Benicia's Budget Crisis, Per-barrel tax, Valero Benicia Refinery

Maybe Benicia should begin action to initiate a local tax on Valero

[Note from BenIndy: The following Politico article suggests a way for Benicia to address its budget crisis, while acknowledging the presence of a financial powerhouse in our back yard. Oh, and, do you suppose this playbook would work with regard to a port tax, too?]

California city’s $550m deal with Chevron could be a national model for environmentalists

California environmentalists have a new playbook for beating Big Oil.

The Chevron Richmond Refinery is seen in 2023. In the summer of 2012, a massive blaze broke out at the refinery. | Eric Risberg/AP

Politico, by Will McCarthy, 09/03/2024

RICHMOND, California — In mid-August, this Northern California city extracted a half-billion dollar payout from Chevron, one of the most powerful companies in the world. It didn’t require a lawsuit, or a refinery disaster, or years of negotiations.

Instead, Chevron caved in the face of a local initiative that would have taxed every barrel it produced within Richmond’s city limits at its century-old, 3,000-acre plant just north of San Francisco. Within weeks of the tax being placed on the ballot, the oil and gas giant offered an unprecedented $550 million settlement to make it go away.

The local activists and city council who initiated the process had not set out to win a compromise, but they have revealed a new source of leverage that can be used to win concessions from large corporations with little political bloodshed. In doing so, they may have inadvertently created a playbook for other local governments by proposing a 50-year tax that would have left Chevron’s business future to the whim of voters.

“The community of Richmond has created a movement that will echo across the nation,” Mayor Eduardo Martinez said upon accepting a deal that will increase the city’s annual general fund by about one-quarter annually over a decade and dramatically shift its medium-term financial outlook. “Other communities too can require their polluters to do the right thing, either by negotiation, or by ballot measure.”

In the weeks since the settlement was ratified, some of those plans are already being set into motion. Representatives from Healthy Martinez, a watchdog group in a nearby Bay Area city home to PBF Energy’s Martinez Refining Company, say they are exploring their own tax initiative. Organizers who helped launch Richmond’s measure say at least two other California cities with major refineries have contacted them for guidance.

Statewide initiatives in California are frequently used as leverage by business groups and deep-pocketed activists to catalyze negotiations with elected officials. Last year, the threat of a referendum over a $22 minimum wage for fast-food employees led restaurant chains and unions to settle on a $20-per-hour accommodation. This summer, a half-dozen measures — on matters as varied as pandemic preparedness and personal-finance education — were pulled off the statewide ballot after lawmakers appeased their proponents by compromise legislation.

Chevron officials minimize the Richmond deal as simply the latest “historical wrinkle” in a sequence of tax agreements with the city, and one that sets no new precedent.

But the speed with which the company succumbed to political pressure has activists asking whether the approach of forcing environmentally damaging industries to defend their business practices before voters can’t be exported across the state, or even the country.

“All of these refinery communities should be considering this kind of effort,” said Healthy Martinez member Heidi Taylor.

A fire fight

It started with a fire.

On a gusty August evening in the summer of 2012, a massive blaze broke out at the Chevron refinery that since 1902 had sat on the flatlands near a wide point jutting out into the San Francisco Bay.

A thick band of black smoke stretched southward across the bay toward Oakland and Berkeley, the dark cloud billowing up from Richmond like a noxious beast released from its bonds. Emergency sirens rang out late into the day. Commuter trains stopped running. The county health department warned residents to remain inside.

By late evening, the flames were contained, but the damage was done. In the days and months to come, 15,000 people sought treatment at local hospitals for respiratory problems related to the fire. Chevron pleaded guilty a year later to criminal charges for failing to fix deficient equipment and paid $2 million in fines.

The refinery had caught fire before — an explosion in 1989 that injured eight people, and then another conflagration in 1999 — but the 2012 fire severed the fragile trust between the city and Chevron in a new way.

Chevron already had a billion-dollar expansion project underway. Two environmental justice groups, Asian Pacific Environmental Network and Communities for a Better Environment, successfully challenged the project in court, on the basis that aspects of Chevron’s environmental impact report were lacking. After notching a victory against the company, activists who had worked for a decade to mobilize residents against the city’s largest employer suddenly found many more were fed up with its presence.

“For organizers now who are now adults, that was an awakening moment for them,” said Megan Zapanta, who in 2011 joined APEN to work with communities living alongside polluting industries. “We started talking about how to hold Chevron accountable.”

A year after the fire, thousands of people marched from the Richmond metro station to the gates of the refinery to raise awareness of its safety record.

The city, after a legacy of siding with Chevron and the thousands of jobs it represented, filed a lawsuit in August 2013 against the company for “a continuation of years of neglect, lax oversight and corporate indifference to necessary safety inspection and repairs.” (Chevron settled with the city in 2018 for $5 million without admitting fault over the fire.)

Activists pushed back when Chevron plastered the city with ads arguing that the update was a mere “modernization” needed to ensure safety after the 2012 fire. Through sustained electoral and community pressure, the groups ultimately helped extract a $90 million community benefits agreement in exchange for the city council approving it in July 2014.

The groups saw an opening to escalate the conflict. Communities for a Better Environment convened local meetings to discuss refinery impacts on residents’ health. APEN held leadership training, aiming to empower people to advocate for their neighborhood. The Richmond Progressive Alliance helped win elections and shift the city council away from corporate influence that former Mayor Gayle McLaughlin said used to put it “under Chevron’s thumb.”

“What could we do in Richmond, something that galvanized our local bases?” APEN’s Zapanta said. “Not just something defensive. We were going all in on something.”

What it looked like to hold a refinery accountable changed dramatically over the course of that decade, amid growing awareness of climate impacts and the shifting sands of oil economics. In 2020, California set ambitious deadlines for ending fossil fuel refining. Nearby refineries converted to biofuel. The activists began thinking about how to prepare for a day when the refinery would pack up and leave town.

That same year, the Richmond City Council tried to increase the share Chevron paid to the city by proposing a tax on businesses’ gross receipts, modeled on one approved three years earlier in Carson, the Los Angeles area city that is home to a Marathon Petroleum refinery. California law requires any special tax to go before voters, and after a campaign driven largely by service unions, Richmond voters approved Measure U by a 50 point margin.

But the environmental justice groups were not satisfied with the $9 million in revenue generated by the new tax. Activists dreamed of a larger fund that would help transform Richmond, mending streets and funding new parks and bringing in job training programs and new businesses.

In searching for ways to secure revenue beyond the city’s standard business tax and license fees, the groups’ attorneys alighted on the idea of taxing Chevron for every barrel it refined in Richmond over the next fifty years. Such a tax would bring in as much as $90 million annually, according to the city’s projections.

“It was a question of what are the tools that are available to us,” said Kerry Guerin, a lawyer with Communities for a Better Environment. “We began to see that a ballot measure general tax would be a way to develop revenue streams for the city.”

Zapanta and other activists wanted to time the necessary initiative for the 2024 general election to capture the type of high turnout that progressives generally think boosts their causes. They chose to get there through the newly friendly city council, rather than qualifying the initiative by collecting signatures, even though it risked putting control of the measure’s language in the hands of politicians with their own interests.

Lawyers from Communities for a Better Environment drafted the proposal while Asian Pacific Environmental Network organizers worked to think through a fundraising and campaign strategy. Although the tax proponents had been actively talking with city council members, they still tried to work in secret to prevent Chevron from learning of their plans, delaying any public report on the measure until they were ready for a campaign.

In the spring of 2024, the groups delivered a proposed initiative to Richmond City Council, whose seven members were all generally supportive, according to current Councilmember McLaughlin. In May, the council voted unanimously to place the tax on the November ballot. Elected officials pitched the tax to their constituents as part of a grand vision that would permanently transition the economy of Richmond, a smokestack city in the early stages of gentrification, away from its industrial history.

Chevron appeared intent on escalating the conflict. A corporate employee and a newly formed group called Coalition for Richmond’s Future sued the city for producing what they called an “aspirational” and “misleading” ballot measure. A company spokesperson said Chevron would be forced to leave Richmond if the tax was enacted, and accused Richmond officials of “playing chicken with the region’s economic future.” Soon after, the company appeared to give weight to the threat by announcing plans to move its headquarters from nearby San Ramon to Texas.

In private, Chevron struck a more accommodating posture. By early August, company representatives were quietly negotiating with the city attorney, the mayor and an ad-hoc committee in what a spokesperson later described as an “open dialogue.” The company initially offered $300 million, and the city countered with a higher number, according to a city presentation. The negotiations were up against a hard deadline: Aug. 14, the final date for a ballot initiative to be removed from the fall ballot.

That day, the council called a special meeting to announce a compromise with unanimous support from its members. Officials would drop the pursuit of a tax on the refinery in exchange for $550 million paid out over ten years, during which time members said it would provide about as much money as the tax would have.

Members who feared the uncertainty that would accompany protracted litigation after the initiative’s passage — as happened in Carson, which had to place the vast majority of its tax revenue into escrow as it awaits the outcome of lawsuits — welcomed the settlement as a “bird in hand.”

“It’s not necessarily a win-win, because I don’t think anyone actually won through this process,” said Ross Allen, a company spokesperson. “But I do think it’s something both sides can probably live with.”

Initiative proponents knew council members were seeking a settlement but were surprised by the timing of the announcement, according to Zapanta and others within the campaign. They had hired a canvassing team to call voters and were organizing a volunteer program for door knocking. A campaign film shoot was scheduled for the day after the city council meeting.

Those who had been chasing Chevron for a decade saw politicians allowing the corporation to buy its way out of a tax it viewed as an existential threat. “Our campaign didn’t approach the city just so Chevron could cut a deal that is pennies to them,” Guerin said.

When the levy breaks

While the activists who brought Chevron to heel are left with mixed feelings about the settlement, other communities are approaching them as victors.

Policy staff with Local Progress, an organization composed of progressive local elected officials nationwide, are in discussions about bringing the per-barrel tax to other cities. McLaughlin said she held meetings last week with a group that aims to use a similar ballot initiative to tax Chevron’s refinery in El Segundo. More communities will likely follow, and possibly look to go after other polluting industries like chemical companies, cement and steel plants, or even auto factories with specialized taxes.

“I don’t think anything is plug and play,” Zapanta said. “But we’re very excited to share lessons.”

Robb Korinke, the founder of a California political consultancy specializing in local ballot-measure campaigns, said the Richmond activists’ represents a “maturation of organizing tactics” in the environmental justice movement. That includes a shift away from emphasizing global themes like climate change toward a local environmental approach that can appeal to a more diverse coalition.

There will be challenges in exporting Richmond’s process to other jurisdictions. It is not entirely unusual for cities to try to pull money from the big businesses within their jurisdiction. But ironically, it is the California law that was supposed to make it more difficult to enact a special tax, by requiring voter approval, that may have given Richmond a unique source of leverage over Chevron through the threat of an all-consuming ballot fight.

Not all local organizers can credibly threaten a large corporation at the ballot. According to David Hackett, the chair of the board of transportation fuel consulting firm Stillwater Associates, there’s no guarantee that other communities have the same level of antagonism that Richmond has toward Chevron. Plus, a less deep-pocketed refinery might simply fold in the face of a $50 million yearly tax.

The success of the initiative in Richmond was a result of decades of organizing and research by a grassroots base that became formidable enough to scare Chevron. The Healthy Martinez coalition, which formed in response to a different high-profile refinery disaster in 2022, is in its infancy compared to what has been built in Richmond.

“The Richmond refinery is a unique asset and the Bay Area is a unique community and political environment,” said Allen. “Chevron maintains continuous dialogue with the jurisdictions where we have assets. The agreement was fruit of that conversation and reflects our long-term discussion with city officials.”

The organizers of the Richmond campaign insist from the outset they had more in their sights than just taxing Chevron. Their initiative, they point out, would have been called Polluters Pay.

“It was always our intention to set a precedent,” Zapata said.

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