Bay Area city still working diligently to keep Valero refinery

Three months after Valero Refining Company-California submitted notice to the California Energy Commission of its intent to idle and cease operations in April of 2026, Benicia leaders are still searching for solutions.

However, Benicia City Manager Mario Giuliani said “time is of the essence” as some deadlines are fast approaching this month in an attempt to keep the refinery in Benicia.

“The city has been working diligently to find solutions to this depth of a loss,” Giuliani said on Wednesday. “We have multiple task forces talking. We’re trying to prepare for the huge revenue loss to the city, but overall still communicating and forming action plans.”

Giuliani said Benicia has partnered with Tyler Munis to process and evaluate the situation.

“The city is preparing to have a significant and seismic shift with losses,” Giuliani said. “There is a potential of a $10 million loss on a $16 million budget.”

In 2023 Gavin Newsom signed a law giving the California Energy Commission the authority to penalize oil companies for excess profits, declaring the state had “finally beat big oil.” More than two years later, the commission hasn’t imposed a single penalty or determined what counts as an excessive profit.

However, just two years later,  the California Energy Commission Vice Chair, Siva Gunda, said that the state should pause the effort in favor of pursuing other policies to lower prices and maintain a steady oil supply.

“Together, we will evolve California’s strategy to successfully phase out petroleum-based fuels by 2045 while protecting communities, workers, and consumers, and foster market conditions that support the industry’s ability to operate safely, reliably, and successfully to meet demand through the transition,” Gunda wrote in a 24-page letter to Newsom in late June.

Gunda’s recommended pause of the penalty would have to be agreed upon by the full commission. Newsom has pitched the penalty as a way to rein in profits by oil companies, but critics said it would only raise prices.

Meanwhile California government officials are trying to find a buyer for the refinery. Giuliani said that losing the refinery would put California in “a crisis for 2026.”

“California will not have a significant fuel supply to meet demand,” Giuliani told the Times-Herald on Wednesday. “All the other refineries are planning to leave as well, so we that doesn’t help. There is a declining demand for fossil fuel, but still enough of a demand that we need it.”

Valero Energy Corporation has owned and operated the Benicia Refinery since 2000. The refinery was originally built for Humble Oil, later called Exxon. Construction of the facility began in 1968 and was completed in 1969.

Valero Energy Corporation, through its subsidiaries (collectively, Valero), is a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, and sells its products primarily in the United States, Canada, the United Kingdom, Ireland and Latin America.

Valero owns 15 petroleum refineries located in the U.S., Canada and the U.K. with a combined throughput capacity of approximately 3.2 million barrels per day.

Valero Headquarters in San Antonio, Texas, and has more than 9,900 employees, with approximately 400 at the Benicia venue. That refinery has a throughput capacity of 170,000 barrels per day, according to the company. According to a list from the California Energy Commission, Benicia has 8.94 percent of the state’s crude oil capacity.

In connection with the evaluation of strategic alternatives for Valero’s operations in California, a combined pre-tax impairment charge of $1.1 billion was recorded for the Benicia and Wilmington refineries, and is expected to be treated as a special item and excluded from first quarter 2025 adjusted earnings. Also included in this amount is the recognition of expected asset retirement obligations of $337 million as of March 31.

Despite the grim news, Giuliani wanted to remind the public that Benicia has a history of coming through in adversity.

“We lost the Benicia Arsenal and Benicia Barracks in the mid 1960’s, but we came back with an industrial park on that land,” Giuliani said. “But we also need to face reality as we will be facing a period of austerity and we need to proceed with action and find new growth for our city.

“This is now a state issue and the state does not want to see this happen,” the city manager continued. “Conversations are continuing and there is certainly a chance that Valero stays, but time is of the essence. There is no deadline, but we’re talking about an amount of days were key points need to take place.”

Giuliani said that Benicia is at a crossroads.

“We’re tackling and fighting a war on two fronts,” the city manager said. “We’re fighting problems of the past while also fighting this problem with the refinery that instead of fighting ten years down the road, we are fighting now.”

While Valero is a big part of Benicia business, is it not without its critics — particularly after the refinery became the site of a series of air pollution incidents. This includes a hydrogen vent at the refinery that had been leaking 2.7 tons of toxics into the air for 15 years. That discovery resulted in an historic $84 million fine imposed by the Bay Area Air Quality Management District (an oversight agency) in 2024.

Critics also point to inspectors reporting that Valero management had known about the leaks for years, but failed to report them or take steps to mitigate the leak. The fine reportedly was the largest penalty ever assessed by the district.

Valero was one of four other refineries that in 2023 didn’t meet requirements as defined by BAAQMD and Rule 12-15. That rule — passed in 2016 — requires refineries to monitor and report fugitive gasses from their operating equipment, such as valves, compressors, and storage tanks. These emissions impact the health of the surrounding communities — the toxic gases released include noxious chemicals like the cancer-causing benzene.

The Benicia City Council on April 2 voted 5-0 on a safety ordinance that aims to help protect Benicians against potential fires, explosions and toxic emissions connected to the Valero Refinery and other facilities causing health concerns in the city. Before the vote, Benicia was previously the only Bay Area refinery town to not yet have an Industrial Safety Ordinance.