Eight factors that may be influencing Valero to shut down the Benicia Refinery

By Stephen Golub, Benicia resident and author, “Benicia and Beyond” column in the Benicia Herald, April 27, 2025

Before addressing the heart of this article, I want to flag a couple of important matters…

First, my sympathies for our many Catholic neighbors and friends in Benicia affected by the passing of Pope Francis. I’ll confess to not being a religious person. But that didn’t stop Pope Francis from touching my life and billions of others (Catholic or not) in terms of the inspiration and compassion he displayed.

Second, even as we consider the ramifications of the focus of this column – the transition Valero is undertaking – I want to emphasize my hope that Benicia can and will help those most immediately affected: the workers who stand to lose their jobs and the businesses that stand to lose substantial income. I realize that there are restrictions on how the Air District can spend the tens of millions of dollars in fines it negotiated with Valero by virtue of its over 15 years of undisclosed poisoning of our air. I hope those restrictions can be interpreted or simply changed to allow some help for those suffering most from Valero’s decision.

Which brings me to the column’s focus: What is behind Valero’s April 16 notification to the California Energy Commission (CEC) of “of its current intent to idle, restructure, or cease refining operations” and its executive vice president’s April 24 follow-up statement that “Our current intent is to close the refinery”? I obviously am not sitting 1,700 miles away in the corporation’s San Antonio headquarters, where the decision was made. But based on a number of in-person and online discussions, I’ll offer some somewhat informed speculation.

To start with, let’s cut to the chase: When a company decides to fire folks, it’s the company’s decision and responsibility, no one else’s.

Let’s also bear in mind that we don’t know for sure what Valero’s going to do, in view of its framing everything in terms of “current intent.” Intents can change.

Finally, let’s hope and expect that Valero will very soon confirm that it intends to fully clean up the refinery of pollutants, toxic wastes, etc. that it may have deposited (whether intentionally or unintentionally, legally or illegally) in the facility, on the grounds and in surrounding waters and other areas. Cleaning up one’s mess is what we expect even of little children. It’s certainly a requirement for a major corporation.

Perhaps its April 16 statement that it has “expected asset retirement obligations of $337 million as of March 31, 2025” is an indication of that clean-up intent; perhaps not. Regardless, we need that clean-up commitment quickly, in clear, non-technical language.

So, what contributed to this decision, or at least to the “current intent”? Again, I certainly don’t know for certain. But I know more than I did a week ago. Because this is so important to Benicia, I delve into this matter a bit more deeply than I did in last week’s column. So, based on both personal and online discussions, it seems that some combination of these international, national, state and market factors may well have been at play:

A negotiating tactic. Returning to the “current intent” consideration, it’s very possible that the threat of closing the refinery, coupled with the rising fuel prices that the decreased fuel supply could cause for Californians, is a ploy to force the state to relax certain regulations. If so, it may be working. A few days ago, Gov. Gavin Newsom instructed the CEC to “redouble” efforts to ensure that California refineries “continue to see the value in serving the California market…”

California regulations. Newsom’s letter seems directed at a core concern of Valero and other refinery operators: that they see California regulations as being too burdensome. While I can understand their concern from a business perspective, I also like the fact that those regulations contribute to cleaner air, healthier kids, less dangerous operations, price-gouging prevention and other benefits. For instance, a recently adopted California law requires California refineries to maintain minimum levels of fuel inventories, which in turn helps prevent surge pricing.

The cost of upgrading the refinery’s operations. As Benicia well knows, there have been frequent operational, safety, health and emissions issues at the refinery. As explained in a recent KQED interview with a UC Berkeley energy economist, “the Benicia refinery’s many production and emissions problems would likely require significant, costly upgrades to address,” so Valero probably decided that it was not worth investing in those upgrades.

Improved profits. That UC Berkeley economist has also indicated that, by reducing supply, shutting down the Benicia facility could increase profits for Valero’s Southern California refinery.

A declining market. Even as the refinery’s possible closure disrupts the California fuel market in some powerful and potentially painful short-term ways, the writing is on the wall for decreased reliance on fossil fuels – particularly in California but also beyond it as electric vehicle sales increase and international trends come into play. Valero understandably needs to plan in terms of decades instead of just years. The declining market could contribute to its reluctance to make upgrades at the refinery.

Tariffs. Though planned tariffs on various imports are such a bouncing ball that it’s tough to keep track of where they stand, the 10 percent that the Trump Administration has threatened to impose on Canadian oil imports (more than a quarter of U.S. refinery demand) could lower Valero’s and other firms’ profit margins. This could influence a cost-benefit analysis of whether operating the refinery makes economic sense. Similar tariff calculations could apply to equipment and other imports important to refinery operations.

A failed sale of the refinery. There is much speculation, some apparently informed by Valero personnel, that the corporation saw a sale of the refinery fall through last year. This could explain relatively recent personnel changes the corporation made at the facility, in anticipation of the planned purchase. In the wake of the failed sale, Valero might have decided that for various reasons outlined here it did not want to continue operating the refinery – or, again, that threatening to close it could push changes in California policies. Or perhaps it even felt that publicly announcing its plans could trigger new investors’ interest in purchasing the operation.

A problematic property. Some of the many factors I’ve sketched here could add up to the refinery being difficult to maintain or sell. Prospective buyers might have seen too many problems to make the purchase of the property financially viable. Continued operations could force the facility to make a fateful choice: on the one hand, conduct expensive upgrades in light of necessary health, safety, environmental and operational requirements; on the other, additional scrutiny of the ways it might dangerously fall short without such upgrades.

Once again, I’m speculating here rather than offering expert opinion. But in understanding how Benicia moves forward, it’s important to consider how we got here.

One thing is clear: Whatever the precise mix of causes, this decision was many months if not years in the making. It springs from major state, national, international and financial trends and factors reaching way beyond anything Benicia’s government has or hasn’t done.

Without holding out excessive hope for our neighbors and friends whose livelihoods are put at risk by the San Antonio headquarters’ decision, one other thing that seems clear is that it is not yet absolutely clear what Valero will do.

In any event, I hope that this list of potentially contributing causes helps a bit as we grapple with our current challenges and start to consider our community’s future.

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