Valero Energy Corporation | Disclosure of Off-Balance Sheet Asset Retirement Obligations at Valero Energy Corporation

Status
Omitted
Previous AGM date
Resolution details
Company ticker
VLO
Lead filer
Vermont Pension Investment Committee (VPIC)
Resolution ask
Report on or disclose
ESG theme
  • Environment
ESG sub-theme
  • Climate change
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Energy
Company HQ country
United States
Resolved clause
Resolved: Given the volatility in energy markets, shifting regulatory landscapes, and the risks of climate change, shareholders request that Valero Energy Corporation (“Valero”) provide disclosure, at reasonable cost and omitting proprietary information, regarding the estimated magnitude of its off-balance sheet asset retirement obligations (AROs).
Supporting statement
Supporting Statement: In April 2025, Valero announced its intent to idle, restructure, or cease operations at its Benicia Refinery in California by April 2026, triggering a combined pre-tax impairment charge of $1.1 billion for its Benicia and Wilmington facilities. This charge included $337 million in newly recognized asset retirement obligations (AROs).1 This disclosure stands in stark contrast to Valero’s prior Form 10-K filing, which stated that the company could not reasonably estimate the fair value of AROs for its California refineries due to “indeterminate” asset lives.2 This abrupt shift raises serious concerns about the adequacy of board and Audit Committee oversight of financial reporting and risk disclosure. Investors rely on consistent and transparent accounting to assess long-term liabilities and capital allocation risks. The failure to recognize material AROs until a strategic exit was announced suggests that Valero’s financial statements may not have fully reflected known or reasonably estimable obligations. To enhance transparency and investor confidence, we recommend that Valero consider including ARO estimates in audited financial statements or supplemental disclosures; providing evidence supporting any determination that a reasonable estimate of fair value cannot be made, including why probabilistic approaches or ranges of outcomes were deemed inapplicable; and clarifying the governance and internal controls used to evaluate long-term environmental and regulatory liabilities. Shareholders must be assured that Valero’s financial disclosures reflect the full scope of its obligations. Improved ARO transparency will support better capital planning, risk management, and alignment with investor expectations. We appreciate that Valero relies on expert guidance for balance sheet reporting and may argue that the disclosure requested in this proposal goes beyond or is incompatible with such expert guidance. However, accounting firms including Deloitte and PwC have issued guidance that encourages quantifying such liabilities despite the uncertain timeline.3 Therefore, the decision to avoid reasonably estimating the fair value of AROs for its refineries raises questions. As there is no prohibition on reporting ARO estimates, we ask that Valero do so.

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