for the issuance of letters of credit of up to $2.4 billion.

Outstanding borrowings under the Valero Revolver bear interest, at our option, at either (i) the Adjusted Term SOFR, a secured overnight financing rate (SOFR) or (ii) the Alternate Base Rate (each of these rates is defined in the Valero Revolver), plus the applicable margins. The Valero Revolver also requires payments for customary fees, including facility fees, letter of credit participation fees, and administrative agent fees. The interest rate and facility fees under the Valero Revolver are subject to adjustment based upon the credit ratings assigned to our senior unsecured debt.

Canadian Revolver

One of our Canadian subsidiaries had a C$150 million committed revolving credit facility (the Canadian Revolver) with a maturity date of November 2023. The Canadian Revolver provided for the issuance of letters of credit. Prior to November 30, 2023, all letters of credit under this facility were canceled and the facility was terminated.

Accounts Receivable Sales Facility

We have an accounts receivable sales facility with a group of third-party entities and financial institutions to sell up to $1.3 billion of eligible trade receivables on a revolving basis. In July 2024, we extended the maturity date of this facility to July 2025. Under this program, one of our marketing subsidiaries (Valero Marketing) sells eligible receivables, without recourse, to another of our subsidiaries (Valero Capital), whereupon the receivables are no longer owned by Valero Marketing. Valero Capital, in turn, sells an undivided percentage ownership interest in the eligible receivables, without recourse, to the third-party entities and financial institutions. To the extent that Valero Capital retains an ownership interest in the receivables it has purchased from Valero Marketing, such interest is included in our financial statements solely as a result of the consolidation of the financial statements of Valero Capital with those of Valero Energy Corporation; the receivables are not available to satisfy the claims of the creditors of Valero Marketing or Valero Energy Corporation.

As of December 31, 2024 and 2023, $2.5 billion and $2.6 billion, respectively, of our accounts receivable composed the designated pool of accounts receivable included in the program. All amounts outstanding under the accounts receivable sales facility are reflected as debt in our balance sheets and proceeds and repayments are reflected as cash flows from financing activities. Outstanding borrowings under the facility bear interest, at either (i) an adjusted daily simple SOFR or (ii) an alternate base rate as allowed under the terms of this facility, plus applicable margins. The interest rates under the program are subject to adjustment based upon the credit ratings assigned to our senior unsecured debt. The program also requires payments for customary fees, including facility fees.

DGD Revolver

DGD, as described in Note 12, has a $400 million unsecured revolving credit facility (the DGD Revolver) with a syndicate of financial institutions that matures in June 2026. DGD has the option to increase the

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

aggregate commitments under the DGD Revolver to $550 million, subject to certain restrictions. The DGD Revolver also provides for the issuance of letters of credit of up to $150 million. The DGD Revolver is only available to fund the operations of DGD, and the creditors of DGD do not have recourse against us.

Outstanding borrowings under the DGD Revolver generally bear interest, at DGD’s option, at (i) an alternate base rate, (ii) an adjusted term SOFR, or (iii) an adjusted daily simple SOFR as allowed under the terms of the agreement for the applicable interest period in effect from time to time, plus the applicable margins. There were no outstanding borrowings under the DGD Revolver as of December 31, 2024. As of December 31, 2023, the variable interest rate was 7.201 percent. The DGD Revolver also requires payments for customary fees, including unused commitment fees, letter of credit fees, and administrative agent fees.

DGD Loan Agreement

DGD has an unsecured revolving loan agreement (the DGD Loan Agreement) with its members (Darling Ingredients Inc. (Darling) and us) with a maturity date of June 2026. Under this agreement, each member has committed $100 million, resulting in aggregate commitments of $200 million. The DGD Loan Agreement is only available to fund the operations of DGD. Any outstanding borrowings under this agreement represent loans made by the noncontrolling member as any transactions between DGD and us under this agreement are eliminated in consolidation.

Outstanding borrowings under the DGD Loan Agreement bear interest at a term SOFR for the applicable interest period in effect from time to time plus the applicable margin.

IEnova Revolver

Central Mexico Terminals, as described in Note 12, has a combined $830 million unsecured revolving credit facility (IEnova Revolver) with IEnova (defined in Note 12), that matures in February 2028. IEnova may terminate this revolver at any time and demand repayment of all outstanding amounts; therefore, all outstanding borrowings are reflected in current portion of debt. The IEnova Revolver is only available to fund the operations of Central Mexico Terminals, and the creditors of Central Mexico Terminals do not have recourse against us.

During the year ended December 31, 2024, IEnova converted $732 million of outstanding borrowings under the IEnova Revolver to additional equity in Central Mexico Terminals, which resulted in an increase in the noncontrolling interest related to IEnova.

Outstanding borrowings under the IEnova Revolver bear interest at a SOFR for the applicable interest period in effect from time to time plus the applicable margin. The interest rate under this revolver is subject to adjustment, with agreement by both parties, based upon changes in market conditions. As of December 31, 2024 and 2023, the variable interest rate was 8.443 percent and 9.245 percent, respectively.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Summary of Credit Facilities

We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (in millions):


				December 31, 2024
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability

Committed facilities:
Valero Revolver	$	4,000	November 2027	$	—	$	2	$	3,998
Accounts receivable sales facility	1,300		July 2025	—		n/a		1,300
Committed facilities of VIEs (b):
DGD Revolver	400		June 2026	—		14		386
DGD Loan Agreement (c)	100		June 2026	—		n/a		100
IEnova Revolver	830		February 2028	58		n/a		772
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		71		n/a

(a)Letters of credit issued as of December 31, 2024 expire at various times in 2025 through 2026.

(b)Creditors of the VIEs do not have recourse against us.

(c)The amounts shown for this facility represent the facility amount available from, and borrowings outstanding to, the noncontrolling member as any transactions between DGD and us under this facility are eliminated in consolidation.

We are charged letter of credit issuance fees under our various uncommitted short-term bank credit facilities. These uncommitted credit facilities have no commitment fees or compensating balance requirements.

Activity under our credit facilities was as follows (in millions):


	Year Ended December 31,
	2024		2023		2022
Borrowings:
Accounts receivable sales facility	$	6,700	$	1,750	$	1,600
DGD Revolver	310		550		759
DGD Loan Agreement	100		—		50
IEnova Revolver	27		120		105
Repayments:
Accounts receivable sales facility	(6,700)		(1,750)		(1,600)
DGD Revolver	(560)		(400)		(759)
DGD Loan Agreement	(100)		(25)		(50)
IEnova Revolver	—		(71)		(67)

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Public Debt

In March 2024, we repaid the $167 million outstanding principal balance of our 1.200 percent Senior Notes that matured on March 15, 2024.

In February 2023, we used cash on hand to purchase and retire a portion of the following notes (in millions):


Debt Purchased and Retired	Principal Amount
6.625% Senior Notes due 2037	$	62
3.650% Senior Notes due 2051	26
4.000% Senior Notes due 2052	45
Various other Valero and VLP Senior Notes	66
Total	$	199

During the year ended December 31, 2022, the following activity occurred:

In November and December 2022, we used cash on hand to purchase and retire a portion of the following notes (in millions):


Debt Purchased and Retired	Principal Amount
2.150% Senior Notes due 2027	$	22
4.500% VLP Senior Notes due 2028	26
2.800% Senior Notes due 2031	28
6.625% Senior Notes due 2037	58
4.90% Senior Notes due 2045	24
3.650% Senior Notes due 2051	95
4.000% Senior Notes due 2052	97
7.45% Senior Notes due 2097	30
Various other Valero Senior Notes	62
Total	$	442

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In September 2022, we used cash on hand to purchase and retire a portion of the following notes in connection with cash tender offers that we publicly announced in August 2022 and completed in September 2022 (in millions):


Debt Purchased and Retired	Principal Amount
3.65% Senior Notes due 2025	$	48
2.850% Senior Notes due 2025	291
4.375% VLP Senior Notes due 2026	62
3.400% Senior Notes due 2026	166
4.350% Senior Notes due 2028	131
4.000% Senior Notes due 2029	552
Total	$	1,250

In June 2022, we reduced our debt through the acquisition of the $300 million of 4.00 percent Gulf Opportunity Zone Revenue Bonds Series 2010 that are due December 1, 2040, but were subject to mandatory tender on June 1, 2022. We have the option to effectuate a remarketing of these bonds.
In February 2022, we issued $650 million of 4.000 percent Senior Notes due June 1, 2052. Proceeds from this debt issuance totaled $639 million before deducting the underwriting discount and other debt issuance costs. The proceeds and cash on hand were used to purchase and retire a portion of the following notes in connection with cash tender offers that we publicly announced and completed in February 2022 (in millions):


Debt Purchased and Retired	Principal Amount
3.65% Senior Notes due 2025	$	72
2.850% Senior Notes due 2025	507
4.375% VLP Senior Notes due 2026	168
3.400% Senior Notes due 2026	653
Total	$	1,400

On February 7, 2025, we issued $650 million of 5.150 percent Senior Notes due February 15, 2030. Proceeds from this debt issuance totaled $649 million before deducting the underwriting discount and other debt issuance costs.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Disclosures

“Interest and debt expense, net of capitalized interest” is comprised as follows (in millions):


	Year Ended December 31,
	2024		2023		2022
Interest and debt expense	$	580	$	611	$	619
Less: Capitalized interest	24		19		57
Interest and debt expense, net of capitalized interest	$	556	$	592	$	562

Our credit facilities and other debt arrangements contain various customary restrictive covenants, including cross-default and cross-acceleration clauses.

Principal maturities for our debt obligations as of December 31, 2024 were as follows (in millions):


2025 (a)	$	499
2026	672
2027	564
2028	1,047
2029	439
Thereafter	4,935
Net unamortized debt issuance costs and other	(71)
Total debt	$	8,085

(a)Maturities for 2025 include the IEnova Revolver.

10. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

We have various purchase obligations under certain crude oil and other feedstock supply arrangements, industrial gas supply arrangements (such as hydrogen supply arrangements), natural gas supply arrangements, and various throughput, transportation, and terminaling agreements. We enter into these contracts to ensure an adequate supply of feedstock and utilities and adequate storage capacity to operate our refineries, renewable diesel plants, and ethanol plants. Substantially all of our purchase obligations are based on market prices or adjustments based on market indices. Certain of these purchase obligations include fixed or minimum volume requirements, while others are based on our usage requirements. None of these obligations is associated with suppliers’ financing arrangements. These purchase obligations are not reflected as liabilities.

Self-Insurance

We are self-insured for certain medical and dental, workers’ compensation, automobile liability, general liability, and other third-party liability claims up to applicable retention limits. Liabilities are accrued for self-insured claims, or when estimated losses exceed coverage limits, and when sufficient information is available to reasonably estimate the amount of the loss. These liabilities are included in accrued expenses and other long-term liabilities.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. EQUITY

Share Activity

Activity in the number of shares of common stock and treasury stock was as follows (in millions):


	Common Stock	Treasury Stock
Balance as of December 31, 2021	673	(264)
Transactions in connection with stock-based compensation plans	—	1
Purchases of common stock for treasury	—	(38)
Balance as of December 31, 2022	673	(301)
Transactions in connection with stock-based compensation plans	—	1
Purchases of common stock for treasury	—	(40)
Balance as of December 31, 2023	673	(340)

Purchases of common stock for treasury	—	(19)
Balance as of December 31, 2024	673	(359)

Preferred Stock

We have 20 million shares of preferred stock authorized with a par value of $0.01 per share. No shares of preferred stock were outstanding as of December 31, 2024 or 2023.

Treasury Stock

We purchase shares of our outstanding common stock as authorized by our board of directors (Board), including under share purchase programs (described in the table below) and with respect to our employee stock-based compensation plans.

Our Board authorized us to purchase shares of our outstanding common stock under various programs with no expiration dates as follows (in millions):


Program Name	Authorization Date	Total Cost Authorized		Completion of Authorized Share Purchases	Remaining Available for Purchase as of December 31, 2024
January 2018 Program	January 23, 2018	$	2,500	Second quarter of 2022	$	—
July 2022 Program	July 7, 2022	2,500		Fourth quarter of 2022	—
October 2022 Program	October 26, 2022	2,500		Second quarter of 2023	—
February 2023 Program	February 23, 2023	2,500		Fourth quarter of 2023	—
September 2023 Program	September 15, 2023	2,500		Third quarter of 2024	—
February 2024 Program	February 22, 2024	2,500		n/a	1,828
September 2024 Program	September 19, 2024	2,500		n/a	2,500

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common Stock Dividends

On January 16, 2025, our Board declared a quarterly cash dividend of $1.13 per common share payable on March 3, 2025 to holders of record at the close of business on January 30, 2025.

Income Tax Effects Related to Components of Other Comprehensive Income (Loss)

The tax effects allocated to each component of other comprehensive income (loss) were as follows (in millions):


	Before-Tax Amount		Tax Expense (Benefit)		Net Amount
Year ended December 31, 2024
Foreign currency translation adjustment	$	(546)	$	(16)	$	(530)
Pension and other postretirement benefits:
Gain (loss) arising during the year related to:
Net actuarial gain	224		51		173


Miscellaneous loss	—		1		(1)
Amounts reclassified into income related to:
Net actuarial gain	(9)		(2)		(7)
Prior service credit	(10)		(3)		(7)
Settlement loss	5		1		4
Effect of exchange rates	(3)		(1)		(2)
Net gain on pension and other postretirement benefits	207		47		160
Derivative instruments designated and qualifying as cash flow hedges:
Net gain arising during the year	30		3		27
Net gain reclassified into income	(117)		(13)		(104)
Net loss on cash flow hedges	(87)		(10)		(77)




Other comprehensive loss	$	(426)	$	21	$	(447)

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Before-Tax Amount		Tax Expense (Benefit)		Net Amount
Year ended December 31, 2023
Foreign currency translation adjustment	$	433	$	—	$	433
Pension and other postretirement benefits:
Gain (loss) arising during the year related to:
Net actuarial gain	77		18		59

Prior service cost	(19)		(4)		(15)
Miscellaneous loss	—		2		(2)
Amounts reclassified into income related to:
Net actuarial gain	(12)		(3)		(9)
Prior service credit	(22)		(5)		(17)
Settlement loss	2		—		2
Effect of exchange rates	4		1		3
Net gain on pension and other postretirement benefits	30		9		21
Derivative instruments designated and qualifying as cash flow hedges:
Net gain arising during the year	82		8		74
Net loss reclassified into income	8		1		7
Net gain on cash flow hedges	90		9		81
Other comprehensive income	$	553	$	18	$	535

Year ended December 31, 2022
Foreign currency translation adjustment	$	(613)	$	(7)	$	(606)
Pension and other postretirement benefits:

Net actuarial gain arising during the year	244		57		187



Amounts reclassified into income related to:
Net actuarial loss	52		12		40
Prior service credit	(22)		(5)		(17)
Settlement loss	61		13		48

Net gain on pension and other postretirement benefits	335		77		258
Derivative instruments designated and qualifying as cash flow hedges:
Net loss arising during the year	(292)		(32)		(260)
Net loss reclassified into income	286		32		254
Net loss on cash flow hedges	(6)		—		(6)
Other comprehensive loss	$	(284)	$	70	$	(354)

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):


	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of December 31, 2021	$	(562)	$	(441)	$	(5)	$	(1,008)
Other comprehensive income (loss) before reclassifications	(606)		187		(114)		(533)
Amounts reclassified from accumulated other comprehensive loss	—		71		111		182

Other comprehensive income (loss)	(606)		258		(3)		(351)
Balance as of December 31, 2022	(1,168)		(183)		(8)		(1,359)
Other comprehensive income before reclassifications	433		42		32		507
Amounts reclassified from accumulated other comprehensive loss	—		(24)		3		(21)
Effect of exchange rates	—		3		—		3
Other comprehensive income	433		21		35		489
Balance as of December 31, 2023	(735)		(162)		27		(870)
Other comprehensive income (loss) before reclassifications	(529)		172		12		(345)
Amounts reclassified from accumulated other comprehensive loss	—		(10)		(45)		(55)
Effect of exchange rates	—		(2)		—		(2)
Other comprehensive income (loss)	(529)		160		(33)		(402)
Balance as of December 31, 2024	$	(1,264)	$	(2)	$	(6)	$	(1,272)

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gains (losses) reclassified out of accumulated other comprehensive loss and into net income were as follows (in millions):


Details about Accumulated Other Comprehensive Loss Components										Affected Line Item in the Statements of Income
	Year Ended December 31,
	2024			2023			2022
Amortization of items related to defined benefit pension plans:
Net actuarial gain (loss)		$	9		$	12		$	(52)	(a) Other income, net
Prior service credit		10			22			22		(a) Other income, net
Settlement loss		(5)			(2)			(61)		(a) Other income, net
		14			32			(91)		Total before tax
		(4)			(8)			20		Tax benefit (expense)
		$	10		$	24		$	(71)	Net of tax

Gains (losses) on cash flow hedges:
Commodity contracts		$	117		$	(8)		$	(286)	Revenues
		117			(8)			(286)		Total before tax
		(13)			1			32		Tax benefit (expense)
		$	104		$	(7)		$	(254)	Net of tax







Total reclassifications for the year		$	114		$	17		$	(325)	Net of tax

(a)These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost, as discussed in Note 13.

12. VARIABLE INTEREST ENTITIES

Consolidated VIEs

In the normal course of business, we have financial interests in certain entities that have been determined to be VIEs. We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary such that we have (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to make this determination, we evaluated our contractual arrangements with the VIE, including arrangements for the use of assets, purchases of products and services, debt, equity, or management of operating activities.

The following discussion summarizes our involvement with the consolidated VIEs:

DGD is a joint venture with a subsidiary of Darling that owns and operates two plants that process waste and renewable feedstocks (predominantly animal fats, used cooking oils, vegetable oils, and inedible DCOs) into renewable diesel, renewable naphtha, and neat sustainable aviation

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

fuel (SAF)5. One plant is located next to our St. Charles Refinery (the DGD St. Charles Plant) and the other plant is located next to our Port Arthur Refinery (the DGD Port Arthur Plant). Our significant agreements with DGD include an operations agreement that outlines our responsibilities as operator of both plants.

As operator, we operate the plants and perform certain day-to-day operating and management functions for DGD as an independent contractor. The operations agreement provides us (as operator) with certain power to direct the activities that most significantly impact DGD’s economic performance. Because this agreement conveys such power to us and is separate from our ownership rights, we determined that DGD was a VIE. For this reason and because we hold a 50 percent ownership interest that provides us with significant economic rights and obligations, we determined that we are the primary beneficiary of DGD. DGD has risk associated with its operations because it generates revenues from external customers.

Central Mexico Terminals is a collective group of three subsidiaries of Infraestructura Energetica Nova, S.A.P.I. de C.V. (IEnova), a Mexican company and indirect subsidiary of Sempra Energy, a U.S. public company. We have terminaling agreements with Central Mexico Terminals that represent variable interests because we have determined them to be finance leases due to our exclusive use of the terminals. Although we do not have an ownership interest in the entities that own each of the three terminals, the finance leases convey to us (i) the power to direct the activities that most significantly impact the economic performance of all three terminals and (ii) the ability to influence the benefits received or the losses incurred by the terminals because of our use of the terminals. As a result, we determined each of the entities was a VIE and that we are the primary beneficiary of each. Substantially all of Central Mexico Terminals’ revenues will be derived from us; therefore, we believe there is limited risk to us associated with revenues from external customers.
We also have financial interests in other entities that have been determined to be VIEs because the entities’ contractual arrangements transfer the power to us to direct the activities that most significantly impact their economic performance or reduce the exposure to operational variability and risk of loss created by the entity that otherwise would be held exclusively by the equity owners. Furthermore, we determined that we are the primary beneficiary of these VIEs because (i) certain contractual arrangements (exclusive of our ownership rights) provide us with the power to direct the activities that most significantly impact the economic performance of these entities and/or (ii) our 50 percent ownership interests provide us with significant economic rights and obligations.

The assets of the consolidated VIEs can only be used to settle their own obligations and the creditors of the consolidated VIEs have no recourse to our other assets. We generally do not provide financial guarantees to the VIEs. Although we have provided credit facilities to some of the VIEs in support of their construction or acquisition activities and working capital requirements, these transactions are

5 DGD produces synthetic paraffinic kerosene (SPK), a renewable blending component, using the Hydrotreated Esters and Fatty Acids (HEFA) process. SPK is also commonly referred to as “neat SAF.” Current aviation regulations allow SPK to be blended up to 50 percent with conventional jet fuel for use in an aircraft. This blend is commonly referred to as “blended SAF” or “SAF.”

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

eliminated in consolidation. Our financial position, results of operations, and cash flows are impacted by the performance of the consolidated VIEs, net of intercompany eliminations, to the extent of our ownership interest in each VIE.

The following table presents summarized balance sheet information for the significant assets and liabilities of the consolidated VIEs, which are included in our balance sheets (in millions):


	DGD		Central Mexico Terminals		Other		Total
December 31, 2024
Assets
Cash and cash equivalents	$	353	$	—	$	21	$	374
Other current assets	976		9		42		1,027
Property, plant, and equipment, net	3,806		647		64		4,517
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	304	$	75	$	4	$	383
Debt and finance lease obligations, less current portion	642		—		—		642




December 31, 2023
Assets
Cash and cash equivalents	$	237	$	—	$	23	$	260
Other current assets	1,520		11		46		1,577
Property, plant, and equipment, net	3,772		665		75		4,512
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	616	$	808	$	19	$	1,443
Debt and finance lease obligations, less current portion	669		—		—		669

Nonconsolidated VIEs

We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. These nonconsolidated VIEs are not material to our financial position or results of operations and are accounted for as equity investments.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. EMPLOYEE BENEFIT PLANS

Defined Benefit Plans

We have defined benefit pension plans, some of which are subject to collective bargaining agreements, that cover most of our employees. These plans provide eligible employees with retirement income based primarily on years of service and compensation during specific periods under final average pay and cash balance formulas. We fund all of our pension plans as required by local regulations. In the U.S., all qualified pension plans are subject to the Employee Retirement Income Security Act’s minimum funding standard. We typically do not fund or fully fund U.S. nonqualified and certain foreign pension plans that are not subject to funding requirements because contributions to these pension plans may be less economic and investment returns may be less attractive than our other investment alternatives.

We also provide health care and life insurance benefits for certain retired employees through our postretirement benefit plans. Most of our employees become eligible for these benefits if, while still working for us, they reach normal retirement age or take early retirement. These plans are unfunded, and retired employees share the cost with us. Individuals who became our employees as a result of an acquisition became eligible for postretirement benefits under our plans as determined by the terms of the relevant acquisition agreement.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in benefit obligation related to all of our defined benefit plans, the changes in fair value of plan assets(a), and the funded status of our defined benefit plans as of and for the years ended below were as follows (in millions):


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2024		2023		2024		2023
Changes in benefit obligation
Benefit obligation as of beginning of year	$	2,618	$	2,413	$	266	$	258
Service cost	112		111		4		4
Interest cost	125		121		13		13

Participant contributions	—		—		24		22
Plan amendments	—		19		—		—


Benefits paid	(186)		(166)		(41)		(42)
Actuarial (gain) loss	(99)		110		(29)		10

Foreign currency exchange rate changes	(4)		10		(2)		1

Benefit obligation as of end of year	$	2,566	$	2,618	$	235	$	266

Changes in plan assets (a)
Fair value of plan assets as of beginning of year	$	2,835	$	2,485	$	—	$	—
Actual return on plan assets	310		399		—		—
Company contributions	76		101		17		20
Participant contributions	—		—		24		22
Benefits paid	(186)		(166)		(41)		(42)

Foreign currency exchange rate changes	(6)		16		—		—

Fair value of plan assets as of end of year	$	3,029	$	2,835	$	—	$	—

Reconciliation of funded status (a)
Fair value of plan assets as of end of year	$	3,029	$	2,835	$	—	$	—
Less: Benefit obligation as of end of year	2,566		2,618		235		266
Funded status as of end of year	$	463	$	217	$	(235)	$	(266)

Accumulated benefit obligation	$	2,423	$	2,450	n/a		n/a

(a)Plan assets include only the assets associated with pension plans subject to legal minimum funding standards. Plan assets associated with U.S. nonqualified pension plans are not included here because they are not protected from our creditors and therefore cannot be reflected as a reduction from our obligations under the pension plans. As a result, the reconciliation of funded status does not reflect the effect of plan assets that exist for all of our defined benefit plans. See Note 19 for the assets associated with certain U.S. nonqualified pension plans.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The actuarial gain for the year ended December 31, 2024 primarily resulted from an increase in the discount rates used to determine our benefit obligations for our pension plans from 5.01 percent in 2023 to 5.72 percent in 2024. The actuarial loss for the year ended December 31, 2023 primarily resulted from a decrease in the discount rates used to determine our benefit obligations for our pension plans from 5.19 percent in 2022 to 5.01 percent in 2023.

The fair value of our plan assets as of December 31, 2024 and 2023 were favorably impacted by the return on plan assets resulting primarily from an improvement in equity market prices during each year.

Amounts recognized in our balance sheets for our pension and other postretirement benefit plans include (in millions):


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2024		2023		2024		2023
Deferred charges and other assets, net	$	724	$	482	$	—	$	—
Accrued expenses	(51)		(32)		(22)		(23)
Other long-term liabilities	(210)		(233)		(213)		(243)
	$	463	$	217	$	(235)	$	(266)

The following table presents information for our pension plans with projected benefit obligations in excess of plan assets (in millions):


	December 31,
	2024		2023
Projected benefit obligation	$	260	$	265
Fair value of plan assets	—		—

The following table presents information for our pension plans with accumulated benefit obligations in excess of plan assets (in millions):


	December 31,
	2024		2023
Accumulated benefit obligation	$	220	$	220
Fair value of plan assets	—		—

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Benefit payments that we expect to pay, including amounts related to expected future services that we expect to receive, are as follows for the years ending December 31 (in millions):


	Pension Benefits		Other Postretirement Benefits
2025	$	224	$	22
2026	228		21
2027	222		20
2028	199		20
2029	189		19
2030-2034	1,112		92

During 2025, we plan to contribute approximately $130 million to our pension plans and $20 million to our other postretirement benefit plans, respectively.

The components of net periodic benefit cost related to our defined benefit plans were as follows (in millions):


	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2024		2023		2022		2024		2023		2022
Service cost	$	112	$	111	$	152	$	4	$	4	$	6
Interest cost	125		121		85		13		13		8
Expected return on plan assets	(214)		(202)		(192)		—		—		—
Amortization of:
Net actuarial (gain) loss	(5)		(6)		52		(4)		(6)		—
Prior service credit	(10)		(18)		(18)		—		(4)		(4)
Settlement loss	5		2		61		—		—		—
Net periodic benefit cost	$	13	$	8	$	140	$	13	$	7	$	10

The components of net periodic benefit cost other than the service cost component (i.e., the non-service cost components) are included in “other income, net.”

Amortization of the net actuarial (gain) loss shown in the preceding table was based on the straight-line amortization of the excess of the unrecognized (gain) loss over 10 percent of the greater of the projected benefit obligation or market-related value of plan assets (smoothed asset value) over the average remaining service period of active employees expected to receive benefits under each respective plan. Amortization of prior service credit shown in the preceding table was based on a straight-line amortization of the credit over the average remaining service period of employees expected to receive benefits under each respective plan.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pre-tax amounts recognized in other comprehensive income (loss) were as follows (in millions):


	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2024		2023		2022		2024		2023		2022
Net gain (loss) arising during the year:
Net actuarial gain (loss)	$	195	$	87	$	158	$	29	$	(10)	$	86
Prior service cost	—		(19)		—		—		—		—

Net (gain) loss reclassified into income:
Net actuarial (gain) loss	(5)		(6)		53		(4)		(6)		(1)
Prior service credit	(10)		(18)		(18)		—		(4)		(4)
Settlement loss	5		2		61		—		—		—
Effect of exchange rates	(2)		4		—		(1)		—		—

Total changes in other comprehensive income (loss)	$	183	$	50	$	254	$	24	$	(20)	$	81

The pre-tax amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost were as follows (in millions):


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2024		2023		2024		2023
Net actuarial (gain) loss	$	62	$	256	$	(96)	$	(73)
Prior service cost	22		11		1		2
Total	$	84	$	267	$	(95)	$	(71)

The weighted-average assumptions used to determine the benefit obligations were as follows:


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2024		2023		2024		2023
Discount rate	5.72	%	5.01	%	5.64	%	5.01	%
Rate of compensation increase	4.04	%	3.83	%	n/a		n/a
Interest crediting rate for cash balance plans	4.25	%	3.59	%	n/a		n/a

The discount rate assumption used to determine the benefit obligations as of December 31, 2024 and 2023 for the majority of our pension plans and other postretirement benefit plans was based on the Aon AA Only Above Median yield curve and considered the timing of the projected cash outflows under our plans. This curve was designed by Aon, our actuarial consultant, to provide a means for plan sponsors to

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value the liabilities of their pension plans or postretirement benefit plans. To develop this curve, a hypothetical double-A yield curve represented by a series of annualized individual discount rates with maturities from six months to 99 years is constructed. Each bond issue underlying the double-A yield curve is required to have an average rating of double-A when averaging all available ratings by Moody’s Investors Service, Standard & Poor’s Ratings Services, and Fitch Ratings. Only the bonds representing the 50 percent highest yielding issuances of this double-A yield curve are then included in the Aon AA Only Above Median yield curve.

We based our discount rate assumption on the Aon AA Only Above Median yield curve because we believe it is representative of the types of bonds we would use to settle our pension and other postretirement benefit plan liabilities as of those dates. We believe that the yields associated with the bonds used to develop this yield curve reflect the current level of interest rates.

The weighted-average assumptions used to determine the net periodic benefit cost were as follows:


	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2024		2023		2022		2024		2023		2022
Discount rate	5.01	%	5.19	%	2.94	%	5.01	%	5.20	%	2.96	%
Expected long-term rate of return on plan assets	7.29	%	7.31	%	6.71	%	n/a		n/a		n/a
Rate of compensation increase	3.84	%	3.76	%	3.70	%	n/a		n/a		n/a
Interest crediting rate for cash balance plans	3.59	%	3.76	%	3.03	%	n/a		n/a		n/a

The assumed health care cost trend rates were as follows:


	December 31,
	2024		2023
Health care cost trend rate assumed for the next year	8.13	%	6.68	%
Rate to which the cost trend rate was assumed to decline (the ultimate trend rate)	4.97	%	4.97	%
Year that the rate reaches the ultimate trend rate	2036		2032

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the fair values of the assets of our pension plans (in millions) as of December 31, 2024 and 2023 by level of the fair value hierarchy. Assets categorized in Level 1 of the hierarchy are measured at fair value using a market approach based on unadjusted quoted prices from national securities exchanges. Assets categorized in Level 2 of the hierarchy are measured at net asset value in a market that is not active or using inputs other than quoted prices that are observable. No assets were categorized in Level 3 of the hierarchy as of December 31, 2024 and 2023. As previously noted, we do not fund or fully fund U.S. nonqualified and certain foreign pension plans that are not subject to funding requirements, and we do not fund our other postretirement benefit plans.


	2024						2023
	Level 1		Level 2		Total		Level 1		Level 2		Total
Equity securities (a)	$	542	$	—	$	542	$	585	$	—	$	585
Mutual funds	233		—		233		223		—		223
Corporate debt instruments	—		261		261		—		251		251
Government securities	81		169		250		86		186		272
Common collective trusts (b)	—		1,337		1,337		—		1,078		1,078
Pooled separate accounts (c)	—		325		325		—		323		323
Private fund	—		—		—		—		46		46
Insurance contract	—		13		13		—		13		13
Interest and dividends receivable	6		—		6		6		—		6
Cash and cash equivalents	64		—		64		48		—		48
Securities transactions payable, net	(2)		—		(2)		(10)		—		(10)
Total pension plan assets	$	924	$	2,105	$	3,029	$	938	$	1,897	$	2,835

(a)This class of securities includes domestic and international securities, which are held in a wide range of industry sectors.

(b)This class primarily includes investments in approximately 70 percent equities and 30 percent bonds as of December 31, 2024. As of December 31, 2023, this class primarily included investments in approximately 80 percent equities and 20 percent bonds.

(c)This class primarily includes investments in approximately 45 percent equities and 55 percent bonds as of December 31, 2024 and 2023.

The investment policies and strategies for the assets of our pension plans incorporate a well-diversified approach that is expected to earn long-term returns from capital appreciation and a growing stream of current income. This approach recognizes that assets are exposed to risk and the market value of the pension plans’ assets may fluctuate from year to year. Risk tolerance is determined based on our financial ability to withstand risk within the investment program and the willingness to accept return volatility. In line with the investment return objective and risk parameters, the pension plans’ mix of assets includes a diversified portfolio of equity and fixed-income investments. Equity securities include international securities and a blend of U.S. growth and value stocks of various sizes of capitalization. Fixed income securities include bonds and notes issued by the U.S. government and its agencies, corporate bonds, and mortgage-backed securities. The aggregate asset allocation is reviewed on an annual basis. As of December 31, 2024, the target allocations for plan assets under our primary pension plan are 65 percent equity securities and 35 percent fixed income investments.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The expected long-term rate of return on plan assets is based on a forward-looking expected asset return model. This model derives an expected rate of return based on the target asset allocation of a plan’s assets. The underlying assumptions regarding expected rates of return for each asset class reflect Aon’s best expectations for these asset classes. The model reflects the positive effect of periodic rebalancing among diversified asset classes. We select an expected asset return that is supported by this model.

Defined Contribution Plans

We have defined contribution plans that cover most of our employees. Our contributions to these plans are based on employees’ compensation and/or a partial match of employee contributions to the plans. Our contributions to these defined contribution plans were $92 million, $87 million, and $83 million for the years ended December 31, 2024, 2023, and 2022, respectively.

14. STOCK-BASED COMPENSATION

Overview

Under our 2020 Omnibus Stock Incentive Plan (the 2020 OSIP), various stock and stock-based awards may be granted to employees, non-employee directors, and third-party service providers. The 2020 OSIP permits grants of (i) restricted stock and restricted stock units; (ii) stock options (including incentive and non-qualified stock options); (iii) stock appreciation rights; (iv) performance awards of cash, stock, or other securities; and (v) other stock-based awards (e.g., stock unit awards). Awards under the 2020 OSIP are granted at the discretion of our Board’s Human Resources and Compensation Committee (and, as applicable, approved by the independent directors) and may be subject to vesting or performance periods, performance goals, or other restrictions. The 2020 OSIP was approved by our stockholders on April 30, 2020, and as of such date, any shares of common stock that were not subject to outstanding awards and were available to be awarded under the 2011 Omnibus Stock Incentive Plan (the 2011 OSIP) became available for issuance under the 2020 OSIP and any shares of common stock subject to awards under the 2011 OSIP outstanding as of April 30, 2020, that are subsequently forfeited, terminated, canceled or rescinded, settled in cash in lieu of common stock, exchanged for awards not involving common stock, or expired unexercised also become available for issuance under the 2020 OSIP. No future awards will be made under the 2011 OSIP. As of December 31, 2024, 11,283,380 shares of our common stock remained available to be awarded under the 2020 OSIP and there were no awards issued under the 2011 OSIP that remained outstanding.

The following table reflects activity related to our stock-based compensation arrangements (in millions):


	Year Ended December 31,
	2024		2023		2022
Stock-based compensation expense:
Restricted stock	$	67	$	69	$	71
Performance awards	33		38		32
Total stock-based compensation expense	$	100	$	107	$	103
Tax benefit recognized on stock-based compensation expense	$	13	$	14	$	15
Tax benefit realized for tax deductions resulting from exercises and vestings	—		2		2

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock

Restricted stock is our most significant stock-based compensation arrangement. Employees, non-employee directors, and third-party service providers are eligible to receive restricted stock, which vests in accordance with individual written agreements between the participants and us, usually in equal annual installments over a period of three years beginning one year after the date of grant. The fair value of each share of restricted stock is equal to the market price of our common stock. A summary of the status of our restricted stock awards is presented in the following table:


	Number of Shares	Weighted- Average Grant-Date Fair Value Per Share
Nonvested shares as of January 1, 2024	902,846	$	112.01
Granted	495,444	131.68
Vested	(594,001)	108.87
Forfeited	(9,069)	111.21
Nonvested shares as of December 31, 2024	795,220	126.63

As of December 31, 2024, there was $52 million of unrecognized compensation cost related to outstanding unvested restricted stock awards, which is expected to be recognized over a weighted-average period of approximately two years.

The following table reflects activity related to our restricted stock:


	Year Ended December 31,
	2024		2023		2022
Weighted-average grant-date fair value per share of restricted stock granted	$	131.68	$	125.57	$	112.88
Fair value of restricted stock vested (in millions)	82		99		99

15. INCOME TAXES

Income Statement Components

Income before income tax expense was as follows (in millions):


	Year Ended December 31,
	2024		2023		2022
U.S. operations	$	2,685	$	9,335	$	11,716
Foreign operations	1,013		2,433		3,591
Income before income tax expense	$	3,698	$	11,768	$	15,307

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Statutory income tax rates applicable to the countries in which we operate were as follows:


	Year Ended December 31,
	2024		2023		2022
U.S.	21	%	21	%	21	%
Canada	15	%	15	%	15	%
U.K. (a)	25	%	25	%	19	%
Ireland	13	%	13	%	13	%
Peru	30	%	30	%	30	%
Mexico	30	%	30	%	30	%

(a)Statutory income tax rate was increased to 25 percent effective April 1, 2023.

The following is a reconciliation of income tax expense computed by applying statutory income tax rates to actual income tax expense (dollars in millions):


	U.S.				Foreign				Total
	Amount		Percent		Amount		Percent		Amount		Percent
Year ended December 31, 2024
Income tax expense at statutory rates	$	564	21.0	%	$	142	14.0	%	$	706	19.1	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	19		0.7	%	101		10.0	%	120		3.2	%
Permanent differences	(83)		(3.1)	%	2		0.2	%	(81)		(2.2)	%
GILTI tax	79		2.9	%	—		—	%	79		2.1	%
Foreign tax credits	(59)		(2.2)	%	—		—	%	(59)		(1.5)	%
Biofuels tax credits (a)	(101)		(3.7)	%	—		—	%	(101)		(2.7)	%
Repatriation withholding tax	57		2.1	%	—		—	%	57		1.5	%


Tax effects of income associated with noncontrolling interests	(50)		(1.8)	%	(6)		(0.6)	%	(56)		(1.5)	%
Valuation allowance	—		—	%	57		5.6	%	57		1.5	%
Other, net	(37)		(1.4)	%	7		0.7	%	(30)		(0.8)	%
Income tax expense	$	389	14.5	%	$	303	29.9	%	$	692	18.7	%

(a)As permitted under Section 40(b) of the Internal Revenue Code of 1986, as amended (the Code), producers of second-generation biofuels that are registered with the Internal Revenue Service (IRS) are eligible for an income tax credit of up to $1.01 per gallon of qualified biofuel that was produced and sold in the U.S. through December 31, 2024. We recorded a gross tax benefit in December 2024 related to these tax credits for the cellulosic ethanol produced by our Ethanol segment from 2020 through 2024.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	U.S.				Foreign				Total
	Amount		Percent		Amount		Percent		Amount		Percent
Year ended December 31, 2023
Income tax expense at statutory rates	$	1,960	21.0	%	$	449	18.5	%	$	2,409	20.5	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	114		1.2	%	161		6.6	%	275		2.3	%
Permanent differences	(87)		(0.9)	%	(18)		(0.7)	%	(105)		(0.9)	%
GILTI tax	167		1.8	%	—		—		167		1.4	%
Foreign tax credits	(149)		(1.6)	%	—		—		(149)		(1.3)	%
Repatriation withholding tax	45		0.5	%	—		—		45		0.4	%

Tax effects of income associated with noncontrolling interests	(84)		(0.9)	%	30		1.2	%	(54)		(0.4)	%
Other, net	8		—	%	23		0.9	%	31		0.3	%
Income tax expense	$	1,974	21.1	%	$	645	26.5	%	$	2,619	22.3	%

Year ended December 31, 2022
Income tax expense at statutory rates	$	2,460	21.0	%	$	611	17.0	%	$	3,071	20.1	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	182		1.6	%	255		7.1	%	437		2.8	%
Permanent differences	(61)		(0.5)	%	(16)		(0.5)	%	(77)		(0.5)	%
GILTI tax	413		3.5	%	—		—		413		2.7	%
Foreign tax credits	(396)		(3.4)	%	—		—		(396)		(2.6)	%
Repatriation withholding tax	51		0.4	%	—		—		51		0.3	%

Tax effects of income associated with noncontrolling interests	(78)		(0.7)	%	25		0.7	%	(53)		(0.3)	%
Other, net	(27)		(0.2)	%	9		0.3	%	(18)		(0.1)	%
Income tax expense	$	2,544	21.7	%	$	884	24.6	%	$	3,428	22.4	%

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Components of income tax expense were as follows (in millions):


	U.S.		Foreign		Total
Year ended December 31, 2024
Current:
Country	$	464	$	180	$	644
U.S. state / Canadian provincial	37		98		135
Total current	501		278		779
Deferred:
Country	(99)		23		(76)
U.S. state / Canadian provincial	(13)		2		(11)
Total deferred	(112)		25		(87)
Income tax expense	$	389	$	303	$	692

Year ended December 31, 2023
Current:
Country	$	1,804	$	415	$	2,219
U.S. state / Canadian provincial	157		140		297
Total current	1,961		555		2,516
Deferred:
Country	25		69		94
U.S. state / Canadian provincial	(12)		21		9
Total deferred	13		90		103
Income tax expense	$	1,974	$	645	$	2,619

Year ended December 31, 2022
Current:
Country	$	2,147	$	766	$	2,913
U.S. state / Canadian provincial	153		312		465
Total current	2,300		1,078		3,378
Deferred:
Country	164		(138)		26
U.S. state / Canadian provincial	80		(56)		24
Total deferred	244		(194)		50
Income tax expense	$	2,544	$	884	$	3,428

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes Paid

Income taxes paid to U.S. and foreign taxing authorities were as follows (in millions):


	Year Ended December 31,
	2024		2023		2022
U.S.	$	701	$	2,158	$	2,396
Foreign	142		1,336		892
Income taxes paid, net	$	843	$	3,494	$	3,288

Deferred Income Tax Assets and Liabilities

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):


	December 31,
	2024		2023
Deferred income tax assets:
Tax credit carryforwards	$	858	$	809
Net operating losses (NOLs)	689		710
Inventories	197		237



Finance lease obligations	317		314
Operating lease liabilities	502		519
Other	195		221
Total deferred income tax assets	2,758		2,810
Valuation allowance	(1,484)		(1,383)
Net deferred income tax assets	1,274		1,427
Deferred income tax liabilities:
Property, plant, and equipment	4,875		5,121
Deferred turnaround costs	450		399
Operating lease ROU assets	467		546

Investments	417		423
Other	332		287
Total deferred income tax liabilities	6,541		6,776
Net deferred income tax liabilities	$	5,267	$	5,349

We had the following income tax credit and loss carryforwards as of December 31, 2024 (in millions):


	Amount		Expiration
U.S. state income tax credits (gross amount)	$	79	2025 through 2039
U.S. state income tax credits (gross amount)	2		Unlimited
U.S. foreign tax credits	794		2027 through 2034
U.S. state income tax NOLs (gross amount)	12,071		2025 through 2040

Foreign NOLs (gross amount)	82		2029 through 2034
Foreign NOLs (gross amount)	174		Unlimited

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We have recorded a valuation allowance as of December 31, 2024 and 2023 due to uncertainties related to our ability to utilize some of our deferred income tax assets associated with our U.S. foreign tax credits, certain U.S. state income tax credits, certain foreign deferred tax assets, and certain NOLs before they expire. The valuation allowance is based on our estimates of future taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. The valuation allowance increased by $101 million in 2024 due to the generation of foreign tax credits, foreign NOLs, and other foreign deferred tax assets that cannot be realized.

Unrecognized Tax Benefits

Changes in Unrecognized Tax Benefits

The following is a reconciliation of the changes in unrecognized tax benefits, excluding related interest and penalties (in millions):


	Year Ended December 31,
	2024		2023		2022
Balance as of beginning of year	$	186	$	284	$	816
Additions for tax positions related to the current year	52		18		27
Additions for tax positions related to prior years	106		4		19
Reductions for tax positions related to prior years	(19)		(73)		(573)
Reductions for tax positions related to the lapse of applicable statute of limitations	(7)		(9)		(5)
Settlements	(2)		(38)		—

Balance as of end of year	$	316	$	186	$	284

As of December 31, 2024 and 2023, there was $236 million and $126 million, respectively, of unrecognized tax benefits that if recognized would reduce our annual effective tax rate.

Interest and penalties incurred during the years ended December 31, 2024, 2023, and 2022 were not material. Accrued interest and penalties as of December 31, 2024 and 2023 were not material.

Although reasonably possible, we do not anticipate that any of our tax audits will be resolved during the next 12 months that would result in a reduction in our liability for unrecognized tax benefits either due to our tax positions being sustained or due to our agreement to their disallowance. Should any reductions occur, we do not expect that they would have a material impact on our financial statements because such reductions would not materially affect our annual effective tax rate.

Tax Returns Under Audit

U.S. Federal

In 2023, we settled the audits related to our U.S. federal income tax returns for 2012 through 2015, with the exception of one issue regarding the timing of deductibility of certain costs at our refineries. During 2024, we filed formal claims for refund with the IRS for this disagreed-upon issue. The settlement related to these audits resulted in a favorable reduction in our unrecognized tax benefits.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2024, our U.S. federal income tax returns for 2017 through 2020 were under audit by the IRS. We continue to work with the IRS to resolve these audits and we believe that they will be resolved for amounts consistent with our recorded amounts of unrecognized tax benefits associated with these audits.

U.S. State

As of December 31, 2024, our California tax returns for 2011 through 2016 were under audit by the state of California. During 2024, we settled the audits related to our California income tax returns for 2017 through 2019 for amounts consistent with our recorded amounts for unrecognized tax benefits. We do not expect the ultimate disposition of the remaining audits will result in a material change to our financial position, results of operations, or liquidity. We believe these audits will be resolved for amounts consistent with our recorded amounts for unrecognized tax benefits associated with these audits.

Foreign

As of December 31, 2024, certain of our Canadian subsidiaries’ federal tax returns for 2013 through 2015 and 2017 through 2022 were under audit by the Canada Revenue Agency and our Quebec provincial tax returns for 2013 through 2015 and 2017 through 2018 were under audit by Revenue Quebec. As of December 31, 2024, the 2020 tax return for one of our Mexican subsidiaries was under audit by Servicio de Administración Tributaria, and we are protesting proposed adjustments for this tax return. We do not expect the ultimate disposition of these audits or inquiries will result in a material change to our financial position, results of operations, or liquidity.

Other Disclosures

Undistributed Earnings of Foreign Subsidiaries

As of December 31, 2024, the cumulative undistributed earnings of our foreign subsidiaries that is considered permanently reinvested in the relevant foreign countries were $6.0 billion. This amount excludes $1.2 billion of earnings that are no longer considered permanently reinvested. We are able to distribute cash via a dividend from our foreign subsidiaries with a full dividend received deduction in the U.S. However, there is a cost to repatriate the undistributed earnings of certain of our foreign subsidiaries to us, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. We have accrued $59 million of withholding and other taxes on the $1.2 billion of earnings previously noted, but it is not practicable to estimate the amount of additional tax that would be payable on the undistributed earnings that are considered permanently reinvested.

Repatriation Tax Liability

Our repatriation tax liability relates to our recognition of a one-time transition tax on the deemed repatriation of previously undistributed accumulated earnings and profits of our foreign subsidiaries and was previously included in other long-term liabilities. This transition tax, which is reflected in income taxes payable as of December 31, 2024 (see Note 8), will be remitted to the IRS over the eight-year period provided in the Code, with the final installment due in 2025.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. EARNINGS PER COMMON SHARE

Earnings per common share was computed as follows (dollars and shares in millions, except per share amounts):


	Year Ended December 31,
	2024		2023		2022
Earnings per common share:
Net income attributable to Valero stockholders	$	2,770	$	8,835	$	11,528
Less: Income allocated to participating securities	8		27		43
Net income available to common stockholders	$	2,762	$	8,808	$	11,485

Weighted-average common shares outstanding	322		353		395

Earnings per common share	$	8.58	$	24.93	$	29.05

Earnings per common share – assuming dilution:
Net income attributable to Valero stockholders	$	2,770	$	8,835	$	11,528
Less: Income allocated to participating securities	8		27		43
Net income available to common stockholders	$	2,762	$	8,808	$	11,485

Weighted-average common shares outstanding	322		353		395
Effect of dilutive securities	—		—		1
Weighted-average common shares outstanding – assuming dilution	322		353		396

Earnings per common share – assuming dilution	$	8.58	$	24.92	$	29.04

Participating securities include restricted stock and performance awards granted under our 2020 OSIP or our 2011 OSIP. Dilutive securities include participating securities as well as outstanding stock options. For the years ended December 31, 2024, 2023, and 2022, we computed earnings per common share – assuming dilution using the two-class method for all dilutive securities.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers

Disaggregation of Revenue

Revenue is presented in the table below under “Segment Information” disaggregated by product because this is the level of disaggregation that management has determined to be beneficial to users of our financial statements.

Contract Balances

Contract balances were as follows (in millions):


	December 31,
	2024		2023
Receivables from contracts with customers, included in receivables, net (see Note 3)	$	5,812	$	7,209
Contract liabilities, included in accrued expenses (see Note 8)	82		40

During the years ended December 31, 2024, 2023, and 2022, we recognized as revenue $39 million, $127 million, and $76 million, respectively, that was included in contract liabilities as of December 31, 2023, 2022, and 2021, respectively.

Remaining Performance Obligations

We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of December 31, 2024, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information

We have three reportable segments—Refining, Renewable Diesel, and Ethanol. Each segment is a strategic business unit that offers different products and services by employing unique technologies and marketing strategies and whose operations and operating performance are managed and evaluated separately. Operating performance is measured based on the operating income generated by the segment, which includes revenues and expenses that are directly attributable to the management of the respective segment. Intersegment sales are generally derived from transactions made at prevailing market rates. The following is a description of each segment’s business operations.

The Refining segment includes the operations of our petroleum refineries, the associated activities to market our refined petroleum products, and the logistics assets that support our refining operations. The principal products manufactured by our refineries and sold by this segment include gasolines and blendstocks, distillates, and other products.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Renewable Diesel segment represents the operations of DGD, a consolidated joint venture as discussed in Note 12, and the associated activities to market renewable diesel, renewable naphtha, and neat SAF. The principal products manufactured by DGD and sold by this segment are renewable diesel, renewable naphtha, and neat SAF. This segment sells some renewable diesel and neat SAF to the Refining segment for blending into petroleum-based diesel and conventional jet fuel, respectively, which is then sold to that segment’s customers as finished product. For the year ended December 31, 2024, all neat SAF sales were to the Refining segment.
The Ethanol segment includes the operations of our ethanol plants and the associated activities to market our ethanol and co-products. The principal products manufactured by our ethanol plants are ethanol and distillers grains. This segment sells some ethanol to the Refining segment for blending into gasoline, which is sold to that segment’s customers as a finished gasoline product.

Operations that are not included in any of the reportable segments are included in the corporate category.

Our chief operating decision maker (CODM) is our Chairman of the Board, Chief Executive Officer and President. Our CODM uses operating income by segment to allocate resources (including employees, property, and financial or capital resources) for each segment primarily during the annual budget process. On a monthly basis, our CODM considers budget-to-actual variances for operating income by segment when evaluating the operating performance of each segment.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables reflect information about our operating income, including a reconciliation to our consolidated income before income tax expense and total expenditures for long-lived assets, by reportable segment (in millions):


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Year ended December 31, 2024
Revenues:
Revenues from external customers	$	123,853	$	2,410	$	3,618	$	—	$	129,881
Intersegment revenues	10		2,656		868		(3,534)		—
Total revenues	123,863		5,066		4,486		(3,534)		129,881
Cost of sales:
Cost of materials and other (a)	112,538		3,944		3,558		(3,524)		116,516

Operating expenses (excluding depreciation and amortization expense reflected below)	4,946		350		536		(1)		5,831
Depreciation and amortization expense	2,391		265		77		(4)		2,729
Total cost of sales	119,875		4,559		4,171		(3,529)		125,076

Other operating expenses	17		—		27		—		44
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		961		961
Depreciation and amortization expense	—		—		—		45		45
Operating income by segment	$	3,971	$	507	$	288	$	(1,011)	3,755
Other income, net									499
Interest and debt expense, net of capitalized interest									(556)
Income before income tax expense									$	3,698

Total expenditures for long-lived assets (b)	$	1,635	$	321	$	34	$	67	$	2,057

See notes on page 126.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Year ended December 31, 2023
Revenues:
Revenues from external customers	$	136,470	$	3,823	$	4,473	$	—	$	144,766
Intersegment revenues	18		3,168		1,086		(4,272)		—
Total revenues	136,488		6,991		5,559		(4,272)		144,766
Cost of sales:
Cost of materials and other (a)	117,401		5,550		4,395		(4,259)		123,087

Operating expenses (excluding depreciation and amortization expense reflected below)	5,208		358		515		8		6,089
Depreciation and amortization expense	2,351		231		80		(4)		2,658
Total cost of sales	124,960		6,139		4,990		(4,255)		131,834

Other operating expenses	17		—		16		—		33
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		998		998
Depreciation and amortization expense	—		—		—		43		43
Operating income by segment	$	11,511	$	852	$	553	$	(1,058)	11,858
Other income, net									502
Interest and debt expense, net of capitalized interest									(592)
Income before income tax expense									$	11,768

Total expenditures for long-lived assets (b)	$	1,488	$	294	$	43	$	91	$	1,916

See notes on page 126.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Year ended December 31, 2022
Revenues:
Revenues from external customers	$	168,154	$	3,483	$	4,746	$	—	$	176,383
Intersegment revenues	56		2,018		740		(2,814)		—
Total revenues	168,210		5,501		5,486		(2,814)		176,383
Cost of sales:
Cost of materials and other (a)	144,588		4,350		4,628		(2,796)		150,770

Operating expenses (excluding depreciation and amortization expense reflected below)	5,509		255		625		—		6,389
Depreciation and amortization expense	2,247		122		59		—		2,428
Total cost of sales	152,344		4,727		5,312		(2,796)		159,587
Asset impairment loss	—		—		61		—		61
Other operating expenses	63		—		3		—		66
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		934		934
Depreciation and amortization expense	—		—		—		45		45
Operating income by segment	$	15,803	$	774	$	110	$	(997)	15,690
Other income, net									179
Interest and debt expense, net of capitalized interest									(562)
Income before income tax expense									$	15,307

Total expenditures for long-lived assets (b)	$	1,763	$	879	$	22	$	73	$	2,737

(a)Cost of materials and other for our Renewable Diesel segment is net of the blender’s tax credit on qualified fuel mixtures of $1.3 billion, $1.2 billion, and $761 million for the years ended December 31, 2024, 2023, and 2022, respectively.

(b)Total expenditures for long-lived assets includes amounts related to capital expenditures; deferred turnaround and catalyst costs; and property, plant, and equipment for acquisitions.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a disaggregation of revenues from external customers for our principal products by reportable segment (in millions):


	Year Ended December 31,
	2024		2023		2022
Refining:
Gasolines and blendstocks	$	56,014	$	61,538	$	70,496
Distillates	55,636		63,664		82,521
Other product revenues	12,203		11,268		15,137
Total Refining revenues	123,853		136,470		168,154
Renewable Diesel:
Renewable diesel	2,316		3,665		3,333
Renewable naphtha	94		158		150
Total Renewable Diesel revenues	2,410		3,823		3,483
Ethanol:
Ethanol	2,647		3,300		3,653
Distillers grains	971		1,173		1,093
Total Ethanol revenues	3,618		4,473		4,746

Revenues	$	129,881	$	144,766	$	176,383

Revenues by geographic area are shown in the following table (in millions). The geographic area is based on location of customer and no customer accounted for 10 percent or more of our revenues.


	Year Ended December 31,
	2024		2023		2022
U.S.	$	93,311	$	104,208	$	126,722
Canada	8,577		10,107		11,743
U.K. and Ireland	15,236		16,148		17,822
Mexico and Peru	5,405		6,438		8,396
Other countries	7,352		7,865		11,700
Revenues	$	129,881	$	144,766	$	176,383

Long-lived assets include “property, plant, and equipment, net” and certain long-lived assets included in “deferred charges and other assets, net.” Long-lived assets by geographic area consisted of the following (in millions):


	December 31,
	2024		2023
U.S.	$	28,359	$	28,868
Canada	1,414		1,598
U.K. and Ireland	1,484		1,346
Mexico and Peru	798		837
Total long-lived assets	$	32,055	$	32,649

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total assets by reportable segment were as follows (in millions):


	December 31,
	2024		2023
Refining	$	46,729	$	49,031
Renewable Diesel	5,680		5,790
Ethanol	1,545		1,549
Corporate and eliminations	6,189		6,686
Total assets	$	60,143	$	63,056

As of December 31, 2024 and 2023, our investments in nonconsolidated joint ventures accounted for under the equity method were $695 million and $713 million, respectively, all of which related to the Refining segment and are reflected in “deferred charges and other assets, net” as presented in Note 7.

18. SUPPLEMENTAL CASH FLOW INFORMATION

In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):


	Year Ended December 31,
	2024		2023		2022
Decrease (increase) in current assets:
Receivables, net	$	1,562	$	(387)	$	(1,619)
Inventories	(286)		(684)		(672)

Prepaid expenses and other	320		(34)		(180)
Increase (decrease) in current liabilities:
Accounts payable	(430)		(169)		521
Accrued expenses	(168)		(50)		(5)
Taxes other than income taxes payable	(57)		(226)		98
Income taxes payable	(146)		(776)		231
Changes in current assets and current liabilities	$	795	$	(2,326)	$	(1,626)

Changes in current assets and current liabilities for the year ended December 31, 2024 were primarily due to the following:

The decrease in receivables was due to a decrease in refined petroleum product prices combined with a decrease in related sales volumes in December 2024 compared to December 2023;
The increase in inventories was primarily due to an increase in inventory volumes in December 2024 compared to December 2023; and
The decrease in accounts payable was due to a decrease in crude oil and other feedstock prices in December 2024 compared to December 2023, partially offset by an increase in related volumes purchased.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in current assets and current liabilities for the year ended December 31, 2023 were primarily due to the following:

The increase in receivables was primarily due to an increase in refined petroleum product sales volumes in December 2023 compared to December 2022, partially offset by a decrease in related prices;
The increase in inventories was primarily due to an increase in inventory volumes in December 2023 compared to December 2022;
The decrease in accounts payable was due to a decrease in crude oil and other feedstock prices in December 2023 compared to December 2022, partially offset by an increase in related volumes purchased; and
The decrease in income taxes payable was primarily due to income tax payments made during the year ended December 31, 2023.

Changes in current assets and current liabilities for the year ended December 31, 2022 were primarily due to the following:

The increase in receivables was primarily due to an increase in refined petroleum product prices in December 2022 compared to December 2021;
The increase in inventories was primarily due to an increase in inventory volumes associated with the DGD Port Arthur Plant, which commenced operations in the fourth quarter of 2022; and
The increase in accounts payable was primarily due to an increase in feedstock volumes purchased for the start-up of the DGD Port Arthur Plant in December 2022 compared to December 2021.

Cash flows related to interest and income taxes were as follows (in millions):


	Year Ended December 31,
	2024		2023		2022
Interest paid in excess of amount capitalized, including interest on finance leases	$	556	$	562	$	570
Income taxes paid, net (see Note 15)	843		3,494		3,288

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Supplemental cash flow information related to our operating and finance leases was as follows (in millions):


	Year Ended December 31,
	2024				2023				2022
	Operating Leases		Finance Leases		Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	527	$	116	$	428	$	107	$	395	$	83
Investing cash flows	1		—		—		—		—		—
Financing cash flows	—		245		—		250		—		180
Changes in lease balances resulting from new and modified leases (a)	448		318		396		157		178		660

(a)Noncash activity for the year ended December 31, 2022 primarily included approximately $500 million for a finance lease ROU asset and related liability recognized in connection with the completion of the DGD Port Arthur Plant. DGD entered into the finance lease agreement with a third party to utilize certain rail facilities, truck rack facilities, and tanks for the transportation and storage of feedstocks and renewable diesel. The agreement commenced in the fourth quarter of 2022, upon completion of the DGD Port Arthur Plant, and has an initial term of 20 years with two automatic five-year renewal periods.

Noncash financing activities for the year ended December 31, 2024 included the conversion by IEnova of $732 million of outstanding borrowings under the IEnova Revolver to additional equity in Central Mexico Terminals, as described in Note 9. There were no other significant noncash investing and financing activities during the year ended December 31, 2024, except as noted in the table above.

There were no significant noncash investing and financing activities during the years ended December 31, 2023 and 2022, except as noted in the table above.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. FAIR VALUE MEASUREMENTS

General

GAAP requires or permits certain assets and liabilities to be measured at fair value on a recurring or nonrecurring basis in our balance sheets, and those assets and liabilities are presented below under “Recurring Fair Value Measurements” and “Nonrecurring Fair Value Measurements.” Assets and liabilities measured at fair value on a recurring basis, such as derivative financial instruments, are measured at fair value at the end of each reporting period. Assets and liabilities measured at fair value on a nonrecurring basis, such as the impairment of property, plant and equipment, are measured at fair value in particular circumstances.

GAAP also requires the disclosure of the fair values of financial instruments when an option to elect fair value accounting has been provided, but such election has not been made. A debt obligation is an example of such a financial instrument. The disclosure of the fair values of financial instruments not recognized at fair value in our balance sheets is presented below under “Financial Instruments.”

GAAP provides a framework for measuring fair value and establishes a three-level fair value hierarchy that prioritizes inputs to valuation techniques based on the degree to which objective prices in external active markets are available to measure fair value. The following is a description of each of the levels of the fair value hierarchy.

*•*Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.

*•*Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

*•*Level 3 – Unobservable inputs for the asset or liability. Unobservable inputs reflect our own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include occasional market quotes or sales of similar instruments or our own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant judgment.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recurring Fair Value Measurements

The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of December 31, 2024 and 2023.

We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented in the following tables on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross in our balance sheets.


	December 31, 2024
							Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
	Fair Value Hierarchy
	Level 1		Level 2		Level 3
Assets
Commodity derivative contracts	$	402	$	—	$	—	$	402	$	(402)	$	—	$	—	$	—
Physical purchase contracts	—		2		—		2		n/a		n/a		2		n/a
Investments of certain benefit plans	89		—		4		93		n/a		n/a		93		n/a
Investments in AFS debt securities	6		20		—		26		n/a		n/a		26		n/a
Foreign currency contracts	6		—		—		6		n/a		n/a		6		n/a
Total	$	503	$	22	$	4	$	529	$	(402)	$	—	$	127

Liabilities
Commodity derivative contracts	$	448	$	—	$	—	$	448	$	(402)	$	(46)	$	—	$	(71)
Blending program obligations	—		13		—		13		n/a		n/a		13		n/a
Physical purchase contracts	—		3		—		3		n/a		n/a		3		n/a

Total	$	448	$	16	$	—	$	464	$	(402)	$	(46)	$	16

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2023
							Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
	Fair Value Hierarchy
	Level 1		Level 2		Level 3
Assets
Commodity derivative contracts	$	803	$	—	$	—	$	803	$	(642)	$	(66)	$	95	$	—


Investments of certain benefit plans	76		—		4		80		n/a		n/a		80		n/a
Investments in AFS debt securities	36		75		—		111		n/a		n/a		111		n/a
Total	$	915	$	75	$	4	$	994	$	(642)	$	(66)	$	286

Liabilities
Commodity derivative contracts	$	643	$	—	$	—	$	643	$	(642)	$	(1)	$	—	$	(67)
Blending program obligations	—		58		—		58		n/a		n/a		58		n/a
Physical purchase contracts	—		6		—		6		n/a		n/a		6		n/a
Foreign currency contracts	7		—		—		7		n/a		n/a		7		n/a
Total	$	650	$	64	$	—	$	714	$	(642)	$	(1)	$	71

A description of our assets and liabilities recognized at fair value along with the valuation methods and inputs we used to develop their fair value measurements are as follows:

Commodity derivative contracts consist primarily of exchange-traded futures, which are used to reduce the impact of price volatility on our results of operations and cash flows as discussed in Note 20. These contracts are measured at fair value using a market approach based on quoted prices from the commodity exchange and are categorized in Level 1 of the fair value hierarchy.
Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments in AFS debt securities consist primarily of commercial paper and U.S. government treasury bills and have maturities within one year. The securities categorized in Level 1 are measured at fair value using a market approach based on quoted prices from national securities exchanges, and the securities categorized in Level 2 are measured at fair value using a market approach based on quoted prices from independent pricing services. The amortized cost basis of the securities approximates fair value. Realized and unrealized gains and losses were de minimis for the years ended December 31, 2024 and 2023.
Blending program obligations represent our liability for the purchase of compliance credits needed to satisfy our blending obligations under the Renewable and Low-Carbon Fuel Programs. The blending program obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based on quoted prices from an independent pricing service.
Foreign currency contracts consist of foreign currency exchange and purchase contracts and foreign currency swap agreements related to our foreign operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are valued based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.

Nonrecurring Fair Value Measurements

As discussed in Note 6, we concluded that our Lakota ethanol plant was impaired as of December 31, 2022, which resulted in an asset impairment loss of $61 million. The fair value of the Lakota ethanol plant was determined using a combination of the income and market approaches and was classified in Level 3. We employed a probability-weighted approach to possible future cash flow scenarios, including the use of peer company metrics and comparison to a recent sales transaction.

There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023.

Financial Instruments

Our financial instruments include cash and cash equivalents, restricted cash, investments in AFS debt securities, receivables, payables, debt obligations, operating and finance lease obligations, commodity derivative contracts, and foreign currency contracts. The estimated fair values of cash and cash equivalents, restricted cash, receivables, payables, and operating and finance lease obligations approximate their carrying amounts; the carrying value and fair value of debt is shown in the table below (in millions).


		December 31, 2024				December 31, 2023
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Debt (excluding finance lease obligations)	Level 2	$	8,085	$	7,776	$	9,218	$	9,109

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments in AFS debt securities, commodity derivative contracts, and foreign currency contracts are recognized at their fair values as shown in “Recurring Fair Value Measurements” above.

20. PRICE RISK MANAGEMENT ACTIVITIES

General

We are exposed to market risks primarily related to the volatility in the price of commodities, foreign currency exchange rates, and the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 19), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income and other comprehensive income (loss) is summarized below under “Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss).”

Risk Management Activities by Type of Risk

Commodity Price Risk

We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil, waste and renewable feedstocks, and corn); the products we produce; and natural gas and electricity used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, such as futures and options. Our positions in commodity derivative instruments are monitored and managed on a daily basis by our risk control group to ensure compliance with our stated risk management policy that is periodically reviewed with our Board and/or relevant Board committee.

We primarily use commodity derivative instruments as cash flow hedges and economic hedges. Our objectives for entering into each type of hedge is described below.

*•*Cash flow hedges – The objective of our cash flow hedges is to lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable.

*•*Economic hedges – Our objectives for holding economic hedges are to (i) manage price volatility in certain feedstock and product inventories and (ii) lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2024, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).


						Notional Contract Volumes by Year of Maturity
						2025
Derivatives designated as cash flow hedges:
Refined petroleum products:
Futures – long						180
Futures – short						1,780

Derivatives designated as economic hedges:
Crude oil and refined petroleum products:


Futures – long						98,086
Futures – short						102,120





Corn:
Futures – long						46,405
Futures – short						85,365
Physical contracts – long						37,826

Foreign Currency Risk

We are exposed to exchange rate fluctuations on transactions related to our foreign operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we often use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of December 31, 2024, we had foreign currency contracts to purchase $777 million of U.S. dollars. These commitments matured on or before January 27, 2025.

Renewable and Low-Carbon Fuel Programs Price Risk

We are exposed to market risk related to the volatility in the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. To manage this risk, we enter into contracts to purchase these credits. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. The Renewable and Low-Carbon Fuel Programs require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree we are unable to blend at the required quotas, we must purchase compliance credits (primarily RINs). For the years ended December 31, 2024, 2023, and 2022, the cost of meeting our credit obligations under the Renewable and Low-Carbon Fuel Programs was $730 million, $1.3 billion, and $1.5 billion, respectively, which are reflected in cost of materials and other.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Values of Derivative Instruments

The following table provides information about the fair values of our derivative instruments as of December 31, 2024 and 2023 (in millions) and the line items in our balance sheets in which the fair values are reflected. See Note 19 for additional information related to the fair values of our derivative instruments.

As indicated in Note 19, we net fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty under master netting arrangements, including cash collateral assets and obligations. The following table, however, is presented on a gross asset and gross liability basis, which results in the reflection of certain assets in liability accounts and certain liabilities in asset accounts:


	Balance Sheet Location		December 31, 2024						December 31, 2023
		Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments:
Commodity contracts	Receivables, net		$	12		$	13		$	141		$	34



Derivatives not designated as hedging instruments:
Commodity contracts	Receivables, net		$	390		$	435		$	662		$	609


Physical purchase contracts	Inventories		2			3			—			6
Foreign currency contracts	Receivables, net		6			—			—			—
Foreign currency contracts	Accrued expenses		—			—			—			7
Total			$	398		$	438		$	662		$	622

Market Risk

Our price risk management activities involve the receipt or payment of fixed price commitments into the future. These transactions give rise to market risk, which is the risk that future changes in market conditions may make an instrument less valuable. We closely monitor and manage our exposure to market risk on a daily basis in accordance with policies that are periodically reviewed with our Board and/or relevant Board committee. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss)

The following table provides information about the gain (loss) recognized in income and other comprehensive income (loss) due to fair value adjustments of our cash flow hedges (in millions):


Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivatives	Year Ended December 31,
2024	2023	2022
Commodity contracts:
Gain (loss) recognized in other comprehensive income (loss)	n/a	$	30	$	82	$	(292)
Gain (loss) reclassified from accumulated other comprehensive loss into income	Revenues	117		(8)		(286)

For cash flow hedges, no component of any derivative instrument’s gain or loss was excluded from the assessment of hedge effectiveness for the years ended December 31, 2024, 2023, and 2022. For the years ended December 31, 2024, 2023, and 2022, cash flow hedges primarily related to forecasted sales of renewable diesel. As of December 31, 2024, the estimated deferred after-tax loss that is expected to be reclassified into revenues within the next 12 months was not material. The changes in accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2024, 2023, and 2022 are described in Note 11.

The following table provides information about the gain (loss) recognized in income on our derivative instruments with respect to our economic hedges and our foreign currency hedges and the line items in our statements of income in which such gains (losses) are reflected (in millions):


Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Year Ended December 31,
	2024	2023		2022
Commodity contracts	Revenues	$	(18)	$	(27)	$	(17)
Commodity contracts	Cost of materials and other	(86)		208		(988)
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	—		1		(1)
Foreign currency contracts	Cost of materials and other	36		(34)		73
Foreign currency contracts	Other income, net	—		—		(119)

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