Joe, a chance to get up to the podium. Next up, we have Valero. I am very happy to have Joe Gorder, the CEO, and Lane, who is the head of the refining business. You have just heard from MPC, so I am sure some of the same topics will come up. Thank you very much, Joe, for your time.
Thanks very much. It is a pleasure to be here with you. Thanks to all of you for taking time to come and listen to the Valero story when you could be out on the slopes. I hope you get a chance to get out there later today. So, there we go. Obviously, this is a safe harbor statement, and we will not dwell on it. It shows that we have lawyers, and this says that the actual results may differ materially from our forward-looking statements. With that, let us go ahead and begin talking about Valero. Valero is the world's largest independent refiner. We have 2.9 million barrels per day of refining capacity. 70% of that is located in the U.S. Gulf Coast in the Mid-Continent. As you know, that is an area that is cost advantage from a natural resource perspective.
We have a very substantial logistics business, which led us in 2013 to execute the IPO to create Valero Energy Partners, which is a traditional logistics MLP with 100% fee-based revenues. We are a marketer of wholesale fuels with approximately 7,400 branded marketing sites operating under several brands, primarily Valero in the United States, Ultramar in Canada, and then Texaco in the U.K. and in Ireland. Then we have a significant renewable fuels business. We have 11 corn ethanol plants that are very efficient, and they produce 85,000 barrels per day of ethanol. Then we have a 50% ownership interest in a renewable diesel plant that has 10,500 barrels per day of production capacity. Now, this map shows the geographic diversity of our operations. The teal-colored states are those that we have a wholesale marketing presence in.
Those with the V logo are where we have a branded wholesale presence. Now, you can see the location of our refineries on this chart. We have two plants on the West Coast. We have a significant concentration of refineries in the U.S. Gulf Coast. We have three refineries in the Mid-Continent. Then if you move further to the east, you can see our refinery at Quebec City. Then finally, if you were to go way to the east, you would see our Pembroke refinery, which is located in Wales. Our 11 corn ethanol plants are located in the upper Midwest, very close to their source of feedstock. Then finally, we have the location of the Diamond Green renewable diesel plant, which is very near New Orleans on the side of our St. Charles refinery.
The table that is on the left here provides you with some additional information on the refineries, including the throughput capacities, crude capacities, and the complexity index. Our strategies to enhance shareholder value, shareholder returns, are really focused on maintaining our operations excellence, on returning capital to stockholders, on making disciplined capital investments, and on unlocking our implicit asset value. Operations excellence is something we have been focused on for some time. It is critically important to us. Obviously, our team realizes that excellent operation leads to higher levels of reliability. It drives safe and profitable operations. We are relentlessly committed to this, and I will talk more about this with a few slides in a minute.
An area where we have had a little bit of shift in priorities, really since towards the middle of the tail end of last year, is on our focus on producing capital returns to stockholders. We are doing this through a very disciplined capital allocation approach that includes dividend growth and share repurchases, and we will cover that in a little bit more detail in a minute also. We follow a very rigorous capital project screening and M&A opportunity review process. Our capital projects, which we will speak of, really are of moderate size, and they are intended to optimize our operations, and they generate high returns. Finally, we are focused on unlocking value, what we would consider to be the implicit value of the logistics assets that are owned by Valero, by dropping those assets on an accelerated basis down to Valero Energy Partners.
On this page, what I would like you to take away, number one, we believe we are excellent operators, and we will show that. But number two, we shifted our priorities really to give a much more intense focus to these last three items. Key market trends that are benefiting our business today are ones that you are very familiar with. We have significant increases in production of U.S. and Canadian crude oil, natural gas, and NGLs, which is providing a real advantage to North American refiners. We have global refining products demand, which continues to grow, and certainly with lower prices, we would expect that trend to be supported. Finally, if you look at Valero's portfolio, we have refineries that are location advantaged. They are located in the U.S. Gulf Coast and the Mid-Continent, and the Canadian refinery also has access to cost-advantaged crudes.
Our U.S. Gulf Coast plants have access to export markets, which is very beneficial to us. The first trend I mentioned was that of the increase in crude and natural gas production in the U.S. If you take a look at the chart on the left, you can see that there has been significant growth in U.S. crude oil production, which is represented by the line on this chart. You can see this shows where we were in 2014. As you know, that volume is higher today than it is on this chart. Most of that crude is light sweet crude that is coming out of producing regions like the Bakken and the Eagle Ford.
This increase in crude production has really been instrumental in promoting energy independence, and it's led to significant reduction in crude oil imports, as you can see from the bars on that chart. If you move over to the chart on the right, you can see here the significant increase in U.S. natural gas production. This increase in supply is really creating downward pressure on natural gas prices, which benefits not only consumers in the U.S., but also those that are in manufacturing industries because it's a significant part of the operating expense. It's also stimulating capital investment in a lot of projects. I know that you know, but the refining companies and the petrochemical companies are looking at ways to try to exploit the inexpensive natural gas. I'm going to shift and focus a little bit on operations excellence.
These charts show that we continue to improve our safety and our environmental performance. in 2014, our refining team had their lowest injury rate in company history, and the combined rate for our people and contractors was at an all-time low and less half that of the industry average. From an environmental perspective, we've made great progress. We've reduced our total air emissions resulting from startup, shutdown, and malfunction events. Our focus on safe and environmentally sensitive operations is leading to good results. This chart, if you look at the chart on the right, it's a little bit busy, but let me explain it to you. This shows the results of the biannual industry survey over the last six years with data points for 2008, 2010, and 2012, and the colored dots reflect those years.
Each benchmark has a bar with four segments, and that shows the performance quartile within each category. The dots where Valero's refining system has rated in each of those categories. What I want to point out here is that you can see that we've had a significant improvement in our performance in the areas of mechanical availability, in our Personnel Index, our Maintenance Index, our Non-Energy CapEx, and our Energy Intensity Index. These are really significant to us because they go directly to the reliability and the profitability of our operations. I should note that what you saw on the previous slide, our performance on health, safety, and environmental really is linked into these improvements in equipment reliability and refinery operations. When our plants run reliably, there's much lower risk of having safety and environmental events. So they all dovetail in.
This type of performance leads into this kind of result. You can see that our performance has manifested itself in very high refinery utilization rates. We were at 95% in 2013, which was very good, and we increased that to 96% in 2014. Our utilization rates are very high. This is attributed not only to very good operations, but also to our ability to optimize our operations which you can see pretty clearly here. If you look at the graph on the right, this is the range of flexibility for Valero's Gulf Coast refining region from a feedstock perspective. We have a very complex refining system in the U.S. Gulf Coast, and it provides us with a lot of opportunities here. You can see how broadly we can shift our feedstock slates to take advantage of the opportunities that the market's giving us.
Very broad ranges of heavy sour, medium sour, light sweet crudes, and then the other feeds. The one thing I will point out, our hardware allows for this, but our team, both the commercial team and the refining team, work very closely together. I would tell you that I think that we are probably the most efficient out there at being able to respond to changes in the market and take advantage of the flexibility that our system has. We get asked a lot about the Port Arthur and St. Charles hydrocracker projects, and that is because they were very large capital projects. Let me just tell you that the two units started up very well. They started up on time, and they are producing the high-quality distillates that we expected to get from them.
From a financial perspective, the EBITDA has slightly exceeded what we had when we looked at these projects. We have got an assumed $800 million in here for the four trailing quarters, which compares to 780 that we had in the transaction economics. You say, "Well, what are you doing to get this?" The results are really coming from a shift in the higher capture rate that we are able to achieve by operating these units, and then the incremental throughput that we are able to get as a result of adding these to the portfolios in those two refineries. The hydrocrackers are performing very well. We are very glad that they are part of our portfolio. This chart really is one of the things I would like to focus on a little bit. It really focuses on the shift in management's priority here.
We talked about our capital allocation discipline, and what we have done here is tried to represent to you how we are looking at this. If you look at the top row, you see those are deemed to be non-discretionary. So we have used sustaining CapEx to maintain our operations, and dividend growth is being non-discretionary uses of cash. We govern these uses of cash by our commitment to maintain our investment grade rating. We believe that we are a bit under-levered or over-equitized, however you want to look at it. So what we have done is set a target debt-to-cap rate of 20%-30%, which we believe puts us well within the range of maintaining the investment-grade rating. So the commitment to the investment-grade rating, dividend growth, and sustaining CapEx, we would consider to be non-discretionary items in our capital allocation.
If you look at the three boxes on the bottom, we would view buybacks, growth CapEx, and acquisitions as discretionary uses of capital. What I really want to communicate to you here is that when we look at dollars that we have available to us now, we are looking at them as a competition for the use of the funds. To approve capital projects, we are going to look at the returns of that project, and we are going to look at an alternative use for that capital, which might be a share repurchase, and we are going to make the decision that is most significant when you look at its effect on our ability to create value for our stockholders.
Now, our focus on capital allocation, and specifically the return of cash to shareholders, led us to increase our regular quarterly dividend in January by 45% to $0.40 per share. We also increased our stock buybacks last year to $1.3 billion, and we've targeted a payout ratio greater than 50% of our earnings in 2015. We really believe that these actions are going to demonstrate our commitment to capital allocation, but also our belief in Valero's earnings potential and our commitment to returning cash. If you take a look at the dividend chart, you can see that we have had a steady progression and increase in our dividend payout. Our stock repurchases increased materially in 2013 and 2014. Regarding capital investments, we completed our 2014 capital program under budget. The budget was $3 billion. This chart shows $2.9 billion.
In 2014, we actually only spent $2.8 billion in 2014. We did this not by canceling projects, but by the rigor that we put in the system. Lane and his team scrubbed the capital projects in a big way. As a result of their efforts, we were able to reduce the capital budget from $3 billion to $2.8 billion actuals. We're committed to applying that same rigor to all of our projects that we look at going forward. Our capital budget for 2015 is $2.65 billion. Of that, $1.5 billion is committed to sustaining CapEx, turnaround, and catalyst. The majority of the growth capital in 2015 is really attributed to the two crude units, which I'll talk about in a minute, and then investments in logistics assets.
If you look out to 2016, we expect that we're going to reduce the spending to about $2.4 billion, with a little over $1 billion of that now being attributed to growth CapEx, and it's really weighted very heavily towards logistics investments. Those logistics projects that we're investing in are going to be candidates for drop-down to Valero Energy Partners, which is our MLP. So we continue to control our capital and manage our capital very aggressively. Our investment in logistics assets are really targeted on enabling us to increase our feedstock flexibility and our product export capabilities. Specifically, we're investing in pipelines to facilitate the incremental movements of domestic crude to our refineries. We're investing in tanks, docks, and vessels at several refineries.
But one that I'll focus on here are the projects to get North American crude, really Eagle Ford crude and WTI, up to our Quebec refinery. The dock project at Corpus Christi allows us to move 25,000 barrels a day of incremental crude there. With the addition of some tankage that we're going to put in place, we'll have the capacity to move up to 50,000 barrels per day there when the economics support it. Finally, we're investing in rail cars and rail unloading facilities. Really, these are intended to help us move bottlenecked crude to our plants for processing. We purchased 5,320 rail cars, and we built rail unloading facilities at Quebec City, at St. Charles, and at Port Arthur.
We hope to get a project permit to build one at our Benicia refinery, where we would then be able to rail in about 30,000-50,000 barrels per day of crude there. We are also investing to increase our capability to process advantaged North American crude, and I mentioned these two crude units just a moment ago. Specifically, we are going to spend $750 million to build two new crude topping units, a 90,000-barrel-per-day unit at our Houston refinery, and then a 70,000-barrel-per-day unit at our Corpus Christi refinery. We expect to have both of these projects online in the first half of 2016. These projects are really intended to optimize our refinery operations at these plants. What they effectively do is back out more expensive purchased feedstocks.
We are going to run discounted crude oils to produce the feedstocks to fill the downstream units and back out purchased feedstocks. The projects have really good, solid IRRs. If you look at the table in the upper right here, using 2014's average prices and the capital that we are going to spend, we would have had a 50% internal rate of return. The base economics for our assessment of these projects were based on Brent and LLS being at parity. Right now, as you know, there is a significant discount here, but at parity, the projects had 25% IRRs. Anyway, they are very good projects, even in a situation where the crude discounts were to not be there. We are also investing in hydrocracker expansions, which increase our distillate yields, and we are taking advantage of low-cost natural gas to do that.
We just recently completed a 20,000-barrel-a-day capacity expansion at our Meraux refinery, and we have projects underway to increase the capacity of the St. Charles and the Port Arthur hydrocrackers. These are all very good projects. We continue to look for opportunities to take advantage of cost-effective natural gas and NGLs. We are evaluating a methanol plant at our St. Charles refinery and then an alkylation unit at our Houston refinery. We expect that we are going to make decisions on these projects sometime in the second half of the year. But right now, they are going through that rigorous capital review process that I described to you earlier. Our ethanol business has been a home run. It has performed very well. To date, we have invested about $950 million to acquire and to maintain these assets, and it has produced over $2.2 billion of EBITDA.
We have very good plants. We have good technology. We are competitively advantaged by not only the scale of the operations, but by the location of the plants. As I mentioned earlier, they are located in the Midwest, right in the middle of the Corn Belt. So they have very cost-effective source of supply. One of the things that really does not show up so well, but it is true, is that we are able to leverage the best practices that we apply in the refining business to these operations, and that has helped improve their operations in a material way. So although the ethanol margins are pretty tight right now, this has been a very good business for us, and we expect it is going to be a good performer going forward. I mentioned our sponsored MLP earlier, Valero Energy Partners. It trades under the symbol of VLP.
Valero owns the 2% general partner. We own all the incentive distribution rights, and we own nearly 70% of the LP interest. We have put in this entity very high-quality assets that support Valero's refining system. We do view it as our primary mechanism for growing Valero's logistics business, and it provides us an access to very low cost of capital funds. Having the MLP is really good, and it's performed very well since we IPO'd it in 2013. We're very committed to growing it. We get asked a lot about what is the EBITDA available to drop from Valero Energy to VLP, and we're showing that on this slide. We have $900 million available that we have line of sight to. This would be between now and 2017.
We have about $770 million of that available to us today, and then we got a couple projects that'll be done by 2017, which will take it up to $900 million. That $900 million is attributed to EBITDA that could be produced via the pipelines, the racks, terminals, and storage, the rail, and the marine. Traditional LP-type assets. What's not included in that $900 million is any EBITDA that might be attributable to the fuels distribution business. We're currently going through a process internally where we're taking a look at the EBITDA streams there that might be available for a drop to VLP. We understand the landscape for MLPs has changed. That has led us to not only take a look at additional sources of EBITDA that might be qualifying income, but it's also led us to accelerate our pace of drops.
As I mentioned earlier, we'll drop $1 billion of assets this year, which on an annualized basis is about $100 million of EBITDA. What that effectively does is it takes us into the high splits for Valero Energy by the end of the year. That's our story. We believe that Valero is an excellent investment. Our refineries are located on the Gulf Coast and in the Mid-Continent, where we have great access to cost-advantaged crude and natural gas. Our ethanol plants are very well located in the middle of the Corn Belt. We've demonstrated that we're excellent operators, and we have a relentless focus on continuing to improve our operations to the point where we want to be the most excellent operator out there. We have a great ethanol business and a good renewable fuels investment portfolio.
We are focused on returning capital to shareholders, and our capital discipline, I think, shows on what we've done to date, and you'll continue to see that as we go forward. We're focused on unlocking the implicit value within Valero's portfolio through the drop-down of assets. Of course, our objective is to get this valuation multiple up. Anyway, with that, Ed, that's what we have for prepared remarks. Be happy to take questions.
Thank you, Joe. Any questions?
Yeah, just quick question, Joe, on the drop-downs. Since you've moved into the higher splits with dropping down assets to the MLP, maybe you can talk about. Do you think about adjusting the multiple a bit? Obviously, when you get into the higher splits, it's harder to make things accretive keeping multiples the same. You look at possibly moving those down a bit or maybe as you go through time, as you get deeper into that high split.
Certainly, that would be something that we would look at. Right now with what we have line of sight to, a 10 time multiple is really what we are targeting. The transactions between the two companies, obviously they have to go through a conflicts committee and get reviewed and approved on both sides. We want to be very fair with what we are doing between the two companies. It seems that the market for dropped assets tends to be around this 10 time EBITDA multiple, so we are very comfortable at that level. We will look at the assets on an individual basis. There are some foreign assets in the portfolio that of course would have different values than with domestic assets.
It will be something that we will consider, but right now I think we are comfortable with that 10 time multiple, at least as a proxy for value.
You mentioned Canadian crudes a number of times and just accessing them. Do you have a view on Keystone XL, Alberta Clipper, and Energy East, and how they may affect your economics?
Lane, you want to speak to any of those?
Well, is this working? I will certainly speak to just the concept. Joe and I actually worked pretty heavily on Keystone XL. We were one of the early companies that subscribed to it, and we have a view that it is a necessary pipeline. I think it will be good. Obviously, the energy platform that North America has in front of it is a great opportunity for energy security, and just positions the whole country better going forward. In terms of how it affects Valero, you can sort of imagine this universe where Canadian heavy, Keystone XL is flowing all the way to the Gulf Coast. It goes to the Port Arthur area, which is where our Port Arthur refinery obviously is. You combine that with Latin America, that same quality of heavy sour.
When you look forward, you can certainly envision a very advantageous position for Valero with the completion of Keystone. With that said, barrels are still flowing. They are coming down. They are making their way through Enbridge's system. They are making their way down really through to the original Keystone project and coming on down the Seaway. These barrels are flowing, and they are just really resulting in a lower net back to Canadian producers. Certainly a 500,000 barrel a day pipeline would increase the availability of heavy sour to refiners in the Gulf Coast and would leverage our assets obviously quite a bit because we have some heavy coking refineries.
As for the other pipelines, I think the one thing that is certain is that the Canadians are going to produce their crude, and they are going to move it to market. Whether it comes Keystone or if it moves across further to the east or to the west, it is going to get to the water, and it is going to get to refining centers. We believe it is going to come. Now the question is, at what point do those projects get approved and move that way? As Lane said, we are supportive of Keystone, and we really expect that, well, we are hopeful anyway that it gets approved. It has been an unbelievably brutal process. Yes.
Joe, a lot of anticipation and anxiety about storage. Love your view on how you see the storage, the crude market, how you see that playing out, and also your view on imports. With WTI Brent wider now, do you still think that we are going to still see elevated imports into the U.S.?
Okay. I'll just tell you, Lane's answered this question probably a half a dozen times, and it's a good one, so you're right on sync. Let's go ahead and we'll let him answer that, if you don't mind.
I would say where we are today, you think about last year and what happened. You had the industry ran off. We finally got a logistics build-out to get all those barrels that had been accumulating in Cushing for six or seven years. We finally flushed into the Gulf Coast. We had plenty of build-out. We ran all the barrels, and it took the market to sort of reposition. You had some of the foreign people, including OPEC, move their barrels away. Then we had the Far East slow down, all the incremental production coming out of the U.S., and it sort of created this position. Cushing's empty. You could see Dated Brent starting to get contango structure sort of July-ish last year. It was saying foreign cargo market was long, but there was still slight backwardation in Cushing.
The world at this point is trying to find places to store barrels because the world was long oil. You could see what was going to happen. It would force foreign barrels back into the U.S., at least to try to get to parity. You could see that happening ultimately somewhere in the fourth quarter. In fact, we imported at least two or three large cargoes into Quebec because we're one of the ones that can swing U.S. Gulf Coast domestic barrels versus North African or West African barrels. Got close, and then you started seeing Cushing dip into contango, which is where we are today. The world's saying that is a good economic place to put barrels. South Africa's full.
You got VLCCs that are trying to fill up, but there's definitely cheap storage in Cushing, so it's going to push barrels back up. You also have at least the issue where you are today in terms of turnaround through your 88%-ish utilization in the U.S., but we're storing 3 million-4 million barrels a day in Cushing. I think there's a pivotal moment somewhere. You can do your numbers. Is it mid-April, May, or June when Cushing might fill? Then it's a matter of, well, those barrels that were going into storage, how much is picked up by turnaround activity in the U.S.? How much of the foreign cargoes are maybe pointed to the U.S. today? These are ones that are being priced really off Gulf Coast pricing markers, and here I'm alluding to really OPEC barrels. How does all that rebalance?
There's going to be a point. Cushing's full. The barrels now have to find a home back in the Gulf Coast, and they'll have to compete for crude capacity again. It'll be up to whether OPEC wants to maintain their market share and how does that. At the end of the day, they got to compete for U.S. refining capacity, Gulf Coast capacity, and we'll see how it plays out.
We'll just have to see. If I absolutely knew the answer to that question, we'd have lots of paper positions on. But you can see the event. It's out there. It is out there.
Just one last question, because we're at the end.
When the days of a zero interest rate policy come to an end and rates go back up and perhaps impact the advantage cost capital of the LP structure has, how do you pivot the CapEx decision from going more towards MLP-able assets? Do you buy back more shares, reinvest in the refining assets? What do you do at that point?
Yeah. I'm sure that is where we would end up. We'll look very hard at it. If you think about the logistics investments we're making today, though, they're really key to supporting and optimizing our refining operations. We're not taking flyers on projects just to create assets to drop into VLP. To the extent that it makes sense to drop those assets into VLP, we will do that, but otherwise, we would probably do the projects for Valero Energy's benefit in any circumstance. Then, I mentioned earlier, the whole notion of interest rates and what they might do. We really aren't smart enough to call that, but they are attractive today. When we look at our balance sheet, we realize that we are under-levered.
We have an opportunity here today to improve what I'd say is our overall cost of capital by taking a look at taking on a little bit of additional debt. As we showed 20%-30% debt-to-cap, that's very modest. At that rate, your coverage ratios aren't an issue relative to your investment grade rating, and it's something that we will probably do. It's imperative that Valero Energy maintains this kind of mid-grade investment grade rating because typically a sponsored MLP is subordinated to the sponsor, and we would not want to be in a position where when we do get a credit rating for VLP, we would find ourselves with a non-investment grade rating. Our thought process goes around all those factors.
Joe, Lane, Valero, thank you very much.
Oh, thank you.