Document and Entity Information - USD ($) $ in Billions	12 Months Ended
Document and Entity Information - USD ($) $ in Billions	Dec. 31, 2019	Jan. 31, 2020	Jun. 28, 2019
Cover page.
Document type	10-K
Document annual report	true
Document period end date	Dec. 31, 2019
Document transition report	false
Entity file number	001-13175
Entity registrant name	VALERO ENERGY CORP/TX
Entity incorporation, state or country code	DE
Entity tax identification number	74-1828067
Entity address, address line one	One Valero Way
Entity address, city or town	San Antonio
Entity address, state or province	TX
Entity address, postal zip code	78249
City area code	210
Local phone number	345-2000
Title of 12(b) security	Common stock
Trading symbol	VLO
Security exchange name	NYSE
Entity well-known seasoned issuer	Yes
Entity voluntary filers	No
Entity current reporting status	Yes
Entity interactive data current	Yes
Entity filer category	Large Accelerated Filer
Entity small business	false
Entity emerging growth company	false
Entity shell company	false
Entity public float			$ 35.5
Entity common stock, shares outstanding		409,337,126
Documents incorporated by reference	We intend to file with the Securities and Exchange Commission a definitive Proxy Statement for our Annual Meeting of Stockholders scheduled for April 30, 2020, at which directors will be elected. Portions of the 2020 Proxy Statement are incorporated by reference in Part III of this Form 10-K and are deemed to be a part of this report.
Entity central index key	0001035002
Amendment flag	false
Document fiscal year focus	2019
Document fiscal period focus	FY
Current fiscal year end date	--12-31

Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 2,583	$ 2,982
Receivables, net	8,904	7,345
Inventories	7,013	6,532
Prepaid expenses and other	469	816
Total current assets	18,969	17,675
Property, plant, and equipment, at cost	44,294	42,473
Accumulated depreciation	(15,030)	(13,625)
Property, plant, and equipment, net	29,264	28,848
Deferred charges and other assets, net	5,631	3,632
Total assets	53,864	50,155
Current liabilities:
Current portion of debt and finance lease obligations	494	238
Accounts payable	10,205	8,594
Accrued expenses	949	630
Taxes other than income taxes payable	1,304	1,213
Income taxes payable	208	49
Total current liabilities	13,160	10,724
Debt and finance lease obligations, less current portion	9,178	8,871
Deferred income tax liabilities	5,103	4,962
Other long-term liabilities	3,887	2,867
Commitments and contingencies
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	6,821	7,048
Treasury stock, at cost; 264,209,742 and 255,905,051 common shares	(15,648)	(14,925)
Retained earnings	31,974	31,044
Accumulated other comprehensive loss	(1,351)	(1,507)
Total Valero Energy Corporation stockholders’ equity	21,803	21,667
Noncontrolling interests	733	1,064
Total equity	22,536	22,731
Total liabilities and equity	$ 53,864	$ 50,155

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Valero Energy Corporation stockholders’ equity:
Common stock, par value (in usd per share)	$ 0.01	$ 0.01
Common stock authorized (shares)	1,200,000,000	1,200,000,000
Common stock issued (shares)	673,501,593	673,501,593
Treasury stock (shares)	264,209,742	255,905,051

Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions

12 Months Ended

Dec. 31, 2019

Dec. 31, 2018

Dec. 31, 2017

Revenues

^[1]

$ 108,324

$ 117,033

$ 93,980

Cost of sales:

Cost of materials and other

96,476

104,732

83,037

Operating expenses (excluding depreciation and amortization expense reflected below)

4,868

4,690

4,504

Depreciation and amortization expense

2,202

2,017

1,934

Total cost of sales

103,546

111,439

89,475

Other operating expenses

21

45

61

General and administrative expenses (excluding depreciation and amortization expense reflected below)

868

925

829

Depreciation and amortization expense

53

52

Operating income (loss)

3,836

4,572

3,563

Other income, net

104

130

112

Interest and debt expense, net of capitalized interest

(454)

(470)

(468)

Income before income tax expense (benefit)

3,486

4,232

3,207

Income tax expense (benefit)

702

879

(949)

Net income

2,784

3,353

4,156

Less: Net income attributable to noncontrolling interests

362

231

91

Net income attributable to Valero Energy Corporation stockholders

$ 2,422

$ 3,122

$ 4,065

Earnings per common share (in usd per share)

$ 5.84

$ 7.30

$ 9.17

Weighted-average common shares outstanding (shares)

413

426

442

Earnings per common share – assuming dilution (in usd per share)

$ 5.84

$ 7.29

$ 9.16

Weighted-average common shares outstanding – assuming dilution (shares)

414

428

444

Supplemental information:

Includes excise taxes on sales by certain of our international operations

$ 5,595

$ 5,626

$ 5,573

[1]	Includes excise taxes on sales by certain of our international operations of $5,595 million, $5,626 million, and $5,573 million for the years ended December 31, 2019, 2018, and 2017.

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net income	$ 3,353	$ 4,156
Other comprehensive income (loss):
Foreign currency translation adjustment	(517)	514
Net gain (loss) on pension and other postretirement benefits	49	(65)
Net loss on cash flow hedges	0	0
Other comprehensive income (loss) before income tax expense (benefit)	(468)	449
Income tax expense (benefit) related to items of other comprehensive income (loss)	10	(21)
Other comprehensive income (loss)	(478)	470
Comprehensive income	2,875	4,626
Less: Comprehensive income attributable to noncontrolling interests	229	91
Comprehensive income attributable to Valero Energy Corporation stockholders	$ 2,646	$ 4,535

Consolidated Statements of Equity - USD ($) $ in Millions	Total	Valero Energy Partners LP [Member]	Entities Other Than Valero Energy Partners LP [Member]	Valero Energy Corporation Stockholders' Equity [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Non-controlling Interests [Member]	Non-controlling Interests [Member] Valero Energy Partners LP [Member]	Non-controlling Interests [Member] Entities Other Than Valero Energy Partners LP [Member]
Balance as of beginning of period at Dec. 31, 2016	$ 20,854			$ 20,024	$ 7	$ 7,088	$ (12,027)	$ 26,366	$ (1,410)	$ 830
Increase (Decrease) in Stockholders' Equity Roll Forward
Net income	4,156			4,065				4,065		91
Dividends on common stock	(1,242)			(1,242)				(1,242)
Stock-based compensation expense	68			68		68
Transactions in connection with stock-based compensation plans	(63)			(63)		(82)	19
Stock purchases under purchase programs	(1,307)			(1,307)			(1,307)
Issuance of Valero Energy Partners LP common units and contributions from noncontrolling interests		$ 33	$ 30								$ 33	$ 30
Distributions to noncontrolling interests	(67)									(67)
Other	(32)			(24)		(35)		11		(8)
Other comprehensive income (loss)	470			470					470	0
Balance as of end of period at Dec. 31, 2017	22,900			21,991	7	7,039	(13,315)	29,200	(940)	909
Increase (Decrease) in Stockholders' Equity Roll Forward
Reclassification of stranded income tax effects	0			0				91	(91)
Net income	3,353			3,122				3,122		231
Dividends on common stock	(1,369)			(1,369)				(1,369)
Stock-based compensation expense	82			82		82
Transactions in connection with stock-based compensation plans	(169)			(169)		(70)	(99)
Stock purchases under purchase programs	(1,511)			(1,511)			(1,511)
Issuance of Valero Energy Partners LP common units and contributions from noncontrolling interests			$ 32									$ 32
Distributions to noncontrolling interests	(116)									(116)
Other	7			(3)		(3)		0		10
Other comprehensive income (loss)	(478)			(476)					(476)	(2)
Balance as of end of period at Dec. 31, 2018	22,731			21,667	7	7,048	(14,925)	31,044	(1,507)	1,064
Increase (Decrease) in Stockholders' Equity Roll Forward
Net income	2,784			2,422				2,422		362
Dividends on common stock	(1,492)			(1,492)				(1,492)
Stock-based compensation expense	77			77		77
Transactions in connection with stock-based compensation plans	(20)			(20)		(50)	30
Stock purchases under purchase programs	(753)			(753)			(753)
Acquisition of Valero Energy Partners LP publicly held common units	(950)			(328)		(328)				(622)
Distributions to noncontrolling interests	(70)									(70)
Other	74			74		74		0		0
Other comprehensive income (loss)	155			156					156	(1)
Balance as of end of period at Dec. 31, 2019	$ 22,536			$ 21,803	$ 7	$ 6,821	$ (15,648)	$ 31,974	$ (1,351)	$ 733

Consolidated Statements of Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Common stock dividends:
Dividends on common stock (in usd per share)	$ 3.6	$ 3.2	$ 2.8

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net income	$ 2,784	$ 3,353	$ 4,156
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	2,255	2,069	1,986
Deferred income tax expense (benefit)	234	203	(2,543)
Changes in current assets and current liabilities	294	(1,297)	1,289
Changes in deferred charges and credits and other operating activities, net	(36)	43	594
Net cash provided by operating activities	5,531	4,371	5,482
Cash flows from investing activities:
Investments in unconsolidated joint ventures	(164)	(181)	(406)
Peru Acquisition, net of cash acquired	0	(468)	0
Acquisitions of undivided interests	(72)	(212)	(72)
Other investing activities, net	12	8	(2)
Net cash provided by (used in) investing activities	(3,001)	(3,928)	(2,382)
Cash flows from financing activities:
Purchases of common stock for treasury	(777)	(1,708)	(1,372)
Common stock dividends	(1,492)	(1,369)	(1,242)
Acquisition of Valero Energy Partners LP publicly held common units	(950)	0	0
Contributions from noncontrolling interests	0	32	30
Distributions to noncontrolling interests	(70)	(116)	(67)
Other financing activities, net	(28)	(15)	20
Net cash provided by (used in) financing activities	(2,997)	(3,168)	(2,272)
Effect of foreign exchange rate changes on cash	68	(143)	206
Net increase (decrease) in cash and cash equivalents	(399)	(2,868)	1,034
Cash and cash equivalents at beginning of year	2,982	5,850	4,816
Cash and cash equivalents at end of year	2,583	2,982	5,850
Minor Acquisitions [Member]
Cash flows from investing activities:
Asset acquisitions	0	(88)	0
Ethanol Plants [Member]
Cash flows from investing activities:
Asset acquisitions	(3)	(320)	0
Variable Interest Entities (VIEs) [Member]
Cash flows from financing activities:
Proceeds from debt issuances and borrowings	239	109	0
Repayments of debt and finance lease obligations	(6)	(6)	(6)
Diamond Green Diesel Holdings LLC (DGD) [Member]
Cash flows from investing activities:
Capital expenditures	(142)	(165)	(84)
Deferred turnaround and catalyst cost expenditures	(18)	(27)	(4)
Other VIEs [Member]
Cash flows from investing activities:
Capital expenditures	(225)	(124)	(26)
Excluding Variable Interest Entities (VIEs) [Member]
Cash flows from investing activities:
Capital expenditures	(1,627)	(1,463)	(1,269)
Deferred turnaround and catalyst cost expenditures	(762)	(888)	(519)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings	1,892	1,258	380
Repayments of debt and finance lease obligations	$ (1,805)	$ (1,353)	$ (15)

Description of Business, Basis of Presentation, and Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

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

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.

We are an international manufacturer and marketer of transportation fuels and petrochemical products. We own and operate 15 petroleum refineries with a combined throughput capacity of approximately 3.15 million barrels per day and 14 ethanol plants with a combined production capacity of approximately 1.73 billion gallons per year as of December 31, 2019. The petroleum refineries are located in the United States (U.S.), Canada, and the United Kingdom (U.K.), and the ethanol plants are located in the Mid-Continent region of the U.S. We are also a joint venture partner in DGD, which owns and operates a renewable diesel plant in Norco, Louisiana. We sell our products in the wholesale rack or bulk markets in the U.S., Canada, the U.K., Ireland, and Latin America. Approximately 7,000 outlets carry our brand names.

Basis of Presentation

General

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

Reclassifications

Effective January 1, 2019, we revised our reportable segments to reflect a new reportable segment — renewable diesel. The renewable diesel segment includes the operations of DGD, our consolidated joint venture as discussed in Note 12, that were transferred from the refining segment. Also effective January 1, 2019, we no longer have a VLP segment, and we now include the operations of Valero Energy Partners LP and its consolidated subsidiaries (VLP) in our refining segment. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation. See Note 2 regarding our merger with VLP, which occurred on January 10, 2019, and Note 17 for segment information.

Prior year amounts for capital expenditures and deferred turnaround and catalyst cost expenditures in the consolidated statements of cash flows have been reclassified to conform to the 2019 presentation to separately provide these expenditures for us and our consolidated VIEs.

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. Our VIEs 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 U.S. 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.

Receivables

Trade receivables are carried at original invoice amount. We maintain an allowance for doubtful accounts, which is adjusted based on management’s assessment of our customers’ historical collection experience, known credit risks, and industry and economic conditions.

Inventories

The cost of refinery feedstocks and refined petroleum products, grain and ethanol, and renewable diesel feedstocks (animal fats, used cooking oils, and other vegetable oils) and renewable diesel 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. 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.

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, especially those of our refining segment, are highly capital intensive. Each of our refineries comprises a large base of property assets, consisting of a series of interconnected, highly integrated and interdependent crude oil processing facilities and supporting logistical infrastructure (Units), and these Units are continuously improved. Improvements consist of the addition of new Units and betterments of existing Units. We plan for these improvements by developing a multi-year capital program that is updated and revised based on changing internal and external factors.

Depreciation of property assets used in our refining and renewable diesel segments 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 plant. 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 refineries and renewable diesel plant in accordance with engineering specifications, design standards, and practices 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 in income. However, a gain or loss is recognized in income 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 property assets used in our ethanol segment is recorded on a straight-line basis over the estimated useful lives of the related assets. The estimated useful life of our grain processing equipment 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 ROU (defined below) assets are amortized as discussed in “Leases” below.

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, ethanol plants, and renewable diesel plant, 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;


•	operating lease ROU (defined below) assets, which are amortized as discussed in “Leases” below;


•	investments in unconsolidated joint ventures;


•	income taxes receivable;


•	intangible assets, which are amortized over their estimated useful lives; and


•	goodwill.

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 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 non-lease components in a contract as a single lease component for all classes of underlying assets. Our marine transportation contracts include non-lease 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 lease 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 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 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.

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 currently in income based on the difference between the estimated current fair value of the investment and its carrying amount.

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 related to our refining and ethanol segments 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 our assets related to our refining and ethanol segments 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 information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred.

Foreign Currency Translation

Generally, our international 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, ethanol, and renewable diesel 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 is typically due in full within two to ten days of delivery. In the normal course of business, we generally do not accept product returns.

The transaction price is the consideration that we expect to be entitled to in exchange for our products. The transaction price for substantially all of our contracts is generally based on commodity market pricing (i.e., variable consideration). As such, this market pricing may be constrained (i.e., not estimable) at the inception of the contract but will be recognized based on the applicable market pricing, which will be known upon transfer of the goods to the customer. 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 governmental 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 international operations. The amount of such taxes is provided in supplemental information in a footnote on the statements of income.

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, 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 environmental credit obligations to comply with various governmental and regulatory programs (such as the cost of Renewable Identification Numbers (RINs) as required by the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard, emission credits under various cap-and-trade systems, as defined in Note 19); (iv) the blender’s tax credit recognized on qualified biodiesel 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, ethanol plants, and logistics assets, except for depreciation and amortization expense. 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 statement 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.

Environmental Compliance Program Costs

We purchase credits in the open market to meet our obligations under various environmental compliance programs. We purchase biofuel credits (primarily RINs in the U.S.) to comply with government regulations that require us to blend a certain percentage of biofuels into the products we produce. To the degree that we are unable to blend biofuels at the required percentage, we must purchase biofuel credits to meet our obligation. We purchase greenhouse gas (GHG) emission credits to comply with government regulations concerning various GHG emission programs, including cap-and-trade systems. These programs are described in Note 20 under “Environmental Compliance Program Price Risk.”

The costs of purchased biofuel credits and GHG emission credits are charged to cost of materials and other as such credits are needed to satisfy our obligation. To the extent we have not purchased enough credits to satisfy our obligation as of the balance sheet date, we charge cost of materials and other for such deficiency based on the market price 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.

Stock-Based Compensation

Compensation expense for our share-based compensation plans is based on the fair value of the awards granted and is recognized in income 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. Stranded income tax effects are released from accumulated other comprehensive loss to retained earnings 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. 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.

Financial Instruments

Our financial instruments include cash and cash equivalents, receivables, payables, debt, operating and finance lease obligations, commodity derivative contracts, and foreign currency derivative contracts. The estimated fair values of these financial instruments approximate their carrying amounts, except for certain debt as discussed in Note 19.

Derivatives and Hedging

All derivative instruments, not designated as normal purchases or sales, are recorded in the balance sheet as either assets or liabilities measured at their fair values with changes in fair value recognized currently in income. To manage commodity price risk, we primarily use cash flow hedges and economic hedges, and we also use fair value hedges from time to time. The cash flow effects of all of our derivative instruments are reflected in operating activities in the consolidated statements of cash flows.

Accounting Pronouncements Adopted During 2019

Topic 842

We adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842, “Leases,” (Topic 842) on January 1, 2019. Topic 842 increases the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 supersedes previous lease accounting requirements under FASB ASC Topic 840, “Leases,” (Topic 840). We adopted Topic 842 using the optional transition method that permits us to record a cumulative-effect adjustment and apply the new disclosure requirements beginning in 2019 and continue to present comparative period information as required under Topic 840; however, we did not have a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption.

In addition, we elected the transition practical expedient package that permits us to not reassess our prior conclusions about lease identification, lease classification, and initial direct costs under the new standard, as well as the practical expedient that permits us to not assess existing land easements under the new standard. See “Leases” above for a discussion of our revised accounting policy and also see Note 5 for information on our leases.

In preparation for the adoption of Topic 842, we enhanced our contracting and lease evaluation systems and related processes, and we developed a new lease accounting system to capture our leases and support the

required disclosures. We integrated our lease accounting system with our general ledger and modified our related procurement and payment processes.

Adoption of this standard resulted in (i) the recognition of ROU assets and lease liabilities for our operating leases of $1.3 billion, (ii) the derecognition of existing assets under construction of $539 million related to a build-to-suit lease arrangement with respect to the MVP Terminal (see Note 10 under “Contractual Capital Commitments—MVP Terminal”), and (iii) the presentation of new disclosures about our leasing activities beginning in the first quarter of 2019. Adoption of this standard did not impact our results of operations or liquidity, and our accounting for finance leases is substantially unchanged.

Other

In addition to the adoption of Topic 842 discussed above, we adopted the following Accounting Standards Update (ASU) on January 1, 2019. Our adoption of this ASU did not affect our financial statements or related disclosures.



ASU		Basis of Adoption
2017-12	Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	Cumulative effect

Accounting Pronouncements Adopted on January 1, 2020

The following ASUs were adopted on January 1, 2020, and our adoption did not have a material impact on our financial statements or related disclosures.



ASU		Basis of Adoption
2016-13	Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (including codification improvements in ASUs 2018-19 and 2019-11 and ASU 2020-02— Financial Instruments—Credit Losses (Topic 326): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119)	Cumulative effect
2018-15	Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	Prospectively
2019-12	Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	Prospectively

Merger and Acquisitions

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

MERGER AND ACQUISITIONS

2.

MERGER AND ACQUISITIONS

Merger with VLP

On January 10, 2019, we completed our acquisition of all of the outstanding publicly held common units of VLP pursuant to a definitive Agreement and Plan of Merger (Merger Agreement, and together with the transactions contemplated thereby, the Merger Transaction) with VLP. Upon completion of the Merger Transaction, each outstanding publicly held common unit was converted into the right to receive $42.25 per common unit in cash without any interest thereon, and all such publicly traded common units were automatically canceled and ceased to exist. Upon completion of the Merger Transaction, we paid aggregate merger consideration of $950 million, which was funded with available cash on hand.

Prior to the completion of the Merger Transaction, we consolidated the financial statements of VLP (see Note 12) and reflected noncontrolling interests on our balance sheet for the portion of VLP’s partners’ capital held by VLP’s public common unitholders. Upon completion of the Merger Transaction, VLP became our indirect wholly owned subsidiary and, as a result, we no longer reflect noncontrolling interests on our balance sheet with respect to VLP. In addition, we no longer attribute a portion of VLP’s net income to noncontrolling interests. Because we had a controlling financial interest in VLP before the Merger Transaction and retained our controlling financial interest in VLP after the Merger Transaction, the change in our ownership interest in VLP as a result of the merger was accounted for as an equity transaction. Accordingly, we did not recognize a gain or loss on the Merger Transaction.

Acquisition of Ethanol Plants

On November 15, 2018, we acquired three ethanol plants from two subsidiaries of Green Plains Inc. for total cash consideration of $320 million including working capital of $20 million. The ethanol plants are located in Bluffton, Indiana; Lakota, Iowa; and Riga, Michigan with a combined ethanol production capacity of 280 million gallons per year. This acquisition was accounted for as an asset acquisition.

Peru Acquisition

On May 14, 2018, we acquired 100 percent of the issued and outstanding equity interests in Pure Biofuels del Peru S.A.C. (now known as Valero Peru S.A.C.) (Valero Peru) from Pegasus Capital Advisors L.P. and various minority equity holders. Valero Peru markets refined petroleum products through its logistics assets in Peru. Valero Peru owns a terminal at the Port of Callao, near Lima, with approximately 1 million barrels of storage capacity for refined petroleum and renewable products. Through one of its subsidiaries, Valero Peru also owns a 180,000-barrel storage terminal in Paita, in northern Peru, which is scheduled to commence operations in the second quarter of 2020, pending regulatory approvals. This acquisition, which is referred to as the Peru Acquisition, was consistent with our general business strategy and broadens the geographic diversity of our refining segment. This acquisition was accounted for as a business combination.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date, based on an independent appraisal that was completed in the fourth quarter of 2018 (in millions). We paid $468 million from available cash on hand, of which $132 million was for working capital. During the third and fourth quarters of 2018, we recognized immaterial adjustments to the preliminary amounts recorded for the Peru Acquisition with a corresponding adjustment to goodwill due to the completion of the independent appraisal. These adjustments did not have a material effect on our results of operations for the year ended December 31, 2018.



Current assets, net of cash acquired	$	158
Property, plant, and equipment	102
Deferred charges and other assets	466
Current liabilities, excluding current portion of debt	(26		)
Debt assumed, including current portion	(137		)
Deferred income tax liabilities	(62		)
Other long-term liabilities	(27		)
Noncontrolling interest	(6		)
Total consideration, net of cash acquired	$	468

Deferred charges and other assets primarily include identifiable intangible assets of $200 million and goodwill of $260 million. Identifiable intangible assets, which consist of customer contracts and relationships, are amortized on a straight-line basis over ten years. Goodwill is calculated as the excess of the consideration transferred over the estimated fair values of the underlying tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill represents the future economic benefits expected to be recognized from our expansion into the Latin American refined petroleum products markets arising from other assets acquired that were not individually identified and separately recognized. We determined that the entire balance of goodwill is related to the refining segment. None of the goodwill is deductible for tax purposes.

Our statements of income include the results of operations of Valero Peru since the date of acquisition, and such results are reflected in the refining segment. Results of operations since the date of acquisition, supplemental pro forma financial information, and acquisition-related costs have not been presented for the Peru Acquisition as such information is not material to our results of operations.

Receivables

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

RECEIVABLES

3.

RECEIVABLES

Receivables consisted of the following (in millions):



	December 31,
	2019			2018
Receivables from contracts with customers	$	5,610		$	4,673
Receivables from certain purchase and sale arrangements	2,484			2,311
Commodity derivative and foreign currency contract receivables	116			229
Other receivables	730			166
Total receivables	8,940			7,379
Allowance for doubtful accounts	(36		)	(34		)
Receivables, net	$	8,904		$	7,345

There were no significant changes in our allowance for doubtful accounts during the years ended December 31, 2019, 2018, and 2017.

Inventories

12 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

INVENTORIES

4.

INVENTORIES

Inventories consisted of the following (in millions):



	December 31,
	2019		2018
Refinery feedstocks	$	2,399	$	2,265
Refined petroleum products and blendstocks	4,034		3,653
Ethanol feedstocks and products	260		298
Renewable diesel feedstocks and products	46		52
Materials and supplies	274		264
Inventories	$	7,013	$	6,532

As of December 31, 2019 and 2018, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by $2.5 billion and $1.5 billion, respectively. Our non-LIFO inventories accounted for $1.4 billion and $1.1 billion of our total inventories as of December 31, 2019 and 2018, respectively.

Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

LEASES

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 refinery feedstock, refined petroleum product, and corn inventories;


•	Marine Transportation includes time charters for ocean-going tankers and coastal vessels;


•	Rail Transportation includes railcars and related storage facilities;


•	Feedstock Processing Equipment includes machinery, equipment, and various facilities used in our refining, ethanol, and renewable diesel operations;


•	Energy and Gases includes facilities and equipment related to industrial gases and power used in our operations;


•	Real Estate includes land and rights-of-way associated with our refineries and pipelines, as well as office facilities; and


•	Other includes 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.

Lease Costs and Other Supplemental Information

In accordance with Topic 842, our total lease cost comprises costs that are included in our income statement, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost by class of underlying asset was as follows (in millions):



	Year Ended December 31, 2019
	Pipelines, Terminals, and Tanks		Transportation					Feedstock Processing Equipment		Energy and Gases		Real Estate			Other		Total
	Pipelines, Terminals, and Tanks		Marine			Rail		Feedstock Processing Equipment		Energy and Gases		Real Estate			Other		Total
Finance lease cost:
Amortization of ROU assets	$	44	$	—		$	—	$	7	$	3	$	—		$	—	$	54
Interest on lease liabilities	47		—			—		1		2		—			—		50
Operating lease cost	182		145			52		20		9		27			4		439
Variable lease cost	66		35			—		1		—		1			—		103
Short-term lease cost	9		53			—		29		—		—			—		91
Sublease income	—		(27		)	—		—		—		(3		)	—		(30		)
Total lease cost	$	348	$	206		$	52	$	58	$	14	$	25		$	4	$	707

In accordance with Topic 840, “rental expense, net of sublease rental income” was as follows (in millions):



	Year Ended December 31,
	2018		2017
Minimum rental expense	$	515	$	691
Contingent rental expense	19		21
Total rental expense	534		712
Less: Sublease rental income	31		54
Rental expense, net of sublease rental income	$	503	$	658

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



	December 31, 2019
	Operating Leases			Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net	$	—		$	790
Deferred charges and other assets, net	1,329			—
Total ROU assets, net	$	1,329		$	790

Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations	$	—		$	41
Accrued expenses	331			—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion	—			750
Other long-term liabilities	959			—
Total lease liabilities	$	1,290		$	791

Other supplemental information
Weighted-average remaining lease term	7.7 years			19.7 years
Weighted-average discount rate	4.9		%	5.2		%

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

Maturity Analysis

The remaining minimum lease payments due under our long-term leases were as follows (in millions):



	December 31, 2019				December 31, 2018
	Operating Leases		Finance Leases		Operating Leases		Capital Leases
2019	n/a		n/a		$	359	$	69
2020	$	376	$	88	245		65
2021	250		86		178		62
2022	194		87		146		64
2023	160		91		123		65
2024	125		82		n/a		n/a
Thereafter	498		1,011		514		957
Total undiscounted lease payments	1,603		1,445		$	1,565	1,282
Less: Amount associated with discounting	313		654				676
Total lease liabilities	$	1,290	$	791			$	606

Future Lease Commencement

As described and defined in Note 10, we have a terminaling agreement with MVP to utilize certain assets at the MVP Terminal upon completion of construction, which is expected to occur during the first quarter of 2020. We expect to recognize a finance lease ROU asset and related liability of approximately $1.5 billion in 2020 in connection with this agreement.

LEASES

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 refinery feedstock, refined petroleum product, and corn inventories;


•	Marine Transportation includes time charters for ocean-going tankers and coastal vessels;


•	Rail Transportation includes railcars and related storage facilities;


•	Feedstock Processing Equipment includes machinery, equipment, and various facilities used in our refining, ethanol, and renewable diesel operations;


•	Energy and Gases includes facilities and equipment related to industrial gases and power used in our operations;


•	Real Estate includes land and rights-of-way associated with our refineries and pipelines, as well as office facilities; and


•	Other includes 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.

Lease Costs and Other Supplemental Information

In accordance with Topic 842, our total lease cost comprises costs that are included in our income statement, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost by class of underlying asset was as follows (in millions):



	Year Ended December 31, 2019
	Pipelines, Terminals, and Tanks		Transportation					Feedstock Processing Equipment		Energy and Gases		Real Estate			Other		Total
	Pipelines, Terminals, and Tanks		Marine			Rail		Feedstock Processing Equipment		Energy and Gases		Real Estate			Other		Total
Finance lease cost:
Amortization of ROU assets	$	44	$	—		$	—	$	7	$	3	$	—		$	—	$	54
Interest on lease liabilities	47		—			—		1		2		—			—		50
Operating lease cost	182		145			52		20		9		27			4		439
Variable lease cost	66		35			—		1		—		1			—		103
Short-term lease cost	9		53			—		29		—		—			—		91
Sublease income	—		(27		)	—		—		—		(3		)	—		(30		)
Total lease cost	$	348	$	206		$	52	$	58	$	14	$	25		$	4	$	707

In accordance with Topic 840, “rental expense, net of sublease rental income” was as follows (in millions):



	Year Ended December 31,
	2018		2017
Minimum rental expense	$	515	$	691
Contingent rental expense	19		21
Total rental expense	534		712
Less: Sublease rental income	31		54
Rental expense, net of sublease rental income	$	503	$	658

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



	December 31, 2019
	Operating Leases			Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net	$	—		$	790
Deferred charges and other assets, net	1,329			—
Total ROU assets, net	$	1,329		$	790

Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations	$	—		$	41
Accrued expenses	331			—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion	—			750
Other long-term liabilities	959			—
Total lease liabilities	$	1,290		$	791

Other supplemental information
Weighted-average remaining lease term	7.7 years			19.7 years
Weighted-average discount rate	4.9		%	5.2		%

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

Maturity Analysis

The remaining minimum lease payments due under our long-term leases were as follows (in millions):



	December 31, 2019				December 31, 2018
	Operating Leases		Finance Leases		Operating Leases		Capital Leases
2019	n/a		n/a		$	359	$	69
2020	$	376	$	88	245		65
2021	250		86		178		62
2022	194		87		146		64
2023	160		91		123		65
2024	125		82		n/a		n/a
Thereafter	498		1,011		514		957
Total undiscounted lease payments	1,603		1,445		$	1,565	1,282
Less: Amount associated with discounting	313		654				676
Total lease liabilities	$	1,290	$	791			$	606

Future Lease Commencement

As described and defined in Note 10, we have a terminaling agreement with MVP to utilize certain assets at the MVP Terminal upon completion of construction, which is expected to occur during the first quarter of 2020. We expect to recognize a finance lease ROU asset and related liability of approximately $1.5 billion in 2020 in connection with this agreement.

Property, Plant, and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT, AND EQUIPMENT

6.

PROPERTY, PLANT, AND EQUIPMENT

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



	December 31,
	2019			2018
Land	$	476		$	416
Crude oil processing facilities	32,047			30,721
Transportation and terminaling facilities	5,179			4,935
Grain processing equipment	1,201			1,212
Administrative buildings	1,015			953
Finance lease ROU assets (see Note 5)	944			711
Other	1,701			1,565
Construction in progress	1,731			1,960
Property, plant, and equipment, at cost	44,294			42,473
Accumulated depreciation	(15,030		)	(13,625		)
Property, plant, and equipment, net	$	29,264		$	28,848

Capital lease assets, as determined in accordance with Topic 840, are presented as “Finance lease ROU assets” as of December 31, 2018. Effective January 1, 2019, in connection with our adoption of Topic 842, these assets are considered finance lease ROU assets and are presented as “Finance lease ROU assets.” As further described in Note 5, our finance lease ROU assets arise from leasing arrangements for the right to use various classes of underlying assets including (i) pipelines, terminals, and tanks, (ii) marine and rail transportation, and (iii) feedstock processing equipment.

Accumulated amortization on the assets presented as “Finance lease ROU assets” was $155 million and $106 million as of December 31, 2019 and 2018, respectively.

Depreciation expense for the years ended December 31, 2019, 2018, and 2017 was $1.5 billion, $1.4 billion, and $1.3 billion, respectively.

Deferred Charges and Other Assets

12 Months Ended

Dec. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

DEFERRED CHARGES AND OTHER ASSETS

7.

DEFERRED CHARGES AND OTHER ASSETS

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



	December 31,
	2019		2018
Deferred turnaround and catalyst costs, net	$	1,778	$	1,749
Operating lease ROU assets, net (see Note 5)	1,329		—
Investments in unconsolidated joint ventures	942		542
Income taxes receivable	525		343
Intangible assets, net	283		307
Goodwill	260		260
Other	514		431
Deferred charges and other assets, net	$	5,631	$	3,632

Amortization expense for deferred turnaround and catalyst costs and intangible assets was $759 million, $668 million, and $650 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Accrued Expenses and Other Long-Term Liabilities

12 Months Ended

Dec. 31, 2019

Accrued Liabilities and Other Liabilities [Abstract]

ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES

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,
	2019		2018		2019		2018
Operating lease liabilities (see Note 5)	$	331	$	—	$	959	$	—
Liability for unrecognized tax benefits (see Note 15)	—		—		954		721
Defined benefit plan liabilities (see Note 13)	37		43		834		654
Repatriation tax liability (see Note 15) (a)	—		—		508		603
Environmental liabilities	27		29		319		327
Wage and other employee-related liabilities	292		302		121		109
Accrued interest expense	83		93		—		—
Contract liabilities from contracts with customers (see Note 17)	55		31		—		—
Environmental credit obligations (see Note 19)	31		34		—		—
Other accrued liabilities	93		98		192		453
Accrued expenses and other long-term liabilities	$	949	$	630	$	3,887	$	2,867

^{__________________________}

(a)

The current portion of repatriation tax liability is included in income taxes payable. As of December 31, 2019, the current portion of repatriation tax liability was $54 million. There was no current portion of repatriation tax liability as of December 31, 2018.

Debt and Finance Lease Obligations

12 Months Ended

Dec. 31, 2019

Debt and Lease Obligation [Abstract]

DEBT AND FINANCE LEASE OBLIGATIONS

9.

DEBT AND FINANCE LEASE OBLIGATIONS

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



	Final Maturity	December 31,
	Final Maturity	2019			2018
Credit facilities:
Valero Revolver	2024	$	—		$	—
IEnova Revolver	2028	348			109
Canadian Revolver	2020	—			—
Accounts receivable sales facility	2020	100			100
Public debt:
Valero Senior Notes
6.625%	2037	1,500			1,500
3.4%	2026	1,250			1,250
4.0%	2029	1,000			—
6.125%	2020	—			850
4.35%	2028	750			750
7.5%	2032	750			750
4.9%	2045	650			650
3.65%	2025	600			600
10.5%	2039	250			250
8.75%	2030	200			200
7.45%	2097	100			100
6.75%	2037	24			24
VLP Senior Notes
4.375%	2026	500			500
4.5%	2028	500			500
Gulf Opportunity Zone Revenue Bonds, Series 2010, 4.0%	2040	300			300
Debenture, 7.65%	2026	100			100
Other debt	Various	47			50
Net unamortized debt issuance costs and other		(88		)	(80		)
Total debt		8,881			8,503
Finance lease obligations (see Note 5)		791			606
Total debt and finance lease obligations		9,672			9,109
Less: Current portion		494			238
Debt and finance lease obligations, less current portion		$	9,178		$	8,871

Credit Facilities

Valero Revolver

In March 2019, we amended our revolving credit facility (the Valero Revolver) to increase the borrowing capacity from $3 billion to $4 billion and to extend the maturity date from November 2020 to March 2024. 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 LIBO rate (as defined in the Valero Revolver) for the applicable interest period in effect from time to time plus the applicable margin or (ii) the alternate base rate (as defined in the Valero Revolver) plus the applicable margin. 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.

We had no borrowings or repayments under the Valero Revolver during the years ended December 31, 2019, 2018, and 2017.

VLP Revolver

As of December 31, 2018, VLP had a $750 million senior unsecured revolving credit facility (the VLP Revolver) with a group of lenders that was scheduled to mature in November 2020. However, on January 10, 2019, in connection with the completion of the Merger Transaction as described in Note 2, the VLP Revolver was terminated.

During the year ended December 31, 2018, VLP repaid the outstanding balance of $410 million on the VLP Revolver using proceeds from its public offering of $500 million 4.5 percent Senior Notes as described in “Public Debt” below. During the year ended December 31, 2017, VLP borrowed $380 million under the revolver and made no repayments.

IEnova Revolver

In February 2018, Central Mexico Terminals (as described in Note 12) entered into a combined $340 million unsecured revolving credit facility (IEnova Revolver) with IEnova (defined in Note 12) that matures in February 2028. In November 2019, the IEnova Revolver was increased to $491 million. 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 available only to the operations of Central Mexico Terminals, and the creditors of Central Mexico Terminals do not have recourse against us.

Outstanding borrowings under this revolver bear interest at the three-month LIBO rate 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, 2019 and 2018, the variable rate was 5.749 percent and 6.046 percent, respectively.

During the year ended December 31, 2019 and 2018, Central Mexico Terminals borrowed $239 million and $109 million, respectively, and had no repayments under this revolver.

Canadian Revolver

In November 2019, one of our Canadian subsidiaries amended its committed revolving credit facility (the Canadian Revolver) of C$150 million, under which it may borrow and obtain letters of credit, to extend the maturity date from November 2019 to November 2020.

We had no borrowings or repayments under this revolver during the years ended December 31, 2019, 2018, and 2017.

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 2019, we amended our agreement to extend the maturity date to July 2020. 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, 2019 and 2018, $2.2 billion and $1.8 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 on our balance sheets and proceeds and repayments are reflected as cash flows from financing activities on the statements of cash flows. As of December 31, 2019 and 2018, the variable interest rate on the accounts receivable sales facility was 2.3866 percent and 3.0618 percent, respectively. During the year ended December 31, 2019, we sold and repaid $900 million of eligible receivables under the accounts receivable sales facility. During the years ended December 31, 2018 and 2017, we had no proceeds from or repayments under the accounts receivable sales facility.

Summary of Credit Facilities

We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (amounts in millions and currency in U.S. dollars, except as noted):



				December 31, 2019
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
Committed facilities:
Valero Revolver	$	4,000	March 2024	$	—	$	34	$	3,966
Canadian Revolver	C$	150	November 2020	C$	—	C$	5	C$	145
Accounts receivable sales facility	$	1,300	July 2020	$	100	n/a		$	1,200
Letter of credit facility (b)	$	50	November 2020	n/a		$	—	$	50
Committed facility of VIE (c):
IEnova Revolver	$	491	February 2028	$	348	n/a		$	143
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		$	121	n/a

^{__________________________}


(a)	Letters of credit issued as of December 31, 2019 expire at various times in 2020 through 2021.


(b)	The letter of credit facility was amended to reduce the facility from $100 million to $50 million and to extend the maturity date from November 2019 to November 2020.


(c)	Creditors of our VIE do not have recourse against us.

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.

Public Debt

During the year ended December 31, 2019, the following activity occurred:

•

We issued $1.0 billion of 4.00 percent Senior Notes due April 1, 2029 (4.00 percent Senior Notes). Proceeds from this debt issuance totaled $992 million before deducting the underwriting discount and other debt issuance costs. The proceeds were used to redeem our 6.125 percent Senior Notes due February 1, 2020 (6.125 percent Senior Notes) for $871 million, or 102.48 percent of stated value, which includes an early redemption fee of $21 million that is reflected in “other income, net” in our statement of income for the year ended December 31, 2019.


•	In connection with the completion of the Merger Transaction as described in Note 2, Valero entered into a guarantee agreement to fully and unconditionally guarantee the prompt payment, when due, of any amount owed to the holders of VLP’s 4.375 percent Senior Notes due December 15, 2026 and 4.5 percent Senior Notes due March 15, 2028. See Note 21 for condensed consolidating financial statements.

During the year ended December 31, 2018, the following activity occurred:

•

We issued $750 million of 4.35 percent Senior Notes due June 1, 2028. Proceeds from this debt issuance totaled $749 million before deducting the underwriting discount and other debt issuance costs. The proceeds were used to redeem our 9.375 percent Senior Notes due March 15, 2019 for $787 million, or 104.9 percent of stated value, which includes an early redemption fee of $37 million that is reflected in “other income, net” in our statement of income for the year ended December 31, 2018.

•

VLP issued $500 million of 4.5 percent Senior Notes due March 15, 2028. Proceeds from this debt issuance totaled $498 million before deducting the underwriting discount and other debt issuance costs. The proceeds were available only to the operations of VLP and were used to repay the outstanding balance of $410 million on the VLP Revolver and $85 million on its notes payable to us, which is eliminated in consolidation.

During the year ended December 31, 2017, there was no issuance or redemption activity related to our public debt.

Other Debt

During the year ended December 31, 2018, we retired $137 million of debt assumed in connection with the Peru Acquisition with available cash on hand.

Other Disclosures

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



	Year Ended December 31,
	2019		2018		2017
Interest and debt expense	$	544	$	557	$	539
Less: Capitalized interest	90		87		71
Interest and debt expense, net of capitalized interest	$	454	$	470	$	468

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, 2019 were as follows (in millions):



2020 (a)	$	453
2021	17
2022	6
2023	19
2024	—
Thereafter	8,474
Net unamortized debt issuance costs and other	(88		)
Total debt	$	8,881

^{__________________________}

(a)

As of December 31, 2019, our debt obligations due in 2020 include $348 million associated with borrowings under the IEnova Revolver.

Commitments and Contingencies	12 Months Ended
Commitments and Contingencies	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	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 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. Contractual Capital Commitments MVP Terminal We have a 50 percent membership interest in MVP Terminalling, LLC (MVP), a Delaware limited liability company formed in September 2017 with a subsidiary of Magellan Midstream Partners LP (Magellan), to construct, own, and operate the Magellan Valero Pasadena marine terminal (MVP Terminal) located adjacent to the Houston Ship Channel in Pasadena, Texas. The MVP Terminal contains (i) approximately 5 million barrels of storage capacity, (ii) a dock with two ship berths, and (iii) a three-bay truck rack facility. In connection with our terminaling agreement with MVP, described below, we will have dedicated use of (i) approximately 4 million barrels of storage, (ii) one ship berth, and (iii) the three-bay truck rack facility. Construction of phases one and two of the project began in 2017 with a total cost of $840 million, of which we have committed to contribute 50 percent ($420 million). The project could expand up to four phases with a total project cost of approximately $1.4 billion if warranted by additional demand and agreed to by Magellan and us. Since inception, we have contributed $404 million to MVP, of which $157 million was contributed during the year ended December 31, 2019. Concurrent with the formation of MVP, we entered into a terminaling agreement with MVP to utilize the MVP Terminal upon completion of the majority of phase two, which is expected to occur in the first quarter of 2020. The terminaling agreement has an initial term of 12 years with two five-year automatic renewals, and year-to-year renewals thereafter. Prior to our adoption of Topic 842 as described in Note 1, we were considered the accounting owner of the MVP Terminal during the construction period due to our membership interest in MVP and because we determined that the terminaling agreement was a capital lease. Accordingly, as of December 31, 2018, we had recorded an asset of $539 million in property, plant, and equipment representing 100 percent of the construction costs incurred by MVP, as well as capitalized interest incurred by us, and a long-term liability of $292 million payable to Magellan. The amounts recorded for the portion of the construction costs associated with the payable to Magellan were noncash investing and financing items, respectively. On January 1, 2019, as a result of our adoption of Topic 842, we derecognized the asset and liability related to MVP discussed above and recorded our equity investment in MVP of $247 million, which is included in “deferred charges and other assets, net.” The amounts derecognized are noncash investing and financing items, respectively. As of December 31, 2019, the carrying value of our equity investment in MVP was $401 million. Central Texas Pipeline We committed to a 40 percent undivided interest in a project with a subsidiary of Magellan to jointly build a 135-mile, 20-inch refined petroleum products pipeline with a capacity of up to 150,000 barrels per day from Houston to Hearne, Texas. The pipeline was placed in service in the third quarter of 2019. The cost of our 40 percent undivided interest in the pipeline was $160 million, of which $80 million was spent during the year ended December 31, 2019. Self-Insurance We are self-insured for certain medical and dental, workers’ compensation, automobile liability, general liability, and property 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.

Equity

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

EQUITY

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, 2016	673	(222	)
Transactions in connection with stock-based compensation plans	—	1
Stock purchases under purchase programs	—	(19	)
Balance as of December 31, 2017	673	(240	)
Stock purchases under purchase programs	—	(16	)
Balance as of December 31, 2018	673	(256	)
Transactions in connection with stock-based compensation plans	—	1
Stock purchases under purchase program	—	(9	)
Balance as of December 31, 2019	673	(264	)

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, 2019 or 2018.

Treasury Stock

We purchase shares of our common stock as authorized under our common stock purchase program (described below) and to meet our obligations under employee stock-based compensation plans.

On July 13, 2015, our board of directors authorized us to purchase $2.5 billion of our outstanding common stock with no expiration date, and we completed that program during 2017. On September 21, 2016, our board of directors authorized our purchase of up to an additional $2.5 billion with no expiration date, and we completed that program during 2018. On January 23, 2018, our board of directors authorized our purchase of up to an additional $2.5 billion (the 2018 Program) with no expiration date. During the years ended December 31, 2019, 2018, and 2017, we purchased $752 million, $1.5 billion, and $1.3 billion, respectively, of our common stock under our programs. As of December 31, 2019, we have approval under the 2018 Program to purchase approximately $1.5 billion of our common stock.

Common Stock Dividends

On January 23, 2020, our board of directors declared a quarterly cash dividend of $0.98 per common share payable on March 4, 2020 to holders of record at the close of business on February 12, 2020.

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, 2019
Foreign currency translation adjustment	$	349		$	—		$	349
Pension and other postretirement benefits:
Loss arising during the year related to:
Net actuarial loss	(245		)	(54		)	(191		)
Prior service cost	(3		)	(1		)	(2		)
Miscellaneous loss	—			4			(4		)
Amounts reclassified into income related to:
Net actuarial loss	38			9			29
Prior service credit	(28		)	(6		)	(22		)
Curtailment and settlement loss	4			1			3
Net loss on pension and other postretirement benefits	(234		)	(47		)	(187		)
Derivative instruments designated and qualifying as cash flow hedges:
Net loss arising during the year	(6		)	(1		)	(5		)
Net gain reclassified into income	(2		)	—			(2		)
Net loss on cash flow hedges	(8		)	(1		)	(7		)
Other comprehensive income	$	107		$	(48	)	$	155



	Before-Tax Amount			Tax Expense (Benefit)			Net Amount
Year ended December 31, 2018
Foreign currency translation adjustment	$	(517	)	$	—		$	(517	)
Pension and other postretirement benefits:
Gain arising during the year related to:
Net actuarial gain	1			—			1
Prior service credit	7			1			6
Amounts reclassified into income related to:
Net actuarial loss	63			14			49
Prior service credit	(29		)	(7		)	(22		)
Curtailment and settlement loss	7			2			5
Net gain on pension and other postretirement benefits	49			10			39
Other comprehensive loss	$	(468	)	$	10		$	(478	)

Year ended December 31, 2017
Foreign currency translation adjustment	$	514		$	—		$	514
Pension and other postretirement benefits:
Loss arising during the year related to:
Net actuarial loss	(79		)	(29		)	(50		)
Prior service cost	(4		)	(1		)	(3		)
Miscellaneous loss	—			3			(3		)
Amounts reclassified into income related to:
Net actuarial loss	50			18			32
Prior service credit	(36		)	(13		)	(23		)
Curtailment and settlement loss	4			1			3
Net loss on pension and other postretirement benefits	(65		)	(21		)	(44		)
Other comprehensive income	$	449		$	(21	)	$	470

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			Losses on Cash Flow Hedges			Total
Balance as of December 31, 2016	$	(1,021	)	$	(389	)	$	—		$	(1,410	)
Other comprehensive income (loss) before reclassifications	514			(56		)	—			458
Amounts reclassified from accumulated other comprehensive loss	—			12			—			12
Other comprehensive income (loss)	514			(44		)	—			470
Balance as of December 31, 2017	(507		)	(433		)	—			(940		)
Other comprehensive income (loss) before reclassifications	(515		)	7			—			(508		)
Amounts reclassified from accumulated other comprehensive loss	—			32			—			32
Other comprehensive income (loss)	(515		)	39			—			(476		)
Reclassification of stranded income tax effects	—			(91		)	—			(91		)
Balance as of December 31, 2018	(1,022		)	(485		)	—			(1,507		)
Other comprehensive income (loss) before reclassifications	346			(197		)	(2		)	147
Amounts reclassified from accumulated other comprehensive loss	—			10			(1		)	9
Other comprehensive income (loss)	346			(187		)	(3		)	156
Balance as of December 31, 2019	$	(676	)	$	(672	)	$	(3	)	$	(1,351	)

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 Statement of Income
	Year Ended December 31,
	2019			2018			2017
Amortization of items related to defined benefit pension plans:
Net actuarial loss	$	(38	)	$	(63	)	$	(50	)	(a) Other income, net
Prior service credit	28			29			36			(a) Other income, net
Curtailment and settlement	(4		)	(7		)	(4		)	(a) Other income, net
	(14		)	(41		)	(18		)	Total before tax
	4			9			6			Tax benefit
	$	(10	)	$	(32	)	$	(12	)	Net of tax

Gains on cash flow hedges:
Commodity contracts	$	2		$	—		$	—		Revenues
	$	2		$	—		$	—		Net of tax

Total reclassifications for the year	$	(8	)	$	(32	)	$	(12	)	Net of tax

_________________________

(a)

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

Variable Interest Entities

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

VARIABLE INTEREST ENTITIES

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 VIEs, 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 our VIEs:

•

DGD is a joint venture with a subsidiary of Darling Ingredients Inc. that owns and operates a plant that processes animal fats, used cooking oils, and other vegetable oils into renewable diesel. The plant is located in Norco, Louisiana next to our St. Charles Refinery. Our significant agreements with DGD include an operations agreement that outlines our responsibilities as operator of the plant and a marketing agreement.

As operator, we operate the plant 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 third-party customers.

•

Central Mexico Terminals is a collective group of three subsidiaries of Infraestructura Energetica Nova, S.A.B. de C.V. (IEnova), a Mexican company and 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, there is limited risk to us associated with Central Mexico Terminals’ operations.

•

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 VIEs’ assets can only be used to settle their own obligations and the VIEs’ creditors have no recourse to our assets. We do not provide financial guarantees to our VIEs. Although we have provided credit facilities to some of our VIEs in support of their construction or acquisition activities, these transactions are eliminated in consolidation. Our financial position, results of operations, and cash flows are impacted by our consolidated VIEs’ performance, net of intercompany eliminations, to the extent of our ownership interest in each VIE.

The following tables present summarized balance sheet information for the significant assets and liabilities of our VIEs, which are included in our balance sheets (in millions).



	December 31, 2019
	DGD		Central Mexico Terminals		Other		Total
Assets
Cash and cash equivalents	$	85	$	—	$	25	$	110
Other current assets	567		33		89		689
Property, plant, and equipment, net	706		381		105		1,192
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	66	$	409	$	8	$	483
Debt and finance lease obligations, less current portion	—		—		31		31



	December 31, 2018
	VLP (a)		DGD		Central Mexico Terminals		Other		Total
Assets
Cash and cash equivalents	$	152	$	65	$	—	$	18	$	235
Other current assets	2		112		20		64		198
Property, plant, and equipment, net	1,409		576		156		113		2,254
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	27	$	28	$	118	$	9	$	182
Debt and finance lease obligations, less current portion	990		—		—		34		1,024

____________________

(a)

Prior to the completion of the Merger Transaction with VLP on January 10, 2019 as discussed in Note 2, VLP was a publicly traded master limited partnership that we had determined was a VIE. VLP was formed by us to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. As of December 31, 2018, we owned a 66.2 percent limited partner interest and a 2.0 percent general partner interest in VLP, and public unitholders owned a 31.8 percent limited partner interest. Upon completion of the Merger Transaction, VLP became our indirect wholly owned subsidiary and, as a result, was no longer a VIE.

Non-Consolidated VIEs

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

Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

EMPLOYEE BENEFIT PLANS

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 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 international 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.

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 were as follows (in millions):



	Pension Plans						Other Postretirement Benefit Plans
	December 31,						December 31,
	2019			2018			2019			2018
Changes in benefit obligation
Benefit obligation as of beginning of year	$	2,639		$	2,926		$	292		$	306
Service cost	119			133			5			6
Interest cost	98			91			11			10
Participant contributions	—			—			11			10
Benefits paid	(154		)	(207		)	(29		)	(28		)
Actuarial (gain) loss	528			(285		)	41			(9		)
Other	9			(19		)	5			(3		)
Benefit obligation as of end of year	$	3,239		$	2,639		$	336		$	292

Changes in plan assets (a)
Fair value of plan assets as of beginning of year	$	2,236		$	2,428		$	—		$	—
Actual return on plan assets	490			(130		)	—			—
Valero contributions	128			156			18			18
Participant contributions	—			—			11			10
Benefits paid	(154		)	(207		)	(29		)	(28		)
Other	9			(11		)	—			—
Fair value of plan assets as of end of year	$	2,709		$	2,236		$	—		$	—

Reconciliation of funded status (a)
Fair value of plan assets as of end of year	$	2,709		$	2,236		$	—		$	—
Less: Benefit obligation as of end of year	3,239			2,639			336			292
Funded status as of end of year	$	(530	)	$	(403	)	$	(336	)	$	(292	)

Accumulated benefit obligation	$	3,039		$	2,492		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.

The actuarial loss for the year ended December 31, 2019 primarily resulted from a decrease in the discount rates used to determine our benefit obligations for our pension plans from 4.25 percent in 2018 to 3.14 percent in 2019. The actuarial gain for the year ended December 31, 2018 primarily resulted from an increase in the discount rates used to determine our benefit obligations for our pension plans from 3.58 percent in 2017 to 4.25 percent in 2018.

The fair value of our plan assets as of December 31, 2019 was favorably impacted by the return on plan assets resulting primarily from an improvement in equity market prices for the year. The fair value of our plan assets as of December 31, 2018 was unfavorably impacted by the negative return on plan assets resulting primarily from a significant decline in equity market prices for the year.

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



	Pension Plans						Other Postretirement Benefit Plans
	December 31,						December 31,
	2019			2018			2019			2018
Deferred charges and other assets, net	$	5		$	2		$	—		$	—
Accrued expenses	(17		)	(22		)	(20		)	(21		)
Other long-term liabilities	(518		)	(383		)	(316		)	(271		)
	$	(530	)	$	(403	)	$	(336	)	$	(292	)

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



	December 31,
	2019		2018
Projected benefit obligation	$	3,182	$	2,564
Fair value of plan assets	2,647		2,160

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



	December 31,
	2019		2018
Accumulated benefit obligation	$	2,760	$	2,253
Fair value of plan assets	2,402		1,974

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
2020	$	179	$	21
2021	219		20
2022	190		20
2023	204		19
2024	205		19
2025-2029	1,105		88

We plan to contribute approximately $140 million to our pension plans and $21 million to our other postretirement benefit plans during 2020.

The components of net periodic benefit cost (credit) 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,
	2019			2018			2017			2019			2018			2017
Service cost	$	119		$	133		$	123		$	5		$	6		$	6
Interest cost	98			91			86			11			10			10
Expected return on plan assets	(166		)	(163		)	(150		)	—			—			—
Amortization of:
Net actuarial (gain) loss	41			65			53			(3		)	(2		)	(3		)
Prior service credit	(19		)	(18		)	(20		)	(9		)	(11		)	(16		)
Special charges	4			7			4			1			—			—
Net periodic benefit cost (credit)	$	77		$	115		$	96		$	5		$	3		$	(3	)

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

Amortization of prior service credit shown in the preceding table was based on a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under each respective plan. 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.

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,
	2019			2018			2017			2019			2018			2017
Net gain (loss) arising during the year:
Net actuarial gain (loss)	$	(204	)	$	(8	)	$	(73	)	$	(41	)	$	9		$	(6	)
Prior service (cost) credit	—			7			(4		)	(3		)	—			—
Net (gain) loss reclassified into income:
Net actuarial (gain) loss	41			65			53			(3		)	(2		)	(3		)
Prior service credit	(19		)	(18		)	(20		)	(9		)	(11		)	(16		)
Curtailment and settlement loss	4			7			4			—			—			—
Total changes in other comprehensive income (loss)	$	(178	)	$	53		$	(40	)	$	(56	)	$	(4	)	$	(25	)

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



	Pension Plans						Other Postretirement Benefit Plans
	December 31,						December 31,
	2019			2018			2019			2018
Net actuarial (gain) loss	$	988		$	828		$	(20	)	$	(64	)
Prior service credit	(90		)	(108		)	(19		)	(31		)
Total	$	898		$	720		$	(39	)	$	(95	)

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



	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2019		2018		2019		2018
Discount rate	3.14	%	4.25	%	3.32	%	4.40	%
Rate of compensation increase	3.75	%	3.78	%	n/a		n/a
Interest crediting rate for cash balance plans	3.03	%	3.04	%	n/a		n/a

The discount rate assumption used to determine the benefit obligations as of December 31, 2019 and 2018 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 to provide a means for plan sponsors to value the liabilities of their pension plans

or postretirement benefit plans. It is a hypothetical double-A yield curve represented by a series of annualized individual discount rates with maturities from one-half year to 99 years. Each bond issue underlying the 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 among those with average ratings of double-A are included in this 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,
	2019		2018		2017		2019		2018		2017
Discount rate	4.24	%	3.59	%	4.08	%	4.40	%	3.72	%	4.26	%
Expected long-term rate of return on plan assets	7.22	%	7.24	%	7.29	%	n/a		n/a		n/a
Rate of compensation increase	3.78	%	3.86	%	3.81	%	n/a		n/a		n/a
Interest crediting rate for cash balance plans	3.04	%	3.04	%	3.04	%	n/a		n/a		n/a

The assumed health care cost trend rates were as follows:



	December 31,
	2019		2018
Health care cost trend rate assumed for the next year	7.32	%	7.29	%
Rate to which the cost trend rate was assumed to decline (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2026		2026

The following tables present the fair values of the assets of our pension plans (in millions) as of December 31, 2019 and 2018 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. As previously noted, we do not fund or fully fund U.S. nonqualified and certain international pension plans that are not subject to funding requirements, and we do not fund our other postretirement benefit plans.



	Fair Value Hierarchy							Total as of December 31, 2019
	Level 1			Level 2		Level 3		Total as of December 31, 2019
Equity securities:
U.S. companies (a)	$	622		$	—	$	—	$	622
International companies	205			1		—		206
Preferred stock	4			—		—		4
Mutual funds:
International growth	123			—		—		123
Index funds	90			—		—		90
Corporate debt instruments (a)	—			293		—		293
Government securities:
U.S. Treasury securities	53			—		—		53
Other government securities	—			148		—		148
Common collective trusts (b)	—			751		—		751
Pooled separate accounts	—			250		—		250
Private funds	—			104		—		104
Insurance contract	—			17		—		17
Interest and dividends receivable	5			—		—		5
Cash and cash equivalents	59			—		—		59
Securities transactions payable, net	(16		)	—		—		(16		)
Total pension plan assets	$	1,145		$	1,564	$	—	$	2,709

^{___________________________}

See notes on page 108.



	Fair Value Hierarchy							Total as of December 31, 2018
	Level 1			Level 2		Level 3		Total as of December 31, 2018
Equity securities:
U.S. companies (a)	$	497		$	—	$	—	$	497
International companies	159			1		—		160
Preferred stock	4			—		—		4
Mutual funds:
International growth	97			—		—		97
Index funds	76			—		—		76
Corporate debt instruments (a)	—			284		—		284
Government securities:
U.S. Treasury securities	45			—		—		45
Other government securities	—			138		—		138
Common collective trusts (b)	—			609		—		609
Pooled separate accounts	—			190		—		190
Private funds	—			87		—		87
Insurance contract	—			18		—		18
Interest and dividends receivable	5			—		—		5
Cash and cash equivalents	40			—		—		40
Securities transactions payable, net	(14		)	—		—		(14		)
Total pension plan assets	$	909		$	1,327	$	—	$	2,236

^{__________________________________}


(a)	This class of securities is held in a wide range of industrial sectors.


(b)	This class includes primarily investments in approximately 75 percent equities and 25 percent bonds as of December 31, 2019. As of December 31, 2018, this class included primarily investments in approximately 70 percent equities and 30 percent bonds.

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 stocks 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, 2019, the target allocations for plan assets under our primary pension plan are 70 percent equity securities and 30 percent fixed income investments.

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 $77 million, $74 million, and $70 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

14.

STOCK-BASED COMPENSATION

Overview

Under our 2011 Omnibus Stock Incentive Plan (the OSIP), various stock and stock-based awards may be granted to employees and non-employee directors. Awards available under the OSIP include, but are not limited to, (i) restricted stock that vests over a period determined by our compensation committee, (ii) performance awards that vest upon the achievement of an objective performance goal, (iii) options to purchase shares of common stock, (iv) dividend equivalent rights, and (v) stock unit awards. The OSIP was approved by our stockholders on April 28, 2011 and re-approved by our stockholders on May 12, 2016. As of December 31, 2019, 7,740,665 shares of our common stock remained available to be awarded under the OSIP.

We also maintain another stock-based compensation plan under which previously granted equity awards remain outstanding. No additional grants may be awarded under this plan.

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



	Year Ended December 31,
	2019		2018		2017
Stock-based compensation expense:
Restricted stock	$	64	$	63	$	58
Performance awards	23		22		19
Stock options and other awards	2		1		—
Total stock-based compensation expense	$	89	$	86	$	77
Tax benefit recognized on stock-based compensation expense	$	19	$	18	$	27
Tax benefit realized for tax deductions resulting from exercises and vestings	17		32		44
Effect of tax deductions in excess of recognized stock-based compensation expense	7		20		24

The following is a discussion of our significant stock-based compensation arrangement.

Restricted Stock

Restricted stock is granted to employees and non-employee directors. Restricted stock granted to employees 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. Restricted stock granted to our non-employee directors vests in equal annual installments over a period of three years beginning one year after the date of grant. The fair value of each restricted stock per share 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, 2019	1,176,578		$	80.70
Granted	677,482		98.75
Vested	(757,217	)	78.54
Forfeited	(4,989	)	83.18
Nonvested shares as of December 31, 2019	1,091,854		93.38

As of December 31, 2019, there was $59 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,
	2019		2018		2017
Weighted-average grant-date fair value per share of restricted stock granted	$	98.75	$	92.12	$	79.32
Fair value of restricted stock vested (in millions)	74		80		71

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

15.

INCOME TAXES

Income Statement Components

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



	Year Ended December 31,
	2019		2018		2017
U.S. operations	$	2,496	$	3,168	$	2,283
International operations	990		1,064		924
Income before income tax expense (benefit)	$	3,486	$	4,232	$	3,207

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



	Year Ended December 31,
	2019		2018		2017
U.S.	21	%	21	%	35	%
Canada	15	%	15	%	15	%
U.K.	19	%	19	%	19	%
Ireland	13	%	13	%	13	%
Peru	30	%	30	%	n/a
Mexico	30	%	30	%	n/a

The following is a reconciliation of income tax expense (benefit) computed by applying statutory income tax rates as reflected in the preceding table to actual income tax expense (benefit) (in millions):



	U.S.					International					Total
	Amount			Percent		Amount			Percent		Amount			Percent
Year ended December 31, 2019
Income tax expense at statutory rates	$	524		21.0	%	$	147		14.8	%	$	671		19.2	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	16			0.7	%	88			8.9	%	104			3.0	%
Permanent differences	(36		)	(1.5	)%	10			1.0	%	(26		)	(0.7	)%
GILTI tax (a)	115			4.6	%	—			—		115			3.3	%
Foreign tax credits	(95		)	(3.8	)%	—			—		(95		)	(2.7	)%
Repatriation withholding tax	45			1.8	%	—			—		45			1.3	%
Tax effects of income associated with noncontrolling interests	(77		)	(3.1	)%	2			0.2	%	(75		)	(2.2	)%
Other, net	(36		)	(1.4	)%	(1		)	(0.1	)%	(37		)	(1.1	)%
Income tax expense	$	456		18.3	%	$	246		24.8	%	$	702		20.1	%

^{__________________________}


(a)	See note on page 112.



	U.S.					International				Total
	Amount			Percent		Amount		Percent		Amount			Percent
Year ended December 31, 2018
Income tax expense at statutory rates	$	665		21.0	%	$	163	15.3	%	$	828		19.6	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	44			1.4	%	80		7.5	%	124			2.9	%
Permanent differences	(9		)	(0.3	)%	—		—		(9		)	(0.2	)%
GILTI tax (a)	67			2.1	%	—		—		67			1.6	%
Foreign tax credits	(50		)	(1.6	)%	—		—		(50		)	(1.2	)%
Effects of Tax Reform (a)	(12		)	(0.4	)%	—		—		(12		)	(0.3	)%
Tax effects of income associated with noncontrolling interests	(49		)	(1.5	)%	—		—		(49		)	(1.2	)%
Other, net	(23		)	(0.7	)%	3		0.3	%	(20		)	(0.5	)%
Income tax expense	$	633		20.0	%	$	246	23.1	%	$	879		20.7	%

Year ended December 31, 2017
Income tax expense at statutory rates	$	799		35.0	%	$	158	17.1	%	$	957		29.8	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	37			1.6	%	46		5.0	%	83			2.6	%
Permanent differences:
Manufacturing deduction	(42		)	(1.8	)%	—		—		(42		)	(1.3	)%
Other	(9		)	(0.4	)%	—		—		(9		)	(0.3	)%
Change in tax law (a)	(1,862		)	(81.6	)%	—		—		(1,862		)	(58.1	)%
Tax effects of income associated with noncontrolling interests	(31		)	(1.4	)%	—		—		(31		)	(1.0	)%
Other, net	(52		)	(2.3	)%	7		0.8	%	(45		)	(1.4	)%
Income tax expense (benefit)	$	(1,160	)	(50.9	)%	$	211	22.9	%	$	(949	)	(29.7	)%

^{__________________________}


(a)	See “Tax Reform” below for a discussion of the changes in tax law in the U.S. that were enacted in December 2017.

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



	U.S.				International			Total
Year ended December 31, 2019
Current:
Country	$	145			$	186		$	331
U.S. state / Canadian provincial	37				100			137
Total current	182				286			468
Deferred:
Country	290				(28		)	262
U.S. state / Canadian provincial	(16		)		(12		)	(28		)
Total deferred	274				(40		)	234
Income tax expense	$	456			$	246		$	702

Year ended December 31, 2018
Current:
Country	$	432			$	141		$	573
U.S. state / Canadian provincial	37				66			103
Total current	469			(a)	207			676
Deferred:
Country	145				25			170
U.S. state / Canadian provincial	19				14			33
Total deferred	164			(b)	39			203
Income tax expense	$	633			$	246		$	879

Year ended December 31, 2017
Current:
Country	$	1,305			$	194		$	1,499
U.S. state / Canadian provincial	34				61			95
Total current	1,339			(a)	255			1,594
Deferred:
Country	(2,522		)		(29		)	(2,551		)
U.S. state / Canadian provincial	23				(15		)	8
Total deferred	(2,499		)	(b)	(44		)	(2,543		)
Income tax expense (benefit)	$	(1,160	)		$	211		$	(949	)

^{___________________________}


(a)	Current income tax expense includes a $21 million benefit and a $781 million expense related to our Tax Reform adjustment for the years ended December 31, 2018 and 2017, respectively, as described in “Tax Reform” below.


(b)	Deferred income tax expense (benefit) includes a $9 million expense and a $2.6 billion benefit related to our Tax Reform adjustment for the years ended December 31, 2018 and 2017, respectively, as described in “Tax Reform” below.

Income Taxes Paid (Refunded)

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



	Year Ended December 31,
	2019				2018		2017
U.S.	$	(298	)	(a)	$	1,016	$	239
International	182				345		171
Income taxes paid (refunded), net	$	(116	)		$	1,361	$	410

^{__________________________}


(a)	This amount includes a refund of $348 million, including interest, that we received related to the settlement of the combined audit of our U.S. federal income tax returns for 2010 and 2011. See “Tax Returns Under Audit – U.S. Federal” below.

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,
	2019			2018
Deferred income tax assets:
Tax credit carryforwards	$	683		$	644
Net operating losses (NOLs)	582			523
Inventories	141			101
Compensation and employee benefit liabilities	213			175
Environmental liabilities	69			71
Other	156			141
Total deferred income tax assets	1,844			1,655
Valuation allowance	(1,200		)	(1,111		)
Net deferred income tax assets	644			544

Deferred income tax liabilities:
Property, plant, and equipment	4,924			4,589
Deferred turnaround costs	331			316
Inventories	217			287
Investments	122			142
Other	153			172
Total deferred income tax liabilities	5,747			5,506
Net deferred income tax liabilities	$	5,103		$	4,962

We had the following income tax credit and loss carryforwards as of December 31, 2019 (in millions):



	Amount		Expiration
U.S. state income tax credits (gross amount)	$	89	2020 through 2033
U.S. state income tax credits (gross amount)	17		Unlimited
U.S. foreign tax credits	598		2027
U.S. state NOLs (gross amount)	10,913		2020 through 2039

We have recorded a valuation allowance as of December 31, 2019 and 2018 due to uncertainties related to our ability to utilize some of our deferred income tax assets associated with our U.S. foreign tax credits and certain U.S. state income tax credits and 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 $89 million in 2019 primarily due to an increase in excess U.S. foreign tax credits as well as U.S. state income tax NOLs.

As a part of completing our accounting for Tax Reform in 2018 as described in “Tax Reform” below, we assessed our ability to use our foreign tax credits to offset the tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and concluded that our foreign tax credit carryforwards were not more likely than not to be realized, and we recorded a full valuation allowance against the deferred income tax asset associated with those carryforwards.

As described in “Tax Reform” below, one of the most significant changes in Tax Reform was the shift from a worldwide system of taxation to a hybrid territorial system. The shift to a hybrid territorial system allows us to distribute cash via a dividend from our international subsidiaries with a full dividend received deduction in the U.S. As a result, we will not recognize U.S. federal deferred taxes for the future tax consequences attributable to undistributed earnings of our international subsidiaries. However, there may be a cost to repatriate the undistributed earnings of certain of our international subsidiaries to us, including, but not limited to, withholding taxes imposed by certain international jurisdictions and U.S. state income taxes. As of December 31, 2019, the cumulative undistributed earnings of these subsidiaries that is considered permanently reinvested in those countries were approximately $4.2 billion. It is not practicable to estimate the amount of additional tax that would be payable on those earnings, if distributed.

Unrecognized Tax Benefits

Change in Unrecognized Tax Benefits

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



	Year Ended December 31,
	2019			2018			2017
Balance as of beginning of year	$	970		$	941		$	936
Additions for tax positions related to the current year	19			23			33
Additions for tax positions related to prior years	30			28			15
Reductions for tax positions related to prior years	(101		)	(19		)	(42		)
Reductions for tax positions related to the lapse of applicable statute of limitations	(14		)	(1		)	(1		)
Settlements	(7		)	(2		)	—
Balance as of end of year	$	897		$	970		$	941

Liability for Unrecognized Tax Benefits

The following is a reconciliation of unrecognized tax benefits to our liability for unrecognized tax benefits presented in our balance sheets (in millions).



	December 31,
	2019			2018
Unrecognized tax benefits	$	897		$	970
Tax refund claims not yet filed but that we intend to file	(29		)	(277		)
Interest and penalties	100			88
Liability for unrecognized tax benefits presented in our balance sheets	$	968		$	781

Our liability for unrecognized tax benefits is reflected in the following balance sheet line items (in millions):



	December 31,
	2019		2018
Income taxes payable	$	—	$	42
Other long-term liabilities	954		721
Deferred tax liabilities	14		18
Liability for unrecognized tax benefits presented in our balance sheets	$	968	$	781

As of December 31, 2019, our liability for unrecognized tax benefits includes $525 million of refund claims associated with taxes paid on incentive payments received from the U.S. federal government for blending biofuels into refined petroleum products. We recorded a tax refund receivable of $525 million in connection with our refund claims, but we also recorded a liability for unrecognized tax benefits of $525 million due to the complexity of this matter and uncertainties with respect to sustaining these refund claims. Therefore, our

financial position, results of operations, and liquidity will not be negatively impacted if we are unsuccessful in sustaining these refund claims.

Other Disclosures

As of December 31, 2019 and 2018, there was $762 million and $807 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, 2019, 2018, and 2017 was immaterial.

Although reasonably possible, we do not anticipate that any of our tax audits will be resolved in 2020 that would result in a reduction in our liability for unrecognized tax benefits due to the tax positions being sustained or due to our agreement of their disallowance. Should any reductions occur, we do not expect they would have a significant impact on our financial statements because such reductions would not significantly affect our annual effective tax rate.

Tax Returns Under Audit

U.S. Federal

In 2019, we settled the combined audit related to our U.S. federal income tax returns for 2010 and 2011 and received a refund of $348 million, including interest. We did not have a significant change to our liability for unrecognized tax benefits upon settlement of the audit. As of December 31, 2019, our U.S. federal income tax returns for 2012 through 2015 were under audit by the IRS. The IRS has proposed adjustments and we are working with the IRS to resolve these matters. We believe that these matters will be resolved for amounts consistent with our liability for unrecognized tax benefits associated with these matters.

We have amended our U.S federal income tax returns for 2005 through 2011 to exclude from taxable income incentive payments received from the U.S. federal government for blending biofuels into refined petroleum products, and we have claimed $525 million in refunds. The 2005 through 2009 amended return refund claims have been disallowed by the IRS and we are currently evaluating our options to contest the disallowance of these adjustments. As noted above in the discussion of our liability for unrecognized tax benefits, an ultimate disallowance of these refund claims would not negatively impact our financial position, results of operations, and liquidity.

U.S. State

As of December 31, 2019, our California tax returns for 2004 through 2008 and 2011 through 2016 were under audit by the state of California. We do not expect the ultimate disposition of these 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 the liability for unrecognized tax benefits associated with these audits.

International

As of December 31, 2019, our Canadian subsidiary’s federal tax returns for 2013 through 2016 were under audit by the Canada Revenue Agency (CRA) and our Quebec provincial tax returns for 2013 through 2016 were under audit by Revenue Quebec. We are currently protesting the proposed adjustments by the CRA for 2013 and 2014 and we do not expect the ultimate disposition of these adjustments will result in a material change to our financial position, results of operations, or liquidity.

Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (Tax Reform) was enacted, which resulted in significant changes to the Code and was effective beginning on January 1, 2018. The most significant changes affecting us are as follows:


•	reduction in the statutory income tax rate from 35 percent to 21 percent;


•	assessment of a one-time transition tax on deemed repatriated earnings and profits from our international subsidiaries;


•	shift from a worldwide system of taxation to a hybrid territorial system of taxation, resulting in a minimum tax on the income of international subsidiaries (the GILTI tax) rather than a tax deferral on such earnings in certain circumstances;


•	deduction for all of the costs to acquire or construct certain business assets in the year they are placed in service through 2022; and


•	repeal of the manufacturing deduction;

The following narrative describes the activity that occurred with respect to Tax Reform for the years ended December 31, 2017 and 2018.

We reflected an overall income tax benefit of $1.9 billion for the year ended December 31, 2017 with respect to Tax Reform as a result of the following:


•	We remeasured our U.S. deferred tax assets and liabilities using the 21 percent rate, which resulted in a tax benefit and a reduction to our net deferred tax liabilities of $2.6 billion.

•

We recognized a one-time transition tax of $734 million on the deemed repatriation of previously undistributed accumulated earnings and profits of our international subsidiaries based on approximately $4.7 billion of the combined earnings and profits of our international subsidiaries that had not been distributed to us. This transition tax will be remitted to the Internal Revenue Service (IRS) over the eight-year period provided in the Code, with the first annual remittance paid in 2018.


•	We accrued withholding tax of $47 million on a portion of the earnings of one of our international subsidiaries that we have deemed to not be permanently reinvested in our operations in that country.

Because of the significant and complex changes to the Code from Tax Reform, including the need for regulatory guidance from the IRS to properly account for many of the provisions, the SEC issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” which required that the effects of Tax Reform be recorded for items where the accounting was complete, as well as for items where a reasonable estimate could be made (referred to as provisional amounts). For items where reasonable estimates could not be made, provisional amounts were not recorded and those items continued to be accounted for under the Code prior to changes from Tax Reform until a reasonable estimate could be made.

The following table summarizes the components of our adjustment (in millions) to reflect the effects of Tax Reform for the years ended December 31, 2018 and 2017, including whether such amounts were complete, provisional, or incomplete. The amounts presented for 2018 were completed during the fourth quarter of 2018.



	Year Ended December 31,								Cumulative Tax Reform Adjustment
	2017				2018
	Accounting Status	Amount			Accounting Status	Amount
Income tax benefit from the remeasurement of U.S. deferred income tax assets and liabilities	Complete	$	(2,643	)	Complete	$	—		$	(2,643	)
Tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries	Provisional	734			Complete	6			740
Recognition of foreign withholding tax, net of U.S. federal tax benefit	Complete	47			Complete	—			47
Deductibility of certain executive compensation expense	Incomplete	—			Complete	5			5
Income tax expense associated with the statutory income tax rate differential on accrual to return adjustments that were identified upon completion of our U.S. federal income tax return in 2018	Incomplete	—			Complete	9			9
Foreign tax credit available to offset the tax on deemed repatriation of the accumulated earnings and profits of our international subsidiaries	Incomplete	—			Complete	(32		)	(32		)
Tax Reform benefit		$	(1,862	)		$	(12	)	$	(1,874	)

Earnings Per Common Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

EARNINGS PER COMMON SHARE

16.

EARNINGS PER COMMON SHARE

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



	Year Ended December 31,
	2019		2018		2017
Earnings per common share
Net income attributable to Valero stockholders	$	2,422	$	3,122	$	4,065
Less: Income allocated to participating securities	7		9		14
Net income available to common shareholders	$	2,415	$	3,113	$	4,051

Weighted-average common shares outstanding	413		426		442

Earnings per common share	$	5.84	$	7.30	$	9.17

Earnings per common share – assuming dilution
Net income attributable to Valero stockholders	$	2,422	$	3,122	$	4,065

Weighted-average common shares outstanding	413		426		442
Effect of dilutive securities	1		2		2
Weighted-average common shares outstanding – assuming dilution	414		428		444

Earnings per common share – assuming dilution	$	5.84	$	7.29	$	9.16

Participating securities include restricted stock and performance awards granted under our 2011 Omnibus Stock Incentive Plan. Dilutive securities include participating securities as well as outstanding stock options granted under our 2011 Omnibus Stock Incentive Plan.

Revenues and Segment Information

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

REVENUES AND SEGMENT INFORMATION

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.

Receivables from Contracts with Customers

Our receivables from contracts with customers are included in “receivables, net” as presented in Note 3.

Contract Liabilities from Contracts with Customers

Our contract liabilities from contracts with customers are included in accrued expenses as presented in Note 8. Substantially all of the contract liabilities as of December 31, 2018 were recognized into revenue during the year ended December 31, 2019.

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, 2019, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information

Effective January 1, 2019, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. Accordingly, we created a new reportable segment — renewable diesel — because of the growing importance of renewable fuels in the market and the growth of our investments in renewable fuels production. The renewable diesel segment includes the operations of DGD, which were transferred from the refining segment on January 1, 2019. Also effective January 1, 2019, we no longer have a VLP segment, and we include the operations of VLP in our refining segment. This change was made because of the Merger Transaction with VLP, as described in Note 2, and the resulting change in how we manage VLP’s operations. We no longer manage VLP as a business but as logistics assets that support the operations of our refining segment. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.

We have three reportable segments — refining, ethanol, and renewable diesel. 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 15 petroleum refineries, the associated marketing activities, and 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.

•

The ethanol segment includes the operations of our 14 ethanol plants, the associated marketing activities, and logistics assets that support our ethanol operations. 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.


•	The renewable diesel segment includes the operations of DGD, our consolidated joint venture as discussed in Note 12. The principal product manufactured by DGD and sold by this segment is renewable diesel. This segment sells some renewable diesel to the refining segment, which is then sold to that segment’s customers.

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

The following tables reflect information about our operating income and total expenditures for long-lived assets by reportable segment (in millions):



	Refining		Ethanol		Renewable Diesel		Corporate and Eliminations			Total
Year ended December 31, 2019
Revenues:
Revenues from external customers	$	103,746	$	3,606	$	970	$	2		$	108,324
Intersegment revenues	18		231		247		(496		)	—
Total revenues	103,764		3,837		1,217		(494		)	108,324
Cost of sales:
Cost of materials and other	93,371		3,239		360		(494		)	96,476
Operating expenses (excluding depreciation and amortization expense reflected below)	4,289		504		75		—			4,868
Depreciation and amortization expense	2,062		90		50		—			2,202
Total cost of sales	99,722		3,833		485		(494		)	103,546
Other operating expenses	20		1		—		—			21
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		868			868
Depreciation and amortization expense	—		—		—		53			53
Operating income by segment	$	4,022	$	3	$	732	$	(921	)	$	3,836
Total expenditures for long-lived assets (a)	$	2,581	$	47	$	160	$	58		$	2,846

^{__________________________}


(a)	See note on page 123.



	Refining		Ethanol		Renewable Diesel		Corporate and Eliminations			Total
Year ended December 31, 2018
Revenues:
Revenues from external customers	$	113,093	$	3,428	$	508	$	4		$	117,033
Intersegment revenues	25		210		170		(405		)	—
Total revenues	113,118		3,638		678		(401		)	117,033
Cost of sales:
Cost of materials and other	101,866		3,008		262		(404		)	104,732
Operating expenses (excluding depreciation and amortization expense reflected below)	4,154		470		66		—			4,690
Depreciation and amortization expense	1,910		78		29		—			2,017
Total cost of sales	107,930		3,556		357		(404		)	111,439
Other operating expenses	45		—		—		—			45
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		925			925
Depreciation and amortization expense	—		—		—		52			52
Operating income by segment	$	5,143	$	82	$	321	$	(974	)	$	4,572
Total expenditures for long-lived assets (a)	$	2,767	$	373	$	192	$	44		$	3,376



Year ended December 31, 2017
Revenues:
Revenues from external customers	$	90,258	$	3,324	$	393	$	5		$	93,980
Intersegment revenues	8		176		241		(425		)	—
Total revenues	90,266		3,500		634		(420		)	93,980
Cost of sales:
Cost of materials and other	80,160		2,804		498		(425		)	83,037
Operating expenses (excluding depreciation and amortization expense reflected below)	4,014		443		47		—			4,504
Depreciation and amortization expense	1,824		81		29		—			1,934
Total cost of sales	85,998		3,328		574		(425		)	89,475
Other operating expenses	61		—		—		—			61
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		829			829
Depreciation and amortization expense	—		—		—		52			52
Operating income by segment	$	4,207	$	172	$	60	$	(876	)	$	3,563
Total expenditures for long-lived assets (a)	$	1,732	$	84	$	88	$	44		$	1,948

^{__________________________}


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

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



	Year Ended December 31,
	2019		2018		2017
Refining:
Gasolines and blendstocks	$	42,798	$	46,596	$	40,347
Distillates	51,942		55,037		41,680
Other product revenues	9,006		11,460		8,231
Total refining revenues	103,746		113,093		90,258
Ethanol:
Ethanol	2,889		2,713		2,764
Distillers grains	717		715		560
Total ethanol revenues	3,606		3,428		3,324
Renewable diesel:
Renewable diesel	970		508		393
Corporate – other revenues	2		4		5
Revenues	$	108,324	$	117,033	$	93,980

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,
	2019		2018		2017
U.S.	$	77,173	$	82,992	$	66,614
Canada	7,915		9,211		7,039
U.K. and Ireland	13,584		15,208		11,556
Other countries	9,652		9,622		8,771
Revenues	$	108,324	$	117,033	$	93,980

Long-lived assets include property, plant, and equipment 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,
	2019		2018
U.S.	$	27,485	$	27,475
Canada	1,886		1,798
U.K. and Ireland	1,232		1,113
Other countries	497		266
Total long-lived assets	$	31,100	$	30,652

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



	December 31,
	2019		2018
Refining	$	47,067	$	43,488
Ethanol	1,615		1,691
Renewable diesel	1,412		787
Corporate and eliminations	3,770		4,189
Total assets	$	53,864	$	50,155

As of December 31, 2019 and 2018, our investments in unconsolidated joint ventures accounted for under the equity method were $942 million and $542 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.

Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Information [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

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,
	2019			2018			2017
Decrease (increase) in current assets:
Receivables, net	$	(1,468	)	$	(457	)	$	(870	)
Inventories	(385		)	(197		)	(516		)
Prepaid expenses and other	427			(77		)	151
Increase (decrease) in current liabilities:
Accounts payable	1,534			304			1,842
Accrued expenses	(27		)	(113		)	21
Taxes other than income taxes payable	60			(73		)	172
Income taxes payable	153			(684		)	489
Changes in current assets and current liabilities	$	294		$	(1,297	)	$	1,289

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



	Year Ended December 31,
	2019			2018		2017
Interest paid in excess of amount capitalized, including interest on finance leases	$	452		$	463	$	457
Income taxes paid (refunded), net (see Note 15)	(116		)	1,361		410

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



	Year Ended December 31, 2019
	Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	441	$	50
Investing cash flows	1		—
Financing cash flows	—		34
Changes in lease balances resulting from new and modified leases (a)	1,756		239

___________________


(a)	Includes noncash activity of $1.3 billion for operating lease ROU assets recorded on January 1, 2019 upon adoption of Topic 842.

Noncash investing and financing activities for the year ended December 31, 2019 also included the derecognition of the property, plant, and equipment and the related long-term liability associated with a build-to-suit lease arrangement with respect to the MVP Terminal, and the subsequent recognition of our investment in MVP, which is the unconsolidated joint venture that owns the MVP Terminal, as described in Note 10.

Noncash investing and financing activities for the years ended December 31, 2018 and 2017 included the recognition of (i) finance lease assets and related obligations primarily for the lease of storage tanks and (ii) terminal assets and related obligations under owner accounting as described in Note 10.

Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

19.

FAIR VALUE MEASUREMENTS

General

U.S. 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.

U.S. 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 sheet is presented below under “Other Financial Instruments.”

U.S. 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. 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.

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, 2019 and 2018.

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 on the balance sheet.



	December 31, 2019
							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	$	617	$	—	$	—	$	617	$	(612	)	$	—		$	5	$	—
Foreign currency contracts	27		—		—		27		n/a			n/a			27		n/a
Investments of certain benefit plans	65		—		9		74		n/a			n/a			74		n/a
Total	$	709	$	—	$	9	$	718	$	(612	)	$	—		$	106

Liabilities
Commodity derivative contracts	$	668	$	—	$	—	$	668	$	(612	)	$	(56	)	$	—	$	(84	)
Environmental credit obligations	—		2		—		2		n/a			n/a			2		n/a
Physical purchase contracts	—		3		—		3		n/a			n/a			3		n/a
Foreign currency contracts	10		—		—		10		n/a			n/a			10		n/a
Total	$	678	$	5	$	—	$	683	$	(612	)	$	(56	)	$	15



	December 31, 2018
							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	$	2,792	$	—	$	—	$	2,792	$	(2,669	)	$	(34	)	$	89	$	—
Foreign currency contracts	4		—		—		4		n/a			n/a			4		n/a
Investments of certain benefit plans	60		—		9		69		n/a			n/a			69		n/a
Total	$	2,856	$	—	$	9	$	2,865	$	(2,669	)	$	(34	)	$	162

Liabilities
Commodity derivative contracts	$	2,681	$	—	$	—	$	2,681	$	(2,669	)	$	(12	)	$	—	$	(136	)
Environmental credit obligations	—		13		—		13		n/a			n/a			13		n/a
Physical purchase contracts	—		5		—		5		n/a			n/a			5		n/a
Foreign currency contracts	1		—		—		1		n/a			n/a			1		n/a
Total	$	2,682	$	18	$	—	$	2,700	$	(2,669	)	$	(12	)	$	19

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.

•

Foreign currency contracts consist of foreign currency exchange and purchase contracts and foreign currency swap agreements related to our international 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.

•

Environmental credit obligations represent our liability for the purchase of (i) biofuel credits (primarily RINs in the U.S.) needed to satisfy our obligation to blend biofuels into the products we produce and (ii) emission credits under the California Global Warming Solutions Act (the California cap-and-trade system, also known as AB 32) and similar programs, (collectively, the cap-and-trade systems). To the degree we are unable to blend biofuels (such as ethanol and biodiesel) at percentages required under the biofuel programs, we must purchase biofuel credits to comply with these programs. Under the cap-and-trade systems, we must purchase emission credits to comply with these systems. These programs are described in Note 20 under “Environmental Compliance Program Price Risk.” The liability for environmental credits is based on our deficit for such credits as of the balance sheet date, if any, after considering any credits acquired or under contract, and is equal to the product of the credits deficit and the market price of these credits as of the balance sheet date. The environmental credit obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using the market approach based on quoted prices from an independent pricing service.

There were no transfers into or out of Level 3 for assets and liabilities held as of December 31, 2019 and 2018 that were measured at fair value on a recurring basis.

There was no significant activity during the years ended December 31, 2019, 2018, and 2017 related to the fair value amounts categorized in Level 3 as of December 31, 2019 and 2018.

Nonrecurring Fair Value Measurements

There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2019 and 2018.

Other Financial Instruments

Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the following table along with their associated fair values (in millions):



		December 31, 2019				December 31, 2018
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	Level 1	$	2,583	$	2,583	$	2,982	$	2,982
Financial liabilities
Debt (excluding finance leases)	Level 2	8,881		10,583		8,503		8,986

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Price Risk Management Activities

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

PRICE RISK MANAGEMENT ACTIVITIES

20.

PRICE RISK MANAGEMENT ACTIVITIES

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 various government and regulatory 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 is summarized below under “Effect of Derivative Instruments on Income.”

Risk Management Activities by Type of Risk

Commodity Price Risk

We are exposed to market risks related to the volatility in the price of crude oil, refined petroleum products (primarily gasoline and distillate), renewable diesel, grain (primarily corn), renewable diesel feedstocks, and natural gas 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 has been approved by our board of directors.

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 (i) feedstock, refined petroleum product, or natural gas purchases, or (ii) refined petroleum product or renewable diesel 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 refined petroleum product inventories and fixed-price purchase contracts, and (ii) lock in the price of forecasted feedstock, refined petroleum product, or natural gas purchases or refined petroleum product or renewable diesel sales at existing market prices that we deem favorable.

As of December 31, 2019, 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
	2020	2021
Derivatives designated as cash flow hedges
Renewable diesel:
Futures – long	995	—
Futures – short	2,492	—

Derivatives designated as economic hedges
Crude oil and refined petroleum products:
Futures – long	73,348	2
Futures – short	76,045	—
Options – long	1,550	—
Options – short	1,550	—
Corn:
Futures – long	50,120	—
Futures – short	66,575	295
Physical contracts – long	22,055	306

Foreign Currency Risk

We are exposed to exchange rate fluctuations on transactions related to our international 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 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, 2019, we had foreign currency contracts to purchase $739 million of U.S. dollars and $2.3 billion of U.S. dollar equivalent Canadian dollars. All of these commitments matured on or before February 15, 2020.

Environmental Compliance Program Price Risk

We are exposed to market risk related to the volatility in the price of credits needed to comply with various governmental and regulatory environmental compliance programs. To manage this risk, we enter into contracts to purchase these credits when prices are deemed favorable. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. Certain of these programs require us to blend biofuels into the products we produce, and we are subject to such programs in most of the countries in which we operate. These countries set annual quotas for the percentage of biofuels that must be blended into the motor fuels consumed in these countries. As a producer of motor fuels from petroleum, we are obligated to blend biofuels into the products we produce at

a rate that is at least equal to the applicable quota. To the degree we are unable to blend at the applicable rate, we must purchase biofuel credits (primarily RINs in the U.S.). We are exposed to the volatility in the market price of these credits, and we manage that risk by purchasing biofuel credits when prices are deemed favorable. For the years ended December 31, 2019, 2018, and 2017, the cost of meeting our obligations under these compliance programs was $318 million, $536 million, and $942 million, respectively. These amounts are reflected in cost of materials and other.

We are subject to additional requirements under GHG emission programs, including the cap-and-trade systems, as discussed in Note 19. Under these cap-and-trade systems, we purchase various GHG emission credits available on the open market. Therefore, we are exposed to the volatility in the market price of these credits. The cost to implement certain provisions of the cap-and-trade systems are significant; however, we recovered the majority of these costs from our customers for the years ended December 31, 2019, 2018, and 2017 and expect to continue to recover the majority of these costs in the future. For the years ended December 31, 2019, 2018, and 2017, the net cost of meeting our obligations under these compliance programs was immaterial.

Fair Values of Derivative Instruments

The following tables provide information about the fair values of our derivative instruments as of December 31, 2019 and 2018 (in millions) and the line items in the 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 tables, however, are 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, 2019				December 31, 2018
	Balance Sheet Location	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments
Commodity contracts	Receivables, net	$	9	$	20	$	—	$	—

Derivatives not designated as hedging instruments
Commodity contracts	Receivables, net	$	608	$	648	$	2,792	$	2,681
Physical purchase contracts	Inventories	—		3		—		5
Foreign currency contracts	Receivables, net	27		—		4		—
Foreign currency contracts	Accrued expenses	—		10		—		1
Total		$	635	$	661	$	2,796	$	2,687

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 approved by our board of directors. 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.

Effect of Derivative Instruments on Income

The following table provides information about the gain (loss) recognized in income on our derivative instruments and the line items in the 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,
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	2019			2018			2017
Commodity contracts	Revenues	$	5		$	—		$	—
Commodity contracts	Cost of materials and other	(68		)	(165		)	(278		)
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	—			7			—
Foreign currency contracts	Cost of materials and other	(21		)	56			(40		)
Foreign currency contracts	Other income, net	75			(43		)	—

Condensed Consolidating Financial Statements

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

21.

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

In connection with the completion of the Merger Transaction as described in Note 2, Valero Energy Corporation, the parent company, entered into a guarantee agreement to fully and unconditionally guarantee the prompt payment, when due, of the following debt issued by Valero Energy Partners LP, an indirect wholly owned subsidiary of Valero Energy Corporation, that was outstanding as of December 31, 2019:

•4.375 percent Senior Notes due December 15, 2026, and

•4.5 percent Senior Notes due March 15, 2028.

The following condensed consolidating financial information is provided as an alternative to providing separate financial statements for Valero Energy Partners LP, which has no independent assets or operations. The financial position, results of operations, and cash flows of Valero Energy Partners LP’s wholly owned subsidiaries are included in “Other Non-Guarantor Subsidiaries.” The accounts for all companies reflected herein are presented using the equity method of accounting for investments in subsidiaries.

Condensed Consolidating Balance Sheet

December 31, 2019

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP		Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	912		$	—	$	1,671		$	—		$	2,583
Receivables, net	—			—		8,904			—			8,904
Receivables from affiliates	4,336			—		13,806			(18,142		)	—
Inventories	—			—		7,013			—			7,013
Prepaid expenses and other	63			—		406			—			469
Total current assets	5,311			—		31,800			(18,142		)	18,969
Property, plant and equipment, at cost	—			—		44,294			—			44,294
Accumulated depreciation	—			—		(15,030		)	—			(15,030		)
Property, plant and equipment, net	—			—		29,264			—			29,264
Investment in affiliates	37,902			2,673		382			(40,957		)	—
Deferred charges and other assets, net	771			—		4,860			—			5,631
Total assets	$	43,984		$	2,673	$	66,306		$	(59,099	)	$	53,864
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	—		$	—	$	494		$	—		$	494
Accounts payable	—			—		10,205			—			10,205
Accounts payable to affiliates	12,515			1,291		4,336			(18,142		)	—
Accrued expenses	120			7		822			—			949
Taxes other than income taxes payable	—			—		1,304			—			1,304
Income taxes payable	108			—		100			—			208
Total current liabilities	12,743			1,298		17,261			(18,142		)	13,160
Debt and finance lease obligations, less current portion	7,095			991		1,092			—			9,178
Deferred income tax liabilities	—			2		5,101			—			5,103
Other long-term liabilities	2,343			—		1,544			—			3,887
Equity:
Stockholders’ equity:
Common stock	7			—		1			(1		)	7
Additional paid-in capital	6,821			—		9,771			(9,771		)	6,821
Treasury stock, at cost	(15,648		)	—		—			—			(15,648		)
Retained earnings	31,974			—		31,636			(31,636		)	31,974
Partners’ equity	—			382		—			(382		)	—
Accumulated other comprehensive loss	(1,351		)	—		(833		)	833			(1,351		)
Total stockholders’ equity	21,803			382		40,575			(40,957		)	21,803
Noncontrolling interests	—			—		733			—			733
Total equity	21,803			382		41,308			(40,957		)	22,536
Total liabilities and equity	$	43,984		$	2,673	$	66,306		$	(59,099	)	$	53,864

Condensed Consolidating Balance Sheet

December 31, 2018

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP		Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	291		$	152	$	2,539		$	—		$	2,982
Receivables, net	—			—		7,345			—			7,345
Receivables from affiliates	4,369			2		10,684			(15,055		)	—
Inventories	—			—		6,532			—			6,532
Prepaid expenses and other	466			—		355			(5		)	816
Total current assets	5,126			154		27,455			(15,060		)	17,675
Property, plant and equipment, at cost	—			—		42,473			—			42,473
Accumulated depreciation	—			—		(13,625		)	—			(13,625		)
Property, plant and equipment, net	—			—		28,848			—			28,848
Investment in affiliates	34,696			2,267		(321		)	(36,642		)	—
Long-term notes receivable from affiliates	285			—		—			(285		)	—
Deferred charges and other assets, net	572			1		3,059			—			3,632
Total assets	$	40,679		$	2,422	$	59,041		$	(51,987	)	$	50,155
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	—		$	—	$	238		$	—		$	238
Accounts payable	14			—		8,580			—			8,594
Accounts payable to affiliates	9,847			837		4,370			(15,054		)	—
Accrued expenses	155			7		468			—			630
Accrued expenses to affiliates	—			1		—			(1		)	—
Taxes other than income taxes payable	—			—		1,213			—			1,213
Income taxes payable	53			1		—			(5		)	49
Total current liabilities	10,069			846		14,869			(15,060		)	10,724
Debt and finance lease obligations, less current portion	6,955			990		926			—			8,871
Long-term notes payable to affiliates	—			285		—			(285		)	—
Deferred income tax liabilities	—			2		4,960			—			4,962
Other long-term liabilities	1,988			—		879			—			2,867
Equity:
Stockholders’ equity:
Common stock	7			—		1			(1		)	7
Additional paid-in capital	7,048			—		9,754			(9,754		)	7,048
Treasury stock, at cost	(14,925		)	—		—			—			(14,925		)
Retained earnings	31,044			—		28,305			(28,305		)	31,044
Partners’ equity	—			299		—			(299		)	—
Accumulated other comprehensive loss	(1,507		)	—		(1,097		)	1,097			(1,507		)
Total stockholders’ equity	21,667			299		36,963			(37,262		)	21,667
Noncontrolling interests	—			—		444			620			1,064
Total equity	21,667			299		37,407			(36,642		)	22,731
Total liabilities and equity	$	40,679		$	2,422	$	59,041		$	(51,987	)	$	50,155

Condensed Consolidating Statement of Income

Year Ended December 31, 2019

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP			Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	—		$	108,324		$	—		$	108,324
Cost of sales:
Cost of materials and other	—			—			96,476			—			96,476
Operating expenses (excluding depreciation and amortization expense reflected below)	—			—			4,868			—			4,868
Depreciation and amortization expense	—			—			2,202			—			2,202
Total cost of sales	—			—			103,546			—			103,546
Other operating expenses	—			—			21			—			21
General and administrative expenses (excluding depreciation and amortization expense reflected below)	6			—			862			—			868
Depreciation and amortization expense	—			—			53			—			53
Operating income (loss)	(6		)	—			3,842			—			3,836
Equity in earnings of subsidiaries	3,006			406			357			(3,769		)	—
Other income, net	193			—			625			(714		)	104
Interest and debt expense, net of capitalized interest	(927		)	(47		)	(194		)	714			(454		)
Income before income tax expense (benefit)	2,266			359			4,630			(3,769		)	3,486
Income tax expense (benefit)	(156		)	—			858			—			702
Net income	2,422			359			3,772			(3,769		)	2,784
Less: Net income attributable to noncontrolling interests	—			—			360			2			362
Net income attributable to stockholders	$	2,422		$	359		$	3,412		$	(3,771	)	$	2,422

Condensed Consolidating Statement of Income

Year Ended December 31, 2018

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP			Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	—		$	117,033		$	—		$	117,033
Cost of sales:
Cost of materials and other	—			—			104,732			—			104,732
Operating expenses (excluding depreciation and amortization expense reflected below)	—			—			4,690			—			4,690
Depreciation and amortization expense	—			—			2,017			—			2,017
Total cost of sales	—			—			111,439			—			111,439
Other operating expenses	—			—			45			—			45
General and administrative expenses (excluding depreciation and amortization expense reflected below)	2			—			923			—			925
Depreciation and amortization expense	—			—			52			—			52
Operating income (loss)	(2		)	—			4,574			—			4,572
Equity in earnings of subsidiaries	3,724			319			196			(4,239		)	—
Other income, net	220			2			621			(713		)	130
Interest and debt expense, net of capitalized interest	(913		)	(55		)	(215		)	713			(470		)
Income before income tax expense (benefit)	3,029			266			5,176			(4,239		)	4,232
Income tax expense (benefit)	(93		)	2			970			—			879
Net income	3,122			264			4,206			(4,239		)	3,353
Less: Net income attributable to noncontrolling interests	—			—			163			68			231
Net income attributable to stockholders	$	3,122		$	264		$	4,043		$	(4,307	)	$	3,122

Condensed Consolidating Statement of Income

Year Ended December 31, 2017

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP			Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	—		$	93,980		$	—		$	93,980
Cost of sales:
Cost of materials and other	—			—			83,037			—			83,037
Operating expenses (excluding depreciation and amortization expense reflected below)	—			—			4,504			—			4,504
Depreciation and amortization expense	—			—			1,934			—			1,934
Total cost of sales	—			—			89,475			—			89,475
Other operating expenses	—			—			61			—			61
General and administrative expenses (excluding depreciation and amortization expense reflected below)	6			—			823			—			829
Depreciation and amortization expense	—			—			52			—			52
Operating income (loss)	(6		)	—			3,569			—			3,563
Equity in earnings of subsidiaries	5,236			275			176			(5,687		)	—
Other income, net	290			1			415			(594		)	112
Interest and debt expense, net of capitalized interest	(780		)	(36		)	(246		)	594			(468		)
Income before income tax expense (benefit)	4,740			240			3,914			(5,687		)	3,207
Income tax expense (benefit)	675			2			(1,626		)	—			(949		)
Net income	4,065			238			5,540			(5,687		)	4,156
Less: Net income attributable to noncontrolling interests	—			—			29			62			91
Net income attributable to stockholders	$	4,065		$	238		$	5,511		$	(5,749	)	$	4,065

Condensed Consolidating Statement of Comprehensive Income

Year Ended December 31, 2019

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP		Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	2,422		$	359	$	3,772		$	(3,769	)	$	2,784
Other comprehensive income:
Foreign currency translation adjustment	346			—		286			(283		)	349
Net loss on pension and other postretirement benefits	(234		)	—		(19		)	19			(234		)
Net loss on cash flow hedges	(4		)	—		(8		)	4			(8		)
Other comprehensive income before income tax benefit	108			—		259			(260		)	107
Income tax benefit related to items of other comprehensive income	(48		)	—		(4		)	4			(48		)
Other comprehensive income	156			—		263			(264		)	155
Comprehensive income	2,578			359		4,035			(4,033		)	2,939
Less: Comprehensive income attributable to noncontrolling interests	—			—		359			2			361
Comprehensive income attributable to stockholders	$	2,578		$	359	$	3,676		$	(4,035	)	$	2,578

Condensed Consolidating Statement of Comprehensive Income

Year Ended December 31, 2018

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP		Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	3,122		$	264	$	4,206		$	(4,239	)	$	3,353
Other comprehensive loss:
Foreign currency translation adjustment	(515		)	—		(419		)	417			(517		)
Net gain on pension and other postretirement benefits	49			—		18			(18		)	49
Other comprehensive loss before income tax expense	(466		)	—		(401		)	399			(468		)
Income tax expense related to items of other comprehensive loss	10			—		3			(3		)	10
Other comprehensive loss	(476		)	—		(404		)	402			(478		)
Comprehensive income	2,646			264		3,802			(3,837		)	2,875
Less: Comprehensive income attributable to noncontrolling interests	—			—		161			68			229
Comprehensive income attributable to stockholders	$	2,646		$	264	$	3,641		$	(3,905	)	$	2,646

Condensed Consolidating Statement of Comprehensive Income

Year Ended December 31, 2017

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP		Other Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income	$	4,065		$	238	$	5,540	$	(5,687	)	$	4,156
Other comprehensive income:
Foreign currency translation adjustment	514			—		434		(434		)	514
Net gain (loss) on pension and other postretirement benefits	(65		)	—		4		(4		)	(65		)
Other comprehensive income before income tax expense (benefit)	449			—		438		(438		)	449
Income tax expense (benefit) related to items of other comprehensive income	(21		)	—		1		(1		)	(21		)
Other comprehensive income	470			—		437		(437		)	470
Comprehensive income	4,535			238		5,977		(6,124		)	4,626
Less: Comprehensive income attributable to noncontrolling interests	—			—		29		62			91
Comprehensive income attributable to stockholders	$	4,535		$	238	$	5,948	$	(6,186	)	$	4,535

Condensed Consolidating Statement of Cash Flows

Year Ended December 31, 2019

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP			Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(131	)	$	(46	)	$	6,165		$	(457	)	$	5,531
Cash flows from investing activities:
Capital expenditures (excluding VIEs)	—			—			(1,627		)	—			(1,627		)
Capital expenditures of VIEs:
DGD	—			—			(142		)	—			(142		)
Other VIEs	—			—			(225		)	—			(225		)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	—			—			(762		)	—			(762		)
Deferred turnaround and catalyst cost expenditures of DGD	—			—			(18		)	—			(18		)
Investments in unconsolidated joint ventures	—			—			(164		)	—			(164		)
Acquisitions of ethanol plants	—			—			(3		)	—			(3		)
Acquisitions of undivided interests	—			—			(72		)	—			(72		)
Intercompany investing activities	395			2			(2,973		)	2,576			—
Other investing activities, net	—			—			12			—			12
Net cash provided by (used in) investing activities	395			2			(5,974		)	2,576			(3,001		)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)	992			—			900			—			1,892
Proceeds from borrowings of VIEs	—			—			239			—			239
Repayments of debt and finance lease obligations (excluding VIEs)	(871		)	—			(934		)	—			(1,805		)
Repayments of debt of VIEs	—			—			(6		)	—			(6		)
Intercompany financing activities	2,520			268			(212		)	(2,576		)	—
Purchases of common stock for treasury	(777		)	—			—			—			(777		)
Common stock dividends	(1,492		)	—			(81		)	81			(1,492		)
Acquisition of VLP publicly held common units	—			—			(950		)	—			(950		)
Distributions to noncontrolling interests and unitholders of VLP	—			(376		)	(70		)	376			(70		)
Other financing activities, net	(15		)	—			(13		)	—			(28		)
Net cash provided by (used in) financing activities	357			(108		)	(1,127		)	(2,119		)	(2,997		)
Effect of foreign exchange rate changes on cash	—			—			68			—			68
Net increase (decrease) in cash and cash equivalents	621			(152		)	(868		)	—			(399		)
Cash and cash equivalents at beginning of year	291			152			2,539			—			2,982
Cash and cash equivalents at end of year	$	912		$	—		$	1,671		$	—		$	2,583

Condensed Consolidating Statement of Cash Flows

Year Ended December 31, 2018

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP			Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(1,207	)	$	(51	)	$	5,828		$	(199	)	$	4,371
Cash flows from investing activities:
Capital expenditures (excluding VIEs)	—			—			(1,463		)	—			(1,463		)
Capital expenditures of VIEs:
DGD	—			—			(165		)	—			(165		)
Other VIEs	—			—			(124		)	—			(124		)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	—			—			(888		)	—			(888		)
Deferred turnaround and catalyst cost expenditures of DGD	—			—			(27		)	—			(27		)
Investments in unconsolidated joint ventures	—			—			(181		)	—			(181		)
Peru Acquisition, net of cash acquired	—			—			(468		)	—			(468		)
Acquisitions of ethanol plants	—			—			(320		)	—			(320		)
Acquisitions of undivided interests	—			—			(212		)	—			(212		)
Minor acquisitions	—			—			(88		)	—			(88		)
Intercompany investing activities	758			102			(2,381		)	1,521			—
Other investing activities, net	—			—			8			—			8
Net cash provided by (used in) investing activities	758			102			(6,309		)	1,521			(3,928		)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)	750			498			10			—			1,258
Proceeds from borrowings of VIEs	—			—			109			—			109
Repayments of debt and finance lease obligations (excluding VIEs)	(787		)	(410		)	(156		)	—			(1,353		)
Repayments of debt of VIEs	—			—			(6		)	—			(6		)
Intercompany financing activities	2,106			190			(775		)	(1,521		)	—
Purchases of common stock for treasury	(1,708		)	—			—			—			(1,708		)
Common stock dividends	(1,369		)	—			(32		)	32			(1,369		)
Contributions to noncontrolling interests	—			—			32			—			32
Distributions to noncontrolling interests and unitholders of VLP	—			(215		)	(68		)	167			(116		)
Other financing activities, net	2			(4		)	(13		)	—			(15		)
Net cash provided by (used in) financing activities	(1,006		)	59			(899		)	(1,322		)	(3,168		)
Effect of foreign exchange rate changes on cash	—			—			(143		)	—			(143		)
Net increase (decrease) in cash and cash equivalents	(1,455		)	110			(1,523		)	—			(2,868		)
Cash and cash equivalents at beginning of year	1,746			42			4,062			—			5,850
Cash and cash equivalents at end of year	$	291		$	152		$	2,539		$	—		$	2,982

Condensed Consolidating Statement of Cash Flows

Year Ended December 31, 2017

(in millions)



	Valero Energy Corporation			Valero Energy Partners LP			Other Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(73	)	$	(34	)	$	5,720		$	(131	)	$	5,482
Cash flows from investing activities:
Capital expenditures (excluding VIEs)	—			—			(1,269		)	—			(1,269		)
Capital expenditures of VIEs:
DGD	—			—			(84		)	—			(84		)
Other VIEs	—			—			(26		)	—			(26		)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	—			—			(519		)	—			(519		)
Deferred turnaround and catalyst cost expenditures of DGD	—			—			(4		)	—			(4		)
Investments in unconsolidated joint ventures	—			—			(406		)	—			(406		)
Acquisitions of undivided interests	—			—			(72		)	—			(72		)
Intercompany investing activities	(4,002		)	(187		)	(6,696		)	10,885			—
Other investing activities, net	—			—			(2		)	—			(2		)
Net cash used in investing activities	(4,002		)	(187		)	(9,078		)	10,885			(2,382		)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)	—			380			—			—			380
Repayments of debt and finance lease obligations (excluding VIEs)	—			—			(15		)	—			(15		)
Repayments of debt of VIEs	—			—			(6		)	—			(6		)
Intercompany financing activities	6,704			(63		)	4,244			(10,885		)	—
Purchases of common stock for treasury	(1,372		)	—			—			—			(1,372		)
Common stock dividends	(1,242		)	—			(10		)	10			(1,242		)
Contributions from noncontrolling interests	—			—			30			—			30
Distributions to noncontrolling interests and unitholders of VLP	—			(161		)	(27		)	121			(67		)
Other financing activities, net	10			36			(26		)	—			20
Net cash provided by financing activities	4,100			192			4,190			(10,754		)	(2,272		)
Effect of foreign exchange rate changes on cash	—			—			206			—			206
Net increase (decrease) in cash and cash equivalents	25			(29		)	1,038			—			1,034
Cash and cash equivalents at beginning of year	1,721			71			3,024			—			4,816
Cash and cash equivalents at end of year	$	1,746		$	42		$	4,062		$	—		$	5,850

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL DATA (Unaudited)

22.

QUARTERLY FINANCIAL DATA (Unaudited)

The following tables summarize quarterly financial data for the years ended December 31, 2019 and 2018 (in millions, except per share amounts).



	2019 Quarter Ended
	March 31		June 30		September 30		December 31
Revenues	$	24,263	$	28,933	$	27,249	$	27,879
Gross profit (a)	533		1,123		1,119		2,003
Operating income	308		908		881		1,739
Net income	167		648		639		1,330
Net income attributable to Valero Energy Corporation stockholders	141		612		609		1,060
Earnings per common share	0.34		1.47		1.48		2.58
Earnings per common share – assuming dilution	0.34		1.47		1.48		2.58

	2018 Quarter Ended
	March 31		June 30		September 30		December 31
Revenues	$	26,439	$	31,015	$	30,849	$	28,730
Gross profit (a)	1,062		1,535		1,451		1,546
Operating income	801		1,253		1,219		1,299
Net income	582		875		874		1,022
Net income attributable to Valero Energy Corporation stockholders	469		845		856		952
Earnings per common share	1.09		1.96		2.01		2.26
Earnings per common share – assuming dilution	1.09		1.96		2.01		2.24

^{___________________________}

(a)

Gross profit is calculated as revenues less total cost of sales.

Description of Business, Basis of Presentation, and Significant Accounting Policies (Policies)