California’s Fuel Fears Threaten Benicia’s ‘Just Transition’ to Green Economy

In the city of Benicia on the bank of the Carquinez Strait, the view has fundamentally changed: smoke, steam, and black soot no longer spiral from the stacks of the Valero refinery, which stopped refining crude oil in April. So why are residents holding their breath?

With the shuttering of the refinery, Benicia became the latest test case for California’s promise of a “just transition” from fossil fuels to renewable energy that protects workers’wages and livelihoods, invests in economically disadvantaged communities and reduces pollution impacts on the most vulnerable communities. Many Benicians are optimistic they have the assets and the know-how to succeed. But in a politically charged environment where gasoline prices are spiraling higher, California’s shifting interests threaten to delay any rebirth of the city.

State leaders negotiated an agreement with Valero this year to use its idled Benicia facility to store and transport imported fuel, which brings little economic activity while freezing redevelopment plans.

For more than half a century, Benicia’s economy and identity have depended on oil production. Valero’s 400-plus employees, a quarter of whom lived in town, spent some of their paychecks at First Street’s bars and restaurants, which also served hundreds more workers contracted for maintenance each year. Local businesses provided equipment, parts and services to Valero and must find a new market — or pivot to make a new product. Benicia businesses expect the ripple effects of the refinery closure to devastate livelihoods.

The closure was expected. California established its goal to completely phase out fossil fuels to combat global warming more than a decade ago. But Benicia is losing its largest taxpayer much sooner than the city can afford.

Valero’s refinery shutdown will cost Benicia an estimated $10.8 million annually in tax revenues, about 13% of the city’s general fund budget. The city manager reassured residents at a packed February town hall that they could still count on city services funded by $3 million in cash reserves. The city planned to sell water that Valero used, half the city’s supply, to other businesses, and applied for millions of dollars worth of community grants from the Bay Area Air District to sustain staff.

In the long term, Benecia’s leaders are banking on redevelopment of Valero’s 900 acres to bring new tax revenue and vitalize the local economy.

Nearly 500 of those acres were a buffer to mitigate risks of explosions, fires, emissions and other pollution. The land could be developed sooner than the land under the refinery itself, which state regulators expect could take ten years to clean up.

“I wanna see dismantling and movement into our future,” said Kari Birdseye, a Benicia city council member, “I’m not sure that’s the vision that the state has right now because of the precarious nature of our petroleum situation.”

California state leaders have primarily focused on stabilizing fuel supply and keeping gas prices from spiraling out of control.

On April 16, 2025, Valero announced it planned to idle, restructure, or cease refining operations in Benicia. This came six months after Phillips 66 declared its plans to stop refining in Wilmington, Los Angeles, by the year’s end.

At the time, these facilities comprised nearly 20% of California’s refining capacity. The closures threatened to push oil prices higher — a political and economic disaster in a state where gasoline historically costs $0.90 more per gallon than the national average, according to the U.S. Energy and Information Administration.

Gov. Gavin Newsom responded to Valero’s announcement with a letter dated April 21 to the California Energy Commission, directing the state agency responsible for sustaining fuel supply to “redouble its efforts” with “high-level immediate engagement, to help ensure that Californians continue to have access to a safe, affordable, and reliable supply of transportation fuels.”

A month later, Siva Gunda, vice chair of the energy commission, recommended easing regulations to increase fuel imports and local production. Many of the suggestions were enacted with the passage of SB 237 in September.

Environmentalists criticized the legislative changes as an oil industry wish list. They waived California’s requirement to switch to a lower emission fuel in summer months, exempted some oil and gas well permits from final environmental review, and paused penalties on excessive oil profits that lawmakers created to prevent price gouging.

None of the changes persuaded Valero to keep refining in Benicia. However, in January, the company agreed to import gasoline to meet its obligations to the state.

Benicia officials said they have not been in negotiations between the state and Valero. But Lauren Bird, the facilities general manager, told the Citizens’ Advisory Panel on April 17 that the refinery will import, store and transport gas and diesel for about two years, though it will no longer import jet fuel.

Using Valero’s facility for imports provides little economic benefit to Benicia and delays redevelopment of 900 acres of prime real estate.

“It basically eliminates our ability to have any new development on the property,” said Christina Gilpin-Hayes, a resident who serves on with the city’s planning commission. “Nobody’s gonna want it. Even the land that’s the buffer acres, nobody’s gonna want to develop there if [Valero] is still using it.”

An energy commission spokesperson could not discuss the talks due to industry confidentiality rules, but said in an email that the agency is working with Benicia and stakeholders on alternatives for the facility.

Some residents have called it a back-door deal and said they worry imported gasoline is a fire safety risk.

“What is the state gonna do for us given that they’re imposing this?” said Marilyn Bardet, a member of the community advisory panel, at the February town hall.

Gunda declined KQED’s request for an interview. But said at a state Senate committee hearing on Feb. 18 that much of the energy commission’s work in the last year was aimed at keeping gasoline costs from rising above $5 a gallon, which worked until the U.S. war with Iran pushed up prices globally.

Gunda urged lawmakers to turn to mitigating the economic impacts of refinery closures.

“These unplanned, disruptive closures could have incredible impacts on the workers and the communities,” Gunda said. “It’s really important … to make sure we have the policies in place to support the transition in a way that we protect Californians.”

“ I’d like to think that some of these strategies are forthcoming,” said Josh Sonnenfeld, a senior researcher at UC Berkeley Labor Center. “Given this is the sixth refinery closure or conversion [in six years], I think we need to pick up our pace here.”

Sonnenfeld previously worked for the Blue Green Alliance, which helped Contra Costa County mitigate the 2020 conversion of the Marathon Refinery to renewable diesel. That change cost 700 refinery workers well-paid union jobs. In response, state lawmakers established the Displaced Oil and Gas Workers Fund to help pay for training and job searches.

The Workforce Development Board of Solano County received $3 million from the fund last year to help laid-off Valero workers, and is offering up to $25,000 in grants to small businesses affected by the closure. Advocates have lobbied to extend and expand the fund, as its authorization sunsets in 2027.

Sonnefeld thinks California leaders should look to other states as examples. For instance, New York created a tax stabilization fund for refinery towns and cities to make up for the sudden loss of refinery dollars, while Michigan and Minnesota each established a community transition office.

“We haven’t set up that infrastructure yet in California around whose job is it to make sure that workers and communities are successfully transitioning,” Sonnenfeld said. “In California, we don’t want to acknowledge that they’re actually folks that are being hurt by the energy transition.”

Sonnenfeld said regional governments have shouldered more of the responsibility for mitigating the impact of refinery closures.

The Bay Area Air District launched a first-of-a-kind program this year where regulatory fines against polluters will be passed on to affected communities in the form of grants.

The air regulator issued $82 million in fines against Valero in 2024 for over a decade of excess emissions at the Benicia refinery, which will provide some $60 million in funding.

Benicia plans to seek up to $43 million of the grants, which are also open to local businesses. Applications are due in May, and the awards are expected to be announced in September. That’s the same month that Signature Development, the company Valero hired to manage the sale of refinery land, is expected to present plans to repurpose the property to the city council for approval.

Until then, Benicia is on a white-knuckle transition trying to jumpstart a new, green economy without knowing when Valero will leave, or how long it will take to decontaminate and repurpose the refinery site.

The state legislature is considering a bill to help California’s eight remaining refinery towns plan better. SB 1259 would require refineries to plan for decommissioning and estimate the costs and timeline for cleaning up after a closure.

Birdseye said the legislation wouldn’t benefit Benicia.

“We’re in a very precarious moment,” Birdseye said. “ But I’m filled with hope because of what we have here.”

Birdseye said businesses have inquired about moving to Benicia for its central location between two interstate highways, with a rail line and port.

From the city’s old clock tower, Birdseye gestured to a berth below, where Valero had exported petroleum coke, a black dust that’s a refining byproduct and a health hazard. She said a federal agency, the Bureau of Ocean Energy Management, has identified the port as a possible supply chain and manufacturing site for the nascent offshore wind industry in California.

“We can put these large pieces of equipment on ships that go out the Golden Gate and either go down to the Port of Long Beach, Morro Bay or up to Humboldt, where they can be assembled into wind turbines,” Birdseye said. “That’s the perfect scenario for a just transition away from fossil fuels.”

On a recent afternoon at Benicia’s waterfront, resident Stephen Golub said one thing lost in the economic discussions about Valero’s departure is the gains in environmental and public health.

“They were polluting our air again and again, sometimes secretly, sometimes more openly,” Golub said. “They were poisoning our politics by pouring massive funds into political campaigns.”

Golub said without a refinery, it’s easier to enjoy all that Benicia has to offer, including 28 public parks, stable political leadership, a vibrant art scene, good schools and safe streets.

“Down the line, maybe 10 or 20 years, people will talk about this thriving community with all it has to offer, and they’ll say, ‘Hey, did you know that there was once a refinery here?’” Golub said.“I really think that’s what’s in the city’s future.”