Oil Giant Valero Looks to Shutter Troubled Bay Area Refinery. It’s ‘a Big Surprise’

Updated 5:35 p.m. Wednesday

Energy giant Valero on Wednesday announced plans to cease operations at its Benicia oil refinery, which has been consistently hindered by malfunctions and unintended toxic releases in recent years.

The Texas-based company said it had submitted notice of its intent to the California Energy Commission to “idle, restructure, or cease operations” at the refinery by the end of April 2026.

The move to shutter the sprawling North Bay refinery comes six months after regional and state air regulators fined the company a record $82 million for exceeding toxic emissions standards for more than a decade before regulators found out. And last month, the city imposed new safety regulations on the facility.

“We woke up to a big surprise this morning. It is some shocking news,” said Benicia Councilmember Kari Birdseye, who spearheaded the new safety regulations.

“The timing is unfortunate because we just passed the local ordinance a couple of weeks ago. But I don’t think that the decision is related,” she said.

Valero has long been one of the city’s biggest employers: More than 400 people work at the Benicia refinery, which is the sixth largest in the state and can process as much as 170,000 barrels of oil a day.

“We understand the impact that this may have on our employees, business partners, and community, and will continue to work with them through this period,” Valero CEO Lane Riggs said in a statement.

The city, which stands to take a major financial hit from the possible refinery closure, said it intended to work with the company to “seek clarity around the timeline and scope” of the proposed changes and pledged to keep residents informed about any “potential economic impacts and challenges this may present.”

“My reaction remains surprise, concern for what it means to the community and a dedication to try to get through this in terms of trying to deal with the impacts it’s going to have on our city,” Benicia Mayor Steve Young told KQED.

Young said the city will work with Valero, regional partners and state agencies “to better understand the path ahead,” with the hope that a deal can be reached with the company to keep the refinery in the city.

“It would certainly be preferable to them leaving altogether. That that serves nobody’s interest,” he said.

Beyond the significant economic hit to the city’s tax base, he said the closure would have a major impact on the community, including the hundreds of residents who work there and the many local businesses that depend on those workers.

“I’m not going to sugarcoat it and say that we’re just going to power through and it won’t have any effect,” he said. “It’s going to have an effect for sure.”

Kristine Roselius, a spokesperson for the Bay Area Air District, told KQED in an email that the agency would work with the refinery on any closure plans “to ensure that emissions are minimized and that air quality and public health are protected during this process.”

Valero has owned and operated the Benicia refinery since 2000. The refinery was originally built in 1968 for Humble Oil, later called Exxon, and began operations the following year.

The facility’s imminent closure would mark a dramatic transition that the city will be “working on for years to come,” Birdseye said. City leaders, she added, planned to seek advice from other former refinery towns that have experienced similar situations, and would also be working with the state to figure out “how we can be part of the clean energy future.”

Birdseye noted that the closure announcement comes with a bright silver lining.

Solano County has some of the highest respiratory disease rates in California. Nearly 15% of residents suffer from asthma, a rate roughly 70% higher than the statewide average, according to state health data from 2020.

“So we will be resilient and we will figure out who we want to bring to our town,” she said, “and make sure that whoever comes isn’t going to increase our asthma rates.”

Severin Borenstein, a UC Berkeley energy economist, said Valero’s announcement suggests the company has been reading the tea leaves.

“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.

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.

The announcement comes amid a growing exodus of traditional oil refiners in California, a state with some of the strictest environmental regulations in the nation. Phillips 66’s refinery in Rodeo and Marathon’s facility in Martinez both recently converted operations to biofuel production. Phillips 66 also plans to close its Los Angeles-area refinery — the seventh largest in the state — later this year.

“I think it is a harbinger of the larger issues that California faces,” Borenstein said. “We should be seriously concerned about how all that gasoline supply is going to get replaced.”

The state Assembly Republican Caucus on Wednesday was quick to blame Gov. Gavin Newsom for the planned closure of the Benicia refinery, saying in a statement that the “real-world consequences” of [his] war on California energy producers are becoming clearer by the day.”

Danny Bernardini, business manager for the Napa-Solano Building & Construction Trades Council, said he was in Benicia just last night talking to city officials about a labor agreement.

“We had good news coming out of Benicia at 8 o’clock at night, and then bad news at 8 in the morning,” said Bernardini, whose council represents hundreds of boilermakers, laborers, plumbers and steamfitters who work on call at the refinery. “We always knew this was a possibility, but to have it kind of just dropped in your lap in the morning, it was definitely a shock.”

Bernardini said he’s still holding out a glimmer of hope that a deal might be reached to keep the refinery operating, but acknowledged that was unlikely.

“We have state and local governments that are not fond of refineries,” he said, noting that in its effort to limit oil production, the state still hasn’t created enough alternatives.

“There’s a lot of laws and ordinances that have been passed that make it hard to do business,” he added. “So this is the other side of that coin.”

KQED’s Julie Small and Natalia Navarro contributed to this report.