Impairment and Other Matters

3 Months Ended

Mar. 31, 2026

Impairment or Disposal of Tangible Assets Disclosure [Abstract]

IMPAIRMENT AND OTHER MATTERS

2.    IMPAIRMENT AND OTHER MATTERS

In March 2025, we approved a plan to idle the processing units and cease refining operations at our Benicia Refinery by the end of April 2026. In addition, we considered strategic alternatives for our remaining operations in California. As a result of these actions, the following impacts were recorded in our Refining segment:

•During the first quarter of 2025, we evaluated the Benicia and Wilmington refineries for potential impairment and concluded that their carrying values were not recoverable as of March 31, 2025. Therefore, we recognized a combined asset impairment loss of $1.1 billion.

•Included in the recoverability assessments discussed above was the recognition of expected asset retirement obligations of $337 million. During the three months ended March 31, 2026, we settled approximately $100 million of the asset retirement obligation related to our Benicia Refinery.

•We shortened the estimated useful life of the Benicia Refinery, and as a result, have been depreciating the revised carrying value of the net property, plant, and equipment and other noncurrent assets since April 2025 to the estimated salvage value. Accordingly, we recorded incremental depreciation of approximately $100 million in depreciation and amortization expense in the three months ended March 31, 2026.

•We implemented a transition plan for the affected employees of the Benicia Refinery, which includes retention incentive payments and separation benefits. During the third quarter of 2025, we recognized a liability of $50 million for these one-time costs, which was included in operating expenses (excluding depreciation and amortization expense). A portion of this amount was paid to eligible employees during the first quarter of 2026 and we expect to distribute the remaining balance by the end of the second quarter of 2026.

•During the fourth quarter of 2025, we reduced certain inventory levels related to our California operations that resulted in the liquidation of last-in, first-out (LIFO) inventory layers with historical costs higher than current costs. As a result, cost of materials and other increased by $37 million.

During the first quarter of 2026, we began idling the processing units through a phased approach and ceased operation of the fuel production units at our Benicia Refinery. In accordance with our plan, full idling of all processing units was completed in April 2026. While we evaluate potential redevelopment options for the future use of the refinery property, we plan to maintain all required operating permits and keep the facilities in a safe, clean, and idled condition. In addition, we expect to continue to fulfill our contractual obligations to customers in the Northern California market through imports or other alternative supply arrangements. Beginning in the second quarter of 2026, activities associated with the decommissioning and redevelopment of our Benicia Refinery will be reported within other corporate expenses in our segment information, as disclosed in Note 10.