Impairment and Other Matters

12 Months Ended

Dec. 31, 2025

Impairment or Disposal of Tangible Assets Disclosure [Abstract]

IMPAIRMENT AND OTHER MATTERS

2.    IMPAIRMENT AND OTHER MATTERS

In recent years, the State of California adopted legislation that has subjected our refining and marketing operations to potential increased operational restrictions and new reporting requirements. The considerable uncertainty and potential adverse effects on our operations and financial performance resulted in the evaluation of strategic alternatives for our operations in California.

In March 2025, we approved a plan with respect to the operations at our Benicia Refinery and currently intend to idle the processing units and cease refining operations by the end of April 2026. In addition, we considered strategic alternatives for our remaining operations in California. As a result, we updated our evaluation of potential impairment and concluded that the carrying values of our Benicia and Wilmington refineries were not recoverable as of March 31, 2025. Therefore, we reduced the carrying values of these assets to their estimated fair values of $722 million and $847 million, respectively, and recognized a combined asset impairment loss of $1.1 billion in our Refining segment in March 2025. See Note 19 for disclosure related to the method used to determine the fair values.

Included in the recoverability assessments discussed above was the recognition of expected asset retirement obligations of $337 million, which primarily reflects the fair value of estimated costs for certain legal obligations to decommission the assets based on a range of potential settlement dates as of March 31, 2025.

In connection with our plan to idle the processing units and cease refining operations at our Benicia Refinery, we shortened the estimated useful life of the refinery assets, and as a result, will depreciate the revised carrying value of the net property, plant, and equipment and other noncurrent assets to the estimated salvage value of $107 million through April 2026. Accordingly, we recorded incremental depreciation of approximately $300 million in depreciation and amortization expense during the year ended December 31, 2025.

In anticipation of a phased plan to idle processing units beginning in February 2026, we reduced certain inventory levels during the fourth quarter of 2025. This reduction resulted in the liquidation of LIFO inventory layers with historical costs higher than current costs. As a result, cost of materials and other increased by $37 million for the year ended December 31, 2025.

We also implemented a transition plan for the affected employees of the Benicia Refinery, which includes retention incentive payments and separation benefits. As a result, we recognized a liability of $50 million for these one-time costs, which we expect to distribute to eligible employees by the end of the second quarter of 2026. These costs are included in operating expenses (excluding depreciation and amortization expense) for the year ended December 31, 2025 and are attributable to our Refining segment.

We continue to evaluate strategic alternatives for our remaining operations in California.