Valero 2015 Annual Report Download - page 128

Table of Contents
VALERO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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, 2015, 2014, and
2013, the cost of meeting our obligations under these compliance programs was $440 million, $372 million, and $517 million,
respectively. These amounts are reflected in cost of sales.
Effective January 1, 2015, we became 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 have recovered the majority of these costs from our customers for the year ended
December 31, 2015 and expect to continue to recover the majority of these costs in the future. For the years ended December 31, 2015,
2014, and 2013, the net cost of meeting our obligations under these compliance programs was immaterial.
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The following tables provide information about the fair values of our derivative instruments as of December 31, 2015 and 2014
(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 tables below, 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, 2015
Asset
Derivatives
Liability
Derivatives
Derivatives not designated as
hedging instruments
Commodity contracts:
Futures Receivables, net
$ 648
$ 522
Swaps Receivables, net
30
33
Options Receivables, net
4
2
Physical purchase contracts Inventories
—
6
Foreign currency contracts Receivables, net
3
—
Total
$ 685
$ 563
122