A Bay Area Refinery Town Contemplates a Future Without Big Oil

Benicia Mayor Steve Young poked at his shrimp Louie salad as he glanced wistfully out the window of a local seafood restaurant perched on the banks of an unusually serene stretch of the Carquinez Strait.

“I’ve had better months. Let’s put it that way,” he said.

Young, 73, looked grateful for the lunch break. He has been deep in damage control mode since last month, when Texas-based oil giant Valero, the city’s largest employer, announced plans to “idle, restructure or cease” operations at its Benicia refinery within a year.

In a recent earnings call, Valero CEO Lane Riggs cited California’s tough “regulatory and enforcement environment” as the main driver behind the company’s intent to close California’s sixth-largest refinery, accounting for about 9% of the state’s total production.

The refinery makes up nearly 20% of Benicia’s tax base, and shutting down the facility, which dominates much of the eastern side of this small, relatively affluent Solano County city, could have a catastrophic impact on the city’s financial well-being.

“We’re in a situation where we’re going to have $10 (million) to $12 million less than last year,” said Young, a tall, gray-haired man with a gravelly voice. “The hit on the community is going to be severe. My main job is to ease that transition as much as we can.”

Benicia is known as a “full-service city,” he said, “which means we do every conceivable municipal service there is.” That’s part of what makes this community of well-kept yards and century-old homes feel so safe and pleasant, with its abundance of parks, libraries and subsidized artists’ studios.

But a decent portion of those amenities are funded, in part, by the property taxes Valero pays the city — leaving Young with the unenviable task of recommending which services to potentially cut, whether it’s the public pool, the summer concert series or even the dog poop bag dispensers in the parks.

“Anything we cut has a passionate base,” Young said, grimacing slightly in anticipation of the inevitable budgeting battles to come.

Shutting down the refinery, he added, would also be a major blow to the hundreds of residents who work there, not to mention the restaurants, hotels and businesses in the city’s industrial park that provide services to the facility and its workers, as well as the many local nonprofits that have long depended on Valero’s donations.

Valero didn’t respond to KQED’s multiple requests for comments for this story.

Young rose to local political prominence nearly a decade ago by pushing back against the company’s strong influence in a place many here consider a “refinery town.”

In 2016, Young, a former local government administrator, stepped out of retirement to join the planning commission, where he successfully led the opposition against the company’s proposal to start bringing in crude oil by rail.

At the time, Valero was accustomed to being “the big dog in town,” and expected the City Council to rubber stamp the proposal, much like it had for many of the company’s other requests, Young said.

“They had been joined at the hip,” he said. “Valero was used to having things slide through.”

So it came as a shock to the company when the City Council voted down the proposal, citing major public safety and congestion concerns about having a constant flow of trains bringing volatile materials through town.

“That was a big deal. It kind of set the tone,” said Young, who went on to win a seat on the Council later that year. He successfully ran for mayor in 2020, despite intense opposition from Valero, which spent some $250,000 in attack ads and campaign mailers opposing him.

Two years later, voters elected two additional candidates to the five-member Council — Kari Birdseye and Terry Scott — who, like Young, pledged to stand up to Valero when its actions compromised public safety.

But Young and his allies now find themselves in the awkward position of beseeching the very company they’ve challenged to stick around — at least for a few more years — to buy the city more time to prepare.

“We need to get moving on this quickly, because 12 months is not a long time given the severity of the economic impact,” Young said, acknowledging that his bargaining chips are limited.

One option, he said, is appealing directly to the state to ease some of the regulations that Valero finds so burdensome. Young appreciates California’s efforts to address climate change, but he questions the practicality of the current approach, especially when it results in frontline communities like his losing their refineries and being forced to suddenly fend for themselves.

“I understand these are necessary steps going forward,” he said. “But the state passes many laws without any consequence or understanding of how they’re going to be implemented and who’s going to have to pay for it. That’s, I think, part of my frustration as a local official.”

Young said he intends to make the case that closing the refinery could pose a national security threat, as it’s currently the sole provider of jet fuel to nearby Travis Air Force Base, which is delivered via a direct pipeline.

“If that is stopped, what does that mean to the base?” Young said. “Travis uses an amazing amount of fuel to fly all their planes, much more than can be easily replaced and certainly not replaced within a year. So I think that this becomes a matter of real concern to the defense department.”

There’s also a possibility that the 900 total acres of land Valero owns, which has unobstructed views of the scenic bluffs and straits that funnel into the mouth of the Sacramento Delta, could be redeveloped into housing and commercial property. Oakland-based Signature Development Group recently announced it was in talks with the company.

Doing so, however, would require a costly remediation effort — one Valero is legally required to do — that would likely take a decade to complete before any development takes place, Young said.

“This would be a good long-term development — to have an outside entity pressing Valero to do the remediation,” Young said. “But in the meantime, we’re not going to have any money at all coming in.”

The city may ultimately need to ask for another tax increase, Young said — a request he believes voters in the city, many of whom have lived here for decades and pay low property taxes, will approve.

“It may come down to that,” he said. “I don’t think we’re going to be able to cut our way to $10 (million) or $12 million and maintain any level of similar services.”

Downtown Benicia has a quaint, small-town feel that belies its proximity to San Francisco, less than 40 miles south. Drivers turning off Interstate 780 are greeted by a sign for an American Legion rib cookoff before passing a large white gazebo in a small park on the edge of downtown. The main drag is filled with restaurants, cafes and galleries.

A monument in a nearby park reminds visitors that Benicia was once the state capital — though only for a year, in 1853.

From many vantage points in this charming city of some 27,000 residents on the outer edge of the Bay Area, it’s easy to forget the refinery is there at all, its stacks, holding tanks and billowing steam hidden from view.

Valero, which has operated the nearly 60-year-old Benicia refinery since buying it from Exxon in 2000, dropped its bombshell announcement on April 16, roughly six months after regional and state air regulators fined the company a record $82 million for secretly exceeding toxic emissions standards for more than 15 years.

Last month, city leaders unanimously approved modest rules to increase their oversight of the refinery, despite staunch opposition from the company.

“ If you keep poking that golden goose, one day it’s going to fly away,” Mark Hughes, a former council member, said during a packed Council meeting in March ahead of the vote. “And that’s not a threat, that’s not any inside information I have about Valero. It’s just the likely outcome of a company that constantly feels that it’s being pushed away.”

The timing of Valero’s closure announcement, less than two weeks later, sparked speculation that the industrial safety ordinance was the final straw for the company.

According to Terry Mollica, who helped lead a group of residents that pushed for the city’s new safety rules, the ordinance is a significantly watered-down version of the original. It merely requires the company to conduct internal reviews following safety incidents and disclose findings to the city, which can then request upgrades if public safety is at risk.

“The ISO, at least the version that was adopted, couldn’t possibly require them to do that much that they would close down a $1.2 billion facility,” he said. “Now, it’s possible that that was part of the reason, but that scenario only makes sense if there was something very seriously wrong with the refinery that they didn’t want disclosed.”

There are serious risks that come from living with a refinery in your backyard, Mollica said, noting the exposure to toxic emissions.

“It’s a great little town and a great little community, and we love living here. But that is the one negative about being here,” he said.

That risk was underscored last week when a major fire ignited at the facility after part of a furnace stack broke off and struck other equipment in a gasoline production area, according to the company’s incident report. The fire sent black plumes of smoke into the air and prompted a brief shelter-in-place order for surrounding neighborhoods.

The incident followed a multi-day blaze in early February at PBF Energy’s Martinez Refining Co., just across the strait.

“I spend a lot of time in the garden, and when these incidents occur, you’re not allowed to go outside. You just don’t know what you’re being exposed to. The history of it has been bad.”

But Danny Bernardini, business manager of the Napa-Solano Building & Construction Trades Council — a group of 15 unions that represent hundreds of boilermakers, laborers, plumbers and steamfitters, many of whom work intermittently at the refinery — thinks the company grew weary of the regulations “pile-on.”

“California is the toughest place to have a refinery. And so at some point they have to say, ‘Does this make business sense for us to stay in California or not?’” Bernardini said. “And I think their announcement was them saying, ‘We can’t do business like this.’”

The facility’s likely closure comes amid a growing exodus of traditional oil refiners in California, raising serious concerns about potential gas shortages and rising prices at the pump.

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. And Valero executives recently hinted they may soon consider “strategic alternatives” for the company’s only other California refinery located near Los Angeles.

“Until there’s an alternative to refineries, we need to keep them,” Bernardini said. “And yes, they need to be safe. They need to not pollute. They need not have incidents. But at the same time, they’re a necessary thing right now because everybody drives in a car.”

He said the workers in his unions are highly skilled technicians who have relied on consistent jobs at the Valero refinery, but many of their skills don’t transfer to other industries.

“Refinery work is very specific to their trade,” he said.

That specialization is on full display at the Heat & Frost Insulators Local 16 apprenticeship facility in Benicia, just down the road from the refinery’s towering stacks.

“For any pipe, duct or vessel that has to maintain a specific temperature, we’re going to insulate those to stay that temperature within the pipe,” said Jonathan Blaine, the apprenticeship coordinator, as about a dozen apprentices practiced on piping models in the classroom.

Apprentices, he said, have to train for 8,000 hours before contractors can hire them. It’s difficult, sometimes dangerous work, but it pays upward of $80 an hour.

“Everybody says, ‘Hey, you need to go to college. That’s the only way that you can afford to live.’ And then you find out about the union building trades,” he said. “It offers a really good career path. You just have to work hard for it.”

But much of that is dependent on the refineries staying open.

“There’s a lot of man-hours that are worked in refineries throughout the year,” he said. “There’s been a lot of questions, and at this point, we don’t really know exactly what’s going to happen.”

Christian Ochoa, an apprentice from Fairfield specializing in installation, said he chose the career path because it would allow him to provide for his two kids and “live a comfortable life” without having to hold down multiple jobs.

Ochoa said he’s confident he’ll still be able to find work at power plants and other industrial facilities if the refinery closes. But he said the news is still disheartening.

“I can see this whole town collapsing, man. A lot of people from around this area work there,” he said. “Less work for us.”

Young is more optimistic, despite the severe budget shortfall that the city will likely soon be forced to confront. If Valero skips town, there will no doubt be some short-term pain, he acknowledged. But that may be worth the price of no longer having to live in the shadow of a refinery.

Losing the refinery would force Benicia to diversify its economy, which “would certainly be a healthier thing for the city,” Young said.

“We have the highest rate of asthma and the highest rate of cancer in Solano County, which is not something that you would typically expect in a city that also has the highest income and the highest education levels,” he said. “So I think from a health perspective, we would be better off.”