Valero CEO Lane Riggs cited California’s tough “regulatory and enforcement environment” as the main driver behind the company’s intent to cease operations at the sprawling North Bay facility. The sixth-largest refinery in the state, it currently produces up to 145,000 barrels of crude oil a day, accounting for about 9% of the state’s production.

“California has been pursuing policies to move away from fossil fuels for really the past 20 years,” Riggs said, calling the state’s regulations “the most stringent and difficult of anywhere else in North America.”

Benicia Mayor Steve Young doesn’t disagree with the assessment, but said he wishes the company had provided more lead time.

“We need to get moving on this quickly because 12 months is not a long time given the severity of the economic impact,” said Young, noting that nearly 20% of Benicia’s $60 million budget comes from the refinery. “I think that’s part of my frustration, is how little time we have to try to plan for some kind of an alternative.”

Shutting down the facility, he added, would also be a major blow to the hundreds of residents who work there, not to mention the scores of restaurants, hotels and other businesses that provide services to those workers in this city of some 27,000 residents.

The Valero refinery is also the exclusive supplier of jet fuel to nearby Travis Air Force Base, which it delivers through a direct pipeline.

“If that is stopped, what does that mean to the base?” Young said. “Travis uses an amazing amount of fuel to fly all their planes, much more than can be easily replaced, and certainly not replaced within a year. So I think that this becomes a matter of real concern to the Defense Department and it’s potentially a national security issue.”

Valero dropped its bombshell April 16 announcement roughly six months after regional and state air regulators fined the company a record $82 million for secretly exceeding toxic emissions standards for at least 15 years. And last month, city leaders voted unanimously to impose moderate new safety regulations on the facility.

“I suspect that compared to other refinery operators, they’re a pretty good business operator. But they’ve also had a pretty bad track record on public safety,” said Terry Mollica, who leads a group of residents that pushed for the city’s new safety rules to increase oversight of the refinery.

But Mollica said that he doesn’t think anybody in his group is particularly excited about the possibility of the facility closing altogether.

“There would be long-term and short-term impacts on the community,” he said. “People would lose their jobs. None of us want to see that happen particularly.”

Valero has owned and operated the Benicia refinery since 2000. The refinery was originally built in 1968 for Humble Oil, later called Exxon, and began operations the following year.

Its possible closure comes amid a growing exodus of traditional oil refiners in California. Phillips 66’s refinery in Rodeo and Marathon’s facility in Martinez both recently converted operations to biofuel production. Phillips 66 also plans to close its Los Angeles-area refinery — the seventh largest in the state — later this year.

And Valero executives, in this week’s earnings call, hinted that they may also soon consider “strategic alternatives” for the company’s only other California refinery, located near Los Angeles, which accounts for more than 5% of the state’s crude oil supply.

“California is phasing out its gasoline consumption and refiners see that coming,” said Severin Borenstein, a UC Berkeley energy economist. “We should be seriously concerned about how all that gasoline supply is going to get replaced.”

California has dramatically reduced its reliance on fossil fuels in recent decades, but most residents still drive gas-powered cars and will continue to do so for years to come, Borenstein said, even though the state already has some of the highest gas prices in the nation.

Gov. Gavin Newsom underscored that sense of urgency this week in a letter (PDF) to California Energy Commission Vice Chair Siva Gunda. He urged the commission to “redouble” its efforts to ensure refiners “continue to see the value in serving the California market, even as demand for fossil fuels continues its gradual decline over the coming decades.”

“I am directing you … to reinforce the State’s openness to a collaborative relationship and our firm belief that Californians can be protected from price spikes and refiners can profitably operate in California — a market where demand for gasoline will still exist for years to come,” Newsom wrote.

Almost immediately after Valero’s announcement, Newsom was lambasted by state Assembly Republicans, who said the potential closure was among the growing number of “real-world consequences” of [his] war on California energy producers that was “becoming clearer by the day.”

In his letter, Newsom defended two different laws he signed in the last two years that give the state more oversight of the oil industry and regulate backup supply when refineries go offline in order to prevent market irregularities. He also asked state energy and environmental officials to produce a report by July 1 on “any changes in the State’s approach that are needed to ensure adequate supply during this transition.”

“The California Energy Commission continues to be committed to working with stakeholders to explore options to ensure an affordable, reliable, and safe transportation fuel supply,” Sandy Louey, a spokesperson for the commission, said in an email in response to Newsom’s letter.

Young, whose city has long felt the health impacts of the refinery’s toxic releases, said he understands the motivation behind California’s ambitious regulations.

“I think certainly [California’s] done them for lots of good environmental reasons, and that obviously climate change is a real thing and burning fossil fuels is a direct contributor to it,” he said. “Did they go too far? I don’t want to say that. But it certainly has created an environment where oil companies feel that either they’ve been unfairly targeted or they are just seeing this as perhaps a way to negotiate some rollbacks of some of those things.”

Young acknowledged that the refinery’s closure would yield some “net benefit” to the health and safety of his community.

“And so from an environmental point of view, sure, it’s certainly possible to look at it as a silver lining,” he said. “But overall, given how quick this is unfolding, I’m certainly not celebrating it by any means.”