San Francisco Chronicle,  by Aidin Vaziri, July 23, 2025

In a rare move to safeguard California’s fuel supply, state officials are actively seeking a buyer for Valero Energy’s Benicia refinery, according to a report Wednesday from Reuters citing sources familiar with the matter.

Valero, the nation’s second-largest refiner by capacity, plans to shut down the 145,000-barrel-per-day facility by April 2026. The closure reflects declining fuel demand in the state and growing regulatory pressure on fossil fuel producers.

But with gasoline prices in California already the highest in the nation — averaging $4.484 per gallon on Wednesday compared to a national average of $3.155, according to AAA — the state is taking steps to prevent further market disruption.

Valero did not immediately respond to a request for comment. City officials in Benicia declined to comment.

The California Energy Commission is quietly facilitating talks with potential buyers in a bid to keep the refinery operational, according to the Reuters report.

“CEC is engaging with market players to explore pathways for the continued operation of in-state refineries,” the agency said in a statement to Reuters.

In a more detailed statement to the Chronicle on Wednesday, the commission emphasized that its efforts extend beyond a single facility and are part of a larger transition plan for California’s fuel supply system.

“CEC has been and is actively supporting conversations with a variety of market players to discuss pathways to address the impacts of the closure intent announcements of the Phillips 66 refinery in Wilmington and Valero refinery in Benicia,” the agency said. “CEC’s goal, as part of a statewide transition strategy, is to support a stable and affordable fuel supply, including by promoting resilience in the transportation fuels system and a prudent cushion in fuel supply to mitigate impacts of refinery outages.”

The move signals a notable shift for a state long committed to aggressive climate goals. In recent years, California has prioritized the transition to renewable energy, pushing to shutter traditional refineries — a policy that has often put the state at odds with oil companies.

The planned Benicia closure follows Phillips 66’s decision last year to shut its Los Angeles-area refinery. Together, the two facilities account for roughly 17% of the state’s gasoline supply. Analysts warn that losing both could drive pump prices as high as $6 to $8 per gallon, according to a UC Davis study.

According to the report, among the parties contacted by the state is HF Sinclair, which had previously held talks with Valero before negotiations fell apart over an environmental issue. It said the Energy Commission has also reached out to European operators familiar with stringent emissions standards, the report said.

Valero employs approximately 400 people in Benicia, ranking among the city’s top employers. It also stands as Benicia’s largest taxpayer and a significant contributor to local charitable efforts.

On the same day news broke that California officials are trying to find a buyer for Valero’s Benicia refinery, authorities responded to intermittent flaring at the facility.

According to the Benicia Fire Department, the flaring began Wednesday after a unit was restarted following routine maintenance. Valero attributed the event to a “mechanical issue” with its nitrogen plant and said it would continue for several hours while the situation was monitored.

“We currently do not anticipate any off-site health impacts,” fire officials said in a social media post.

The Bay Area Air Quality Management District confirmed it was investigating the incident, responding to complaints, and monitoring for possible air quality violations.

Flaring, the controlled burning of excess gases, is a standard safety measure at refineries to relieve pressure and prevent explosions.

The facility has had other problems in recent months, most notably when a significant fire broke out May 5, prompting a shelter-in-place notification for nearby residents. Firefighters brought the blaze under control about an hour later.