Valero Energy : 2024 ESG Report
VLO
ESG Report
The world requires reliable and affordable transportation fuels. We are committed to advancing the future of energy through innovation, ingenuity and unmatched execution.
Valero.com
August 2024
ESG Report
Please visit www.valero.com to learn more about our company. The terms "Valero," "we," "our" and "us," when used herein, may refer to Valero Energy Corporation (NYSE: VLO), to one or more of our consolidated subsidiaries and/or consolidated joint ventures, or to all of them taken as a whole. The term "DGD," when used in this report, may refer to Diamond Green Diesel Holdings LLC, its wholly owned consolidated subsidiary, or both of them taken as a whole.
ABOUT THIS DOCUMENT
Policies and Procedures
This document includes statements regarding various policies, values, standards, approaches, methodologies, procedures, processes, systems, programs, initiatives, assessments, technologies, practices, and similar measures related to our operations, ESG-related data, actions and compliance systems (collectively, "Policies and Procedures"). References to Policies and Procedures in this document do not represent guarantees or promises about their efficacy or continued implementation or use, or any assurance that any such Policies and Procedures will apply in every case. Such Policies and Procedures are subject
to risks, uncertainties and other factors, some of which are beyond the control of Valero and are difficult to predict, and there may be exigent circumstances, factors, or considerations that may cause different implementation thereof or exceptions in specific instances. Please see Forward-Looking Statements below and the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2023.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), including, but not limited to, statements about our Policies and Procedures. You can identify forward-looking statements by words such as "should," "strive," "pursue," "intend," "anticipate," "forecast," "track," "would," "continue," "poised," "focused," "opportunity," "scheduled," "believe," "estimate," "expect," "seek," "could," "may," "potential," "committed," "advancing," "developing," "evaluating," "targeting," "goal," "aspiration," "plan," or other similar expressions that convey the uncertainty of future events or outcomes. Forward- looking statements in this document include those relating to our 2025 and 2035 GHG emissions reduction/ displacement targets, our 2038 update, our 2050 ambition, our support of the development of an onboard CO2 capture system, statements relating to Valero's low-carbon fuels strategy expected timing of completion, cost and performance of projects, future market and industry conditions, future operating and financial performance, expected timing or issuance of future reports and other disclosures, future production and manufacturing ability and size, and management of future risks, among other matters. It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous risk factors, including those outside of Valero's control, such as legislative or political changes or developments, market dynamics, cyberattacks, weather events, and other matters affecting Valero's operations or the demand for Valero's products. These factors also include, but are not limited to, the uncertainties that remain with respect to current or contemplated legal, political or regulatory developments that are adverse to or restrict refining and marketing operations, or that impose profits, windfall or margin taxes or caps or penalties, global geopolitical and other conflicts and tensions, the impact of inflation on margins and costs, economic activity levels, and the adverse effects the foregoing may have on Valero's business plan, strategy, operations and financial performance. These statements are often based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination
of historical operating trends and market conditions made by the management of Valero. Although Valero believes that the assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, Valero cannot give assurance that it will achieve or accomplish its expectations, beliefs or intentions, or that any forward-looking statements will ultimately prove to be accurate. When considering these forward- looking statements, you should keep in mind the risk factors and other cautionary statements contained in Valero's filings with the Securities and Exchange Commission (SEC), including Valero's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports available on Valero's website at www.valero.com. These risks could cause the actual results, actions and Policies and Procedures of Valero to differ materially from those contained in any forward-looking statement. Such statements speak only as of the date of this report and we do not intend to update these statements unless we are required by the securities laws to do so. Results or metrics in this document as of any date, or for any period, ending on or prior to the date of this document are not necessarily indicative of the results that may be expected as of any date, or for any period, ending after the date of this document. Neither the future distribution of this document or the information included or referenced herein, nor the continued availability thereof in archive form on our website, should be deemed to constitute an update or reaffirmation of these figures or statements as of any future date.
This report and the disclosures herein are not "soliciting material," are not deemed filed with the SEC, and are not to be incorporated by reference into any of Valero's filings under the Securities Act or the Exchange Act, whether made before or after the date of this document and irrespective of any general incorporation language therein. Furthermore, references to our website URLs are intended to be inactive textual references only.
This document represents a good faith effort by Valero to address its efforts, initiatives, and performance on an array of diverse and broadly defined ESG-related topics of interest to certain stakeholders. The inclusion of or reference to any information in this document is not an indication that this information or statements related thereto are necessarily material to investors or require disclosure in our filings with the SEC.
6 Highlights
8 Valero's Strategy
22 Environment
32 Safety
42 Community
52 People
64 Governance
ON THE COVER: Valero
partners with organizations to enhance habitats surrounding its facilities. The cover shows the Meraux Terracing Project where the focus is to conserve, restore and manage wetlands near
the Valero Meraux Refinery
in Louisiana.
The information provided in this report is intended for interested readers in the United States. Because science is evolving, references and analyses relied upon are merely provided as an aid to readers.
2
A Message from Our CEO
2023 was another strong year for Valero, with our company achieving its best year ever for both refining environmental scorecard incidents and refining mechanical availability. These accomplishments are a testament to our long-standing commitment to safe, reliable and environmentally responsible operations. This will always be our top priority.
Last year, the company also set many records, including annual sales volumes for our wholesale system and for our renewable diesel segment, as well as throughput volumes for our ethanol business. Valero delivered strong financial performance in 2023, earning $24.92 per share, the second highest in our company history.
As I think about our community, I am proud of Valero's culture and legacy of giving back, as demonstrated through the successful fundraising activities we conducted during the year such as the Valero Texas Open and Benefit for Children, as well as the incredible generosity of our employees through volunteerism and employee giving.
Team Valero is committed to executing strategic projects that enhance the earnings capability of our business and expand our long-term competitive advantage. Our premier refining portfolio and low-carbon fuels businesses have made us the best-in-class producer of liquid transportation fuels and products that are essential to modern life.
On the refining side, we are the lowest-cost producer while achieving reliable top-quartile operations. For many years, we have prioritized capital expenditures to sustain our operations to ensure safety and reliability. We are pursuing projects focused on increasing operational efficiencies and feedstock flexibility, optimizing the value of our product mix and maximizing the utilization of existing conversion capacity.
On a consolidated basis, we have invested more than $5.4 billion in a profitable low-carbon portfolio. Our renewable diesel segment continues to target high-return projects in growing low-carbon markets and we are also diversifying as demonstrated by the development of Sustainable Aviation Fuel or SAF. The SAF project at our renewable diesel plant in Port Arthur, Texas, is progressing ahead of schedule and is expected to be operational in the fourth quarter of 2024. With the completion of this project, the renewable diesel segment is expected to be one of the largest manufacturers of SAF in the world.
We also continue to evaluate and develop economic projects to further reduce the carbon intensity of our ethanol business. With that in mind, we expect to participate as a shipper on a large-scale proposed carbon capture pipeline connecting to eight of our ethanol plants. Once implemented, we estimate a substantial reduction of carbon as well as an uplift in the economics of this segment.
Looking ahead, we remain focused on the things that have been a hallmark of our strategy - maintaining operating excellence, executing our projects well, discipline around capital investments and our commitment to stockholder returns.
As global energy supply increases to meet the demand created by a growing world population, we remain committed to advancing transportation fuels solutions through innovation, ingenuity and unmatched execution.
My deepest gratitude to our 9,900-plus employees for their commitment, our Board for its unwavering support, our stockholders for their investment, and our business partners and other stakeholders for their trust.
R. Lane Riggs
Chief Executive Officer & President
Environmental, Social and Governance Report • 3
About Valero
Our Business
We are a Fortune 500 company and a multinational manufacturer and marketer of petroleum-based and low- carbon liquid transportation fuels and petrochemical products, and we sell our products primarily in the United States (U.S.), Canada, the United Kingdom (U.K.), Ireland and Latin America. We manage our operations through our Refining, Renewable Diesel and Ethanol segments.
REFINING
World's largest independent refiner
RENEWABLE DIESEL
World's 2nd largest renewable diesel producer
ETHANOL
World's 2nd largest corn ethanol producer
Guiding Principles
Safety
Environment
Community
Employees
Governance
Safety is our
We are committed
We will be a good
We consider our
We view our
foundation for
stewards of the
neighbor by sharing
employees a
stakeholders as partners
success.
environment.
our success with the
competitive advantage
to whom we seek to
communities where
and our greatest
deliver operational
we live and work
asset. We foster a
excellence, disciplined
through volunteerism,
supportive culture
management of capital
charitable giving and
and provide a safe,
and long-term value on
the economic support
healthy and rewarding
a foundation of strong
of being a good
work environment
governance and ethical
employer.
with opportunities for
standards.
growth.
4
About Valero
WELCOME
JEAN GAULIN
(QUEBEC)
ALBERT CITY
FORT DODGE CHARLES CITY
AURORA
MONTREAL
LAKOTA
HARTLEY
ALBION
BLUFFTON
CANADA
UNITED
STATES
BLOOMINGBURG
BENICIA
LINDEN
MOUNT
VERNON
WILMINGTON
MEMPHIS
MCKEE
SAN ANTONIO
UNITED
ARDMORE
ST. CHARLES
KINGDOM
MERAUX
THREE
RIVERS
PORT ARTHUR
IRELAND
BILL GREEHEY
HOUSTON
(CORPUS CHRISTI
TEXAS CITY
EAST AND WEST)
PEMBROKE
LONDON
Valero's
Vision
The world requires reliable and affordable energy, and we see this as an opportunity. We are advancing the future of energy through innovation, ingenuity and unmatched execution.
MEXICO CITY
MEXICO
PERU
LIMA
WHOLESALE MARKETING PRESENCE
U.S. RENEWABLE DIESEL WHOLESALE PRESENCE
BRANDED WHOLESALE PRESENCE
PIPELINES
VALERO REFINERIES
PAYMENT SERVICE CENTER
VALERO ETHANOL PLANTS
SUNRAY WIND
VALERO TERMINALS
COGENERATION UNITS
VALERO OFFICES
EXPANDERS
(ELECTRICITY PRODUCED FROM EXHAUST GASES)
DIAMOND GREEN DIESEL
(RENEWABLE DIESEL PLANTS)
Environmental, Social and Governance Report • 5
Highlights
Environment
GHG Emissions
Low-Carbon Investments
Safety and Environmental Performance
6
Highlights
Social
Other ESG Disclosures
Visit our website at www.valero.com > Investors >
ESG
Governance
Executive Compensation Linked to HSE, Sustainability and Climate-Related Initiatives
Board Diversity
Cybersecurity
Other Governance
Environmental, Social and Governance Report • 7
Valero's Strategy
Our strategic actions have enabled us to be a low-cost, efficient, reliable and leading producer of liquid transportation fuels for the world. Liquid transportation fuels use existing infrastructure, are affordable and scalable, and we believe they will continue to be essential products well into the future as global energy supply increases to meet the demand created by a growing world population and economic output.
Throughout Valero's history, we have proactively managed our business portfolio through acquisitions and divestitures and have made strategic investments to build a portfolio of assets that we expect to thrive under most reasonable energy demand forecasts.
Valero is the world's premier independent refiner with a demonstrated commitment to capital discipline, innovation and unmatched execution
Refining
Many of our refineries are located in regions with advantaged operating expenses, raw material costs and access to skilled labor. Many of our investments have resulted in a high-complexity coastal refining system that offers extensive connectivity to inland and imported crudes, as well as operational flexibility to process a wide range of feedstocks. An extensive wholesale network receives more than 1.5 million barrels per day (more than 50% of our light products), and our global operations support optimization of product exports.
Long-term competitive advantage3
$3,529
Free Cash Flow
n Peer Range
Average Free Cash Flow
2012-2023
$0
($ in millions)
Operational and supply flexibility coupled with low-cost operations drive profitability3
Refining Segment Cash Operating Expenses
Per Barrel of Throughput
(excludes turnaround and D&A expenses)
$9.00
Refining Segment Adjusted EBITDA
Per Barrel of Throughput
(excludes turnaround and D&A expenses)
$18.00
$7.50
$3.00
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Peer group includes PSX, MPC, DINO and PBF.
-$4.00
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$4.00
10-Year
Average
See non-GAAP disclosures beginning on page 80.
8
Independent assessments of our refining strategy, under multiple carbon- constrained scenarios, found Valero's overall refining portfolio to be resilient
Responding to the requests of certain stakeholders regarding independent assessments of the resilience of
our strategy under hypothetical oil and biofuel demand scenarios, we have issued three reports following the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and using multiple demand scenarios. Our first TCFD report, the Review of Climate- related Risks and Opportunities, was published in September 2018. At that time, we engaged HSB Solomon Associates (Solomon), a leading refining benchmarking data provider and advisory firm, to conduct an independent analysis under multiple demand scenarios, including the potential transition to a lower-carbon economy consistent with one of the International Energy Agency's (IEA) 2°C scenarios. In the 2021 TCFD Report and Scenario Analysis, Solomon examined our refining business
and reviewed the resilience of our strategy under the IEA's Sustainable Development Scenario (SDS), referred to as a well-below 2°C scenario. And in the 2022 TCFD Report, Solomon conducted an independent scenario analysis based on the assumptions of the IEA Net Zero by 2050 Scenario, as applied by Solomon. The assessments in such reports found Valero's overall refining portfolio to be resilient.4
Strategy
The world is calling for low-carbon
alternatives...
Low-carbon fuels and carbon capture and storage (CCS), which are key components of Valero's low-carbon fuels strategy and its GHG emissions targets, are viewed by both the United Nations (U.N.) Intergovernmental Panel on Climate Change (IPCC)5 and IEA6 as critical to 1.5°C-aligned, net zero by 2050 ambitions. Furthermore, the U.N. Climate Change Conference (COP28) resulted in a multilateral agreement, published on December 13, 2023, that explicitly calls for contributions to rapid and sustained reductions in GHG emissions with efforts such as:
Attended by some 85,000 participants from nearly 200 countries, the COP28 agreement also explicitly "[r]ecognizes that transitional fuels can play a role in facilitating the energy transition while ensuring energy security."8
Additionally, the U.S. Department of Energy recently published a report on pathways to decarbonize the refining industry, which describes phased approaches for refiners to achieve net zero by leveraging technologies such as clean hydrogen, CCS and bio- based feedstocks/low-carbon fuels, among others.9
The conclusions from these influential organizations and initiatives that explicitly place importance on low-carbon fuels and CCS projects have informed and reaffirmed Valero's views on the key role of its current low-carbon fuels strategy and GHG emissions targets. Low-carbon fuels, CCS and other low-carbon projects are also supported and incentivized by the regulations, policies and standards of various government authorities around the world.
...Valero is answering that call!
We still encounter certain stakeholders who recognize the value of our low-carbon fuels initiatives and CCS projects but give no credit to these efforts when accounting for GHG emissions reductions, and would like us to exclusively focus on significant reductions from our refineries (which can only be accomplished by curtailing production or closing assets).
Environmental, Social and Governance Report • 9
Low-Carbon Innovation
For Valero, investments in low-carbon fuels that began in 2009 have provided an advantage for the company to capture market opportunities. As of December 31, 2023, we have invested more than $5.4 billion in our low-carbon businesses, and we expect additional growth opportunities
in this area. These investments, which have been held to the same minimum after-tax IRR hurdle rate as our refining growth projects, have created value for our stockholders and lowered GHG emissions in the transportation sector.
The following are examples of high-return,low-carbon projects that we are producing, developing and/or evaluating:
Renewable Diesel, Renewable Naphtha and Renewable Propane
A drop-in fuel interchangeable with petroleum diesel, our renewable diesel is manufactured primarily from waste feedstocks, including used cooking oil, recycled animal fats and inedible corn oil, as well as other feedstocks such as soybean oil. These feedstocks are pretreated and purified prior to conversion
into renewable diesel and niche grades, such as renewable arctic diesel.
Renewable diesel reduces life cycle GHG emissions by up to 80%, compared with traditional diesel.2
Valero is the world's second-largest renewable diesel producer and currently operates two renewable diesel plants located in St. Charles Parish, Louisiana, and Port Arthur, Texas, with a total annual production capacity of 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha.
Renewable naphtha and renewable propane are produced in the process and recovered as co- products. With an annual production capacity of 50 million gallons, renewable naphtha can be used as a gasoline blendstock or a feedstock for producing low- carbon petrochemicals.
Renewable propane, similarly, has multiple end uses, including as a low-carbon fuel, a renewable petrochemical feedstock or a feedstock in the production of low-carbonhydrogen. Currently, renewable propane from our renewable diesel plants is co-processed in
the hydrogen plants at two of our refineries to generate low-carbon hydrogen. The low-carbon hydrogen is rerouted into the production process further decreasing the carbon intensity (CI) of renewable diesel, renewable propane and renewable naphtha.
We are also co-processingrenewable natural gas from municipal solid waste in the hydrogen plant at one of our refineries. The low-carbon hydrogen is used in the production of lower carbon transportation fuels for export to Europe. This fuel has a higher market value compared with petroleum fuels, and certain governments in Europe use it to help meet GHG emissions reduction targets
or goals. In 2023, we processed nearly 2 trillion BTUs of renewable natural gas, which doubled the amount processed in 2022.
Since 2013, Valero has grown to become the world's second-largest producer of renewable diesel.
Ethanol
Ethanol is a low-carbon,high-octane fuel. When used as a gasoline blendstock, ethanol boosts the octane rating of the finished fuel.
Valero operates 12 ethanol plants located in the U.S. Midwest, with a combined production capacity of 1.6 billion gallons per year. The
plants are dry mill facilities that process corn to produce ethanol and co-products, such as dry distillers grains (DDGs) and syrup for livestock feed, and inedible corn oil. DDGs and syrup are sources of supplemental energy and protein for livestock and poultry.
10
Disclaimer
Valero Energy Corporation published this content on 13 September 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on September 13, 2024 at 14:34:01 UTC.