Valero Benicia Refinery to “idle, restructure, or cease refining operations” by next year

By Stephen Golub, Benicia resident and author, “Benicia and Beyond” column in the Benicia Herald, April 20, 2025

Valero’s Wednesday notification to the California Energy Commission “of its current intent to idle, restructure, or cease refining operations” at its Benicia refinery by the end of April 2026 hit the City and California like a ton of oil-laden bricks.

My heart goes out to the Valero workers and Benicia businesses whose livelihoods are at risk as a result of this decision. As Benicia Council Member Kari Birdseye put it so well in my interview with her, with sentiments echoed by Mayor Steve Young and Council Member Terry Scott,  “If people are going to lose their jobs and businesses their incomes as a result of this move, addressing this has  got to be a priority for the City’s leadership.”  All also strongly sympathize with the nonprofits who may be denied future Valero funding.

This is an unfolding story, to put it mildly. In an attempt to pierce the haze generated by the Valero statement, here is a very initial attempt at some questions and answers – subject to change down the line as all parties clear the air on this development.

Is the refinery closing?

Not necessarily. Again, the Valero notification offers three options:  “to idle, restructure, or cease refining operations.”  Only one of these is closure, though that could involve Valero taking on immense clean-up cost. “Idle” is inherently temporary. “Restructure” can potentially mean all sorts of things, including  sale to another company or  focusing on biofuels or plastics production. Note too that Valero frames the statement in terms of its “current intent,” which gives the Texas-based corporation  some wiggle room.

Why is Valero doing this?

It could be a negotiating tactic, aiming to extract concessions from California regarding regulations, legislation,  policies or costs that the corporation finds unduly burdensome. In a related vein, it could be geared toward avoiding expensive upgrades necessitated by environmental, health or safety requirements that would have protected Benicians. As UC Berkeley energy economist Severin Bornstein put it in a KQED interview:

“California is phasing out its gasoline consumption and refiners see that coming,” Borenstein said, noting that the Benicia refinery’s many production and emissions problems would likely require significant, costly upgrades to address.

“So I think they looked at that and said, ‘Is it worth making that investment?’ and decided it probably isn’t,” he said.

Ironically, the rationale could even include increasing profits in certain respects. As per that KQED interview:

“Borenstein suggested that the company, which owns another refinery in Southern California, may also have calculated that shuttering production at its Benicia facility would raise gasoline prices statewide, helping its other refinery make more money.”

Did Benicia’s recently adopted Industrial Safety Ordinance play a role in this move?

Not according to Valero’s own statement on its decision, which attributes the move to far broader concerns, such as “years of regulatory pressure, significant fines for air quality violations, and a recent lawsuit settlement related to environmental concerns.

Recall, too, that the ISO would cost Valero a few hundred thousand dollars per year, in contrast with the company making $11.6 billion in profits in 2023 and 2024, a good chunk of that from its Benicia refinery. For Valero to quit Benicia because of the ISO would be very roughly equivalent to someone quitting a $50,000 per year job because of, at most, a $10 annual tax, or a business clearing $250,000 per year deciding to close down because of a $50 fee.

There’s one alternative though hopefully unlikely explanation that would partly attribute Valero’s decision to the ISO: The corporation has something to hide from the slightly increased scrutiny the ISO would spur of its emissions, operations, incidents and accidents. Again, hopefully this is not the case, but if Valero is seeking to avoid such scrutiny because it would reveal health, safety or environmental threats to Benicians, that in and of itself should be of great concern to us.

Let’s also bear in mind that the ISO  is a necessary response to a plethora of Valero violations, incidents and accidents dating back over 20 years, both in Benicia and beyond. These include but are by no means limited to Valero pouring toxic emissions hundreds of times the legal limits into Benicia’s air for 15 years without informing us, as well as repeated violations in Texas that were so severe that even the very conservative Attorney General in that very oil-friendly state saw fit to sue the corporation several years ago.

Finally, note that in preparing the ordinance Benicia bent over backwards to try to compromise and address Valero’s legal and operational concerns, resulting in an ISO in some regards more accommodating than other Bay Area refinery-hosting communities have and that other Bay Area refineries manage to live with. It’s hard to believe that a Benicia move so mild could trigger a Valero decision so massive, particularly in view of the far larger California forces and policies at play. In any event, the Benicia City Council twice voted unanimously for  the ISO.

Where do we go from here?

A few tentative thoughts:

1. As Council Member Scott, who has extensive experience and expertise with corporate transitions and planning explains, “We can’t just look in the rearview mirror toward what Valero’s done; we need to peer through the windshield toward current and emerging opportunities.”
2. More specifically, for instance, Benicia has about $64 million coming to it by virtue of the Bay Area Air District’s settlement with Valero over those 15-plus years of pouring poisons into Benicia’s air. These extraordinary circumstances could call for extraordinary solutions, involving interpreting Air District rules broadly or amending them to allow Benicia to adapt to this situation by, for instance, allowing aid to affected individuals and businesses, budgetary support or planning for the inevitable post-refinery economy.
3. As Mayor Young emphasizes, in moving forward we need to address “the real world impacts on Valero employees and Benicia residents and businesses…even as we realize that this Valero move is in response to state decisions and policies rather than Benicia’s ISO.”

Benicia is strong, smart and resilient. Over the past several years, we made it through Covid and earlier budget challenges together. There’s no sugar-coating the fact that the current challenge could well impose pain. But if we pull together rather than point fingers, and pay special heed to the needs of the persons and businesses most affected, we can emerge stronger than ever.

More on this next week.

[Note: As a member of the Benicia Industrial Safety and Health Ordinance working group, I was involved in efforts to get the ISO adopted.]