Valero Energy (V1L) Risk Analysis

We could face increased climate-related litigation with respect to our operations, disclosures, or products. Governments, non-governmental organizations, and private parties across the world have filed lawsuits or initiated regulatory action against fossil fuel companies. Such lawsuits and actions often allege noncompliance with applicable laws or regulations, or personal injury or damages they attribute to perceived climate-related harms, and seek damages and/or abatement under various tort and other theories, including under consumer protection, human rights, or constitutional provisions. We have been named as a co-defendant in a lawsuit in state court by a county in Oregon seeking significant damages and abatement under various tort theories (including deceptive disclosures). We have also been named as a co-defendant in a federal class-action lawsuit in California alleging antitrust and consumer protection claims related to costs of complying with the LCFS. While we intend to vigorously defend against the allegations in those pending actions, the ultimate outcomes and impacts to us cannot be predicted with certainty at this time, we could incur substantial legal costs and reputational damage associated with defending such matters, and an adverse ruling could require us to pay significant damages. From time to time, we have also been subject to, and expect to continue to be subject to, other litigation related to environmental, health, and safety incidents or other accidents arising in the normal course of our operations. Our industry in particular has been subject to a rising number of lawsuits seeking substantial damage awards in such matters, which have been exacerbated by recent legal, judicial, and jury-related trends in certain jurisdictions where we operate. We have faced, and expect to continue to face, increased risks related to such matters and the outcome of pending or future claims for such matters could have a material adverse effect on our business, financial condition, results of operations, and liquidity. Governments and private parties are also increasingly filing lawsuits or initiating regulatory action based on allegations that certain public statements and disclosures by companies regarding climate- and other sustainability-related matters are false or misleading "greenwashing" that violate deceptive trade practices, consumer protection statutes, or other similar laws and regulations, or are fraudulent or misleading under certain corporate or securities laws and regulations. The states of New York and Vermont have also enacted legislation establishing various cost recovery programs designed to upgrade infrastructure and fund community initiatives they designate as purported climate mitigation investments, under which "responsible parties," which the programs have deemed to include refiners and other fossil fuel companies, bear the costs on a strict liability basis, and other U.S. states have proposed or are considering similar legislation. Certain governmental authorities have also sought to attribute blame for certain perceived climate-related matters primarily to fossil fuel companies, and some are considering legislation that would create private causes of action making them strictly liable for damages incurred in certain natural catastrophes and weather events. These matters present a high degree of uncertainty, including due to legal viability, regarding the extent to which fossil fuel companies face an increased risk of liability and reputational damage stemming from alleged climate- and other sustainability-related matters. Various U.S. state and local governments have also proposed or are considering imposing taxes, fees, assessments, or tax abatement limitations on fossil fuel companies. In addition to voluntary disclosures in response to investor and stakeholder requests discussed above, many governments have also proposed or adopted regulations that impose disclosure obligations with respect to various climate-related matters and other sustainability-related matters. In October 2023, California adopted a host of broad and far-reaching climate-related disclosure obligations, including with respect to GHG emissions, climate-related financial-risk reporting, and statements regarding GHG emissions reductions; and carbon offsets, certain of which are currently subject to ongoing litigation and potential delays, creating substantial uncertainty. New York also recently adopted certain GHG reporting requirements that are even broader in scope than California's and require extremely burdensome (perhaps even infeasible) and detailed disclosures, including with respect to the quantity and type of fuel and feedstock related to such emissions. Other U.S. states have proposed or announced disclosure obligations with respect to climate-related matters. The U.K. has adopted and the EU has provisionally adopted certain burdensome disclosures related to various environmental, climate, social, supply chain, human rights, and other sustainability-related matters. In the EU, these include its Corporate Sustainability Reporting Directive (CSRD) and its Corporate Sustainability Due Diligence Directive (CSDDD), which also provides a private cause of action. Although the scope of CSRD and CSDDD have been simplified with provisional agreements by applicable governance bodies within the EU, endorsement and formal adoption are still pending. Further, the scope and extent to which the CSRD and the CSDDD will require any extraterritorial disclosure obligations on non-EU parent companies remains unknown and presents considerable uncertainty for many companies, including us. Some governments have also adopted laws and regulations, or have launched investigations and requested information, based on pricing practices in the fossil fuel industry, which we have been and may again be subject to. For example, California's Oil Refinery Cost Disclosure Act (SB 1322) requires refineries in California to report monthly on the volume and cost of the crude oil they buy, the quantity and price of the wholesale gasoline they sell, and the gross gasoline margin per barrel, among other information. Some governments and other third parties we do business with have also begun requesting product-specific climate-related disclosures from us in connection with their own reporting. At the same time, in September 2025, the EPA proposed to effectively cease its Greenhouse Gas Reporting Program, which presents uncertainties with respect to future climate-related reporting methodologies that are utilized. Our efforts to comply with these laws, regulations, and requests impose a strain on company resources and expose us to risk by requiring disclosure of information that (i) may be protected trade secrets and/or competitively sensitive; (ii) exposes us to litigation and enforcement; (iii) may be inconsistent with other standards or requirements that are subject to ongoing change and uncertainty, or our current practices that may utilize different methodologies or standards; (iv) is subject to many assumptions and inherent calculation difficulties, such as accuracy, completeness, and dependence on third parties; (v) may be perceived in ways that adversely impact our business relationships, credibility, and reputation; and (vi) may be infeasible to obtain or report. The costs, burdens, and risks imposed by the foregoing may cause us to alter our business and operations in certain locations.