Valero Energy to close California refinery, inflicting ‘a major hit on the city' and raising supply concerns

Yahoo

07-05-2025

Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience.
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience.
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways
Located roughly 36 miles away from San Francisco is the city of Benicia, California. With a population of about 26,400 people, it's known for its small-town charm.
The city also relies heavily on one major business — San Antonio, Texas-based Valero has operated a 170,000-barrel-per-day refinery in Benicia for 25 years. The facility employs over 400 workers.
Don't miss
But now, those jobs, and the city's general economy, are threatened as Valero has decided to close that location next year because of high operating costs and the strict environmental regulations California is known for. It also raises concerns for the fuel supply in the state.
Mario Guiliani, city manager for the city of Benicia, called the news "surprising and distressing" and said the refinery generates millions of dollars in revenue for Benicia.
"It would be a major hit on the city," he told ABC7 News. "It is the newest refinery on the West Coast. It produces a significant amount of gasoline for the California market. I cannot foresee a possibility where that refinery just ceases operation altogether."
Last year, another energy company, Phillips 66, announced it will close its Los Angeles oil refinery in late 2025 due to questions about its long-term sustainability. As a result of refinery closures, there's a supply crunch anticipated at the end of this summer in California, reported Argus Media.
Governor Gavin Newsom has asked the California Energy Commission to 'redouble the state's efforts to work closely with refiners' and by July 1 recommend changes to the state's approach to ensure it has adequate fuel supply.
'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,' wrote Newsom in a letter April 21.
Rich Walsh, executive vice president at Valero, said the company is having meetings with the CEC to 'minimize the impacts that would result from the loss of the refinery.'
Why a major refinery seeks to close its doors
The decision for Valero to close its refinery did not come out of the blue. Rather, it "follows years of regulatory pressure, significant fines for air quality violations, and a recent lawsuit settlement related to environmental concerns," the company said in a statement quoted by ABC7.
And it's not just the Benicia refinery that's at risk. The company said it's also reviewing its broader operations in California.
During Valero's most recent earnings call, CEO Lane Riggs said, "California has been pursuing policies to move away from fossil fuels for really for the past 20 years. And the consequence of that is the regulatory and enforcement environment is the most stringent and difficult of anywhere else in North America."
Riggs also said, "Benicia operates in the more difficult part of California with respect to the regulatory and enforcement side of this. And then on top of that, Benicia costs considerably more to maintain."
In October, Valero was charged almost $82 million in fines for a history of toxic chemical releases and other violations at its Benicia refinery dating back to 2003, reported ABC7. That was the largest-ever penalty to be issued by the Bay Area Air District.
A 2019 inspection found that Valero did not properly report toxic emissions from the facility's hydrogen system — emissions that have been linked to health effects.
Read more: Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
A potentially devastating economic blow
The closure of the Valero refinery could cost several hundred Benicia workers their jobs — but the ripple effect goes beyond that.
Benicia Mayor Steve Young told ABC7 that news of the Valero closure is "deeply impactful for our entire community."
Brittany Hodgkinson, the manager of Elviarita's Cantina and Catering in downtown Benicia, told the news network that her business relies on Valero employees for sales.
But beyond that, the refinery plays a big role in the community by sponsoring youth sports and school events.
"Just hoping that someone comes in and buys the refinery and keeps us going … That's just my biggest hope" she said.
Unfortunately, such are the consequences of having a small city or town rely on one major employer for revenue.
For instance, in 2019, the city of Luke, Maryland suffered a major blow when its 131-year-old paper mill shut down, taking 675 jobs away with it, per The Washington Post.
The closure was said to have an impact on 2,000 others employed by other nearby businesses. Taxes from the mill had funded the bulk of the town's budget.
As of now, Valero intends to close its Benicia refinery by April of 2026. Walsh did acknowledge during the company's last earnings call that "there's a genuine interest in California to avoid the closure." But he also said it's a complex issue.
"We are having discussions with the state, but our intent right now is to close the refinery," Walsh said.
Young, meanwhile, told KQED that he wished the company had provided more of a heads-up on its closure plans.
'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, who noted 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.'
What to read next
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.