Oil giant Valero Energy will close California refinery after 25 years in operation, inflicting ‘a major hit on the city’ — why refineries are ditching the Golden State

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.

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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.”