Valero 2015 Annual Report Download - page 123

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Table of Contents
VALERO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
contracts are valued based on quoted prices from the exchange 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 Quebec’s Regulation respecting the
cap-and-trade system for greenhouse gas emission allowances (the Quebec cap-and-trade system), (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 further 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 between Level 1 and Level 2 for assets and liabilities held as of December 31, 2015 and 2014 that were
measured at fair value on a recurring basis.
There was no activity during the years ended December 31, 2015, 2014, and 2013 related to the fair value amounts categorized in
Level 3 as of December 31, 2015, 2014, and 2013.

There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014.
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