(Mark One)

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

The number of shares of the registrant’s only class of common stock, $0.01 par value, outstanding as of October 31, 2008April 30, 2009 was 516,016,448.516,398,749.

 

As used in this report, the terms “Valero,” “we,” “us,” or “our” may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole.

These unaudited consolidated financial statements include the accounts of Valero and subsidiaries in which Valero has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. Investments in significant non-controlled entities are accounted for using the equity method.

These unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Financial information for the three and nine months ended September 30,March 31, 2009 and 2008 and 2007 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited consolidated financial statements. Operating results for the three and nine months ended September 30, 2008March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.2009.

The consolidated balance sheet as of December 31, 20072008 has been derived from the audited financial statements as of that date. For further information, refer to the consolidated financial statements and notes thereto included in our annual report onForm 10-K for the year ended December 31, 2007. As discussed in Note 3, the assets and liabilities related to the Krotz Springs Refinery, including inventory sold by our marketing and supply subsidiary associated with this transaction, have been reclassified as held for sale as of December 31, 2007.

Use of Estimates
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

FASB Statement No. 141 (revised 2007)
In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (Statement No. 141R)141(R)). This statement improves the financial reporting of business combinations and clarifies the accounting for these transactions. The provisions of Statement No. 141R141(R) are to be applied prospectively to business combinations with acquisition dates on or after the beginning of an entity’s fiscal year that begins on or after December 15, 2008, with early adoption prohibited. Due to its application to future acquisitions, the adoption of Statement No. 141R141(R) effective January 1, 2009 willhas not havehad any immediate effect on our financial position or results of operations.

FASB Statement No. 160
In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” Statement No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. This statement provides guidance for the accounting and reporting of noncontrolling interests, changes in controlling interests, and the deconsolidation of subsidiaries. In addition, Statement No. 160 amends FASB Statement No. 128, “Earnings per Share,” to specify the computation, presentation, and disclosure requirements for earnings per share if an entity has one or more noncontrolling interests. The adoption of

FSP No. FAS 133-1 and FIN 45-4132(R)-1
In SeptemberDecember 2008, the FASB issued Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures132(R)-1, “Employers’ Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161”Postretirement Benefit Plan Assets” (FSP No. FAS 133-1 and FIN 45-4)132(R)-1). FSP No. FAS 133-1 and FIN 45-4132(R)-1 amends FASB Statement No. 133, “Accounting for Derivative Instruments132 (revised 2003), “Employers’ Disclosures about Pensions and Hedging Activities,Other Postretirement Benefits,” to requireprovide guidance on an employer’s disclosures by sellersabout plan assets of credit derivatives, including those embedded in hybrid instruments.a defined benefit pension or other postretirement plan. The additional requirements of FSP No. FAS 133-1132(R)-1 are designed to enhance disclosures regarding (i) investment policies and FIN 45-4 also amends FASB Interpretation No. 45, “Guarantor’s Accountingstrategies, (ii) categories of plan assets, (iii) fair value measurements of plan assets, and Disclosure Requirements for Guarantees, Including Indirect Guarantees(iv) significant concentrations of Indebtedness of Others,” to require disclosure about the current status of the payment/performance risk of a guarantee. Additionally,risk. FSP No. FAS 133-1132(R)-1 is effective for fiscal years ending after December 15, 2009, with earlier application permitted. Since FSP No. FAS 132(R)-1 only affects disclosure requirements, the adoption of FSP No. FAS 132(R)-1 will not affect our financial position or results of operations.

FSP No. FAS 141(R)-1
In April 2009, the FASB issued Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and FIN 45-4Liabilities Assumed in a Business Combination That Arise from Contingencies” (FSP No. FAS 141(R)-1). FSP No. FAS 141(R)-1 amends and clarifies the FASB’s intent that disclosures required by FASB Statement No. 161, “Disclosures about Derivatives141(R) to address application issues raised related to (i) initial recognition and Hedging Activities,” should be provided for any reporting period beginning after November 15, 2008.measurement, (ii) subsequent measurement and accounting, and (iii) disclosure of assets and liabilities arising from contingencies in a business combination. The provisions of FSP No. FAS 133-1 and FIN 45-4141(R)-1 are to be applied to contingent assets or contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of an entity’s fiscal year that amend Statement No. 133 and Interpretation No. 45 are effective for fiscal years, and interim periods within those fiscal years, endingbegins on or after NovemberDecember 15, 2008. SinceDue to its application to future acquisitions, the adoption of FSP No. FAS 133-1141(R)-1 effective January 1, 2009 has not had any immediate effect on our financial position or results of operations.

FIN 45-4 only affects disclosure requirements,position or results of operations. However, the adoption of FSP No. FAS 133-1107-1 and FIN 45-4 effective December 31, 2008 will not affect ourAPB 28-1 resulted in additional interim disclosures discussed below.

Our financial position or resultsinstruments include cash and temporary cash investments, restricted cash, receivables, payables, debt, capital lease obligations, commodity derivative contracts, and foreign currency derivative contracts. The estimated fair values of operations.

On February 6, 2009, we entered into a binding agreement with VeraSun Energy Corporation (VeraSun) pursuant to which we offered to purchase from VeraSun five existing ethanol plants and a site currently under development. The existing ethanol plants included in the offtake agreement described below representsare located in Charles City, Fort Dodge, and Hartley, Iowa; Aurora, South Dakota; and Welcome, Minnesota, and the site under development is located in Reynolds, Indiana. VeraSun’s primary business was the production and marketing of ethanol and its co-products, including distillers grains. VeraSun previously filed for relief under Chapter 11 of the U.S. Bankruptcy Code.

On March 18, 2009, the bankruptcy court accepted our bid to purchase the six facilities mentioned above and also approved our purchase of two additional ethanol plants located in Albion, Nebraska, and Albert City, Iowa (collectively, the VeraSun Acquisition). On April 1, 2009, we completed the purchase of the ethanol facilities in our original bid for a continuationpurchase price of activities with$350 million, plus approximately $75 million primarily for inventory and certain other working capital. On April 9, 2009, we completed the Krotz Springs Refinerypurchase of the plant in Albert City for accounting purposes, and as sucha purchase price of $72 million. We expect to complete the resultspurchase of operations related to the Krotz Springs Refinery have not been presented as discontinued operationsplant in Albion for a purchase price of $55 million later in the consolidated statementssecond quarter of income for any2009.

The VeraSun Acquisition expands our clean motor fuels business. The purchase price was funded with part of the periods presented.

On February 1, 2008, we redeemed our 9.50% senior notes for $367 million, or 104.75% of stated value. These notes had a carrying amount of $381 million on the date of redemption, resulting in a gain of $14 million that was included in “other income (expense), net” in the consolidated statement of income. In addition, in March 2008, we made a scheduled debt repayment of $7 million related to certain of our other debt.

As of September 30, 2008,March 31, 2009, we had $456$218 million of letters of credit outstanding under our uncommitted short-term bank credit facilities and $767$224 million of letters of credit outstanding under our three U.S. committed revolving credit facilities, excluding our Canadian facility.facilities. Under our Canadian committed revolving credit facility, we had Cdn. $16$19 million of letters of credit outstanding as of September 30, 2008.March 31, 2009.

Treasury Stock
No significant purchases of our common stock were made during the three months ended March 31, 2009. During the ninethree months ended September 30,March 31, 2008, and 2007, we purchased 14.6 million and 68.98.8 million shares of our common stock at a cost of $774$518 million and $4.8 billion, respectively, in connection with the administration of our employee benefit plans and common stock purchase programs authorized by our board of directors. During the ninethree months ended September 30, 2008,March 31, 2009, we issued 1.30.2 million shares from treasury at an average cost of $66.93$63.49 per share, and for the ninethree months ended September 30, 2007,March 31, 2008, we issued 12.40.6 million shares from treasury at an average cost of $61.65$67.37 per share, for our employee benefit plans.

Earnings per common share from continuing operationsamounts were computed as follows (dollars and shares in millions, except per share amounts):

Approximately 710 million and 2 million outstanding stock options were not included in the computation of dilutive securities for the three and nine months ended September 30,March 31, 2009 and 2008, respectively, because the options’ exercise prices were greater than the average market price of the common shares during the reporting period, and therefore the effect of including such options would be anti-dilutive.

In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):

The valuation methods used to measure our financial instruments at fair value are as follows:

A $17$210 million obligation to pay cash collateral to brokers under master netting arrangements is netted against the fair value of the commodity derivatives reflected in Level 1. Certain of our commodity derivative contracts under master netting arrangements include both asset and liability positions. Under the guidance of FASB Staff Position No. FIN 39-1, “Amendment of FASB Interpretation No. 39,” we have elected to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty, including any related cash collateral asset or obligation.

The following is a reconciliation of the beginning and ending balances (in millions) for fair value measurements developed using significant unobservable inputs. Becauseinputs for the Alon earn-out agreementthree months ended March 31, 2009. We did not arise until the third quarter of 2008, this reconciliation is applicable to bothhave any fair value measurements using significant unobservable inputs for the three and nine months ended September 30,March 31, 2008.

Unrealized lossesgains for the three and nine months ended September 30, 2008,March 31, 2009, which are reported in “other income (expense), net” in the consolidated statement of income, relate to a Level 3 assetthe Alon earn-out agreement that was still held at the reporting date, are reported in “other income, net” in the consolidated statements of income.date. These unrealized lossesgains were offset by the recognition in “other income (expense), net” of gainslosses on derivative instruments entered into to hedge the risk of changes in the fair value of the Alon earn-out agreementagreement. These derivative instruments are included in the “commodity derivative contracts” amounts reflected in the fair value table above.

The table below presents information (dollars in millions) about our nonfinancial liabilities measured and recorded at fair value on a nonrecurring basis that arose on or after January 1, 2009 (the date of adoption of FSP No. FAS 157-2), and indicates the fair value hierarchy of the inputs utilized by us to determine the fair values as discussedof March 31, 2009.

Asset retirement obligations in Note 3.the table above are calculated based on the present value of estimated removal and other closure costs using our internal risk-free rate of return.

We enter into derivative instruments to manage our exposure to commodity price risk, interest rate risk, and foreign currency risk, and to hedge price risk on other contractual derivatives that we have entered into. In addition, we use derivative instruments for trading purposes based on our fundamental and technical analysis of market conditions. All derivative instruments are recorded on our balance sheet as either assets or liabilities measured at their fair values. When we enter into a derivative instrument, it is designated as a fair value hedge, a cash flow hedge, an economic hedge, or a trading activity. The net gain (loss)or loss on a derivative instrument designated and qualifying as a fair value hedge, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized currently in income representing the amount of hedge ineffectiveness was as follows (in millions):

Segment information for our two reportable segments, refining and retail, was as follows (in millions):