Valero may close Benicia refinery by next year, citing CA regulations and high costs

BENICIA, Calif. (KGO) -- For a quarter century, the Valero refinery has been an economic powerhouse for the city of Benicia. But on Wednesday came a surprise announcement that it may close next April.

The facility employs 400 workers in the small Solano County city on the Carquinez Strait.

According to a statement from the company, the refinery is seeking closure because of the high costs and strict environmental regulations in California.

"This follows years of regulatory pressure, significant fines for air quality violations, and a recent lawsuit settlement related to environmental concerns," the statement said. "The company is also reviewing its broader operations in California as part of a strategic reassessment, which led to a $1.1 billion write-down in the value of its California refineries."

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In October, Valero Energy Corp was charged nearly $82 million in fines, the largest-ever penalty by the Bay Area Air District, for a history of toxic chemical releases and other violations at its Benicia refinery dating back to 2003.

A 2019 inspection found the company failed to report toxic emissions from the facility's hydrogen system, including benzene, toluene, ethylbenzene and xylene -- compounds that "cause cancer, reproductive harm and other toxic health effects," according to the air district.

Air district officials said refinery management knew about the hydrogen system problems since at least 2003 but failed to report or prevent them.

"I would have been more prepared for a sale. I am surprised that they are suggesting a complete closure and ceasing operations. That is certainly surprising and distressing news that we heard today," said Mario Guiliani, city manager for the city of Benicia.

Guiliani said Valero generates millions of dollars in revenue, which is vital for this small town. But Valero made it known for some time its frustration and concerns with the high costs and strict environmental regulations in California. He said discussions are underway with state officials and Valero about what comes next.

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"It is the newest refinery on the West Coast. It produces a significant amount of gasoline for the California market. I cannot foresee a possibility where that refinery just ceases operation altogether," Guiliani said.

The Benicia facility produces 170,000 barrels of fuel per day, processing crude oil to make ethanol-blended gasoline, diesel oil, jet fuel and asphalt. The refinery was originally built in 1969 for Humble Oil, later called Exxon. Valero Energy Corporation, headquartered in Texas, has owned and operated the Benicia refinery since 2000.

In a statement to ABC7 News, Valero confirmed that it: "submitted notice to the California Energy Commission of its current intent to idle, restructure, or cease refining operations at Valero's Benicia Refinery by the end of April 2026."

"Valero has long been a part of Benicia's identity and economy, and today's news is deeply impactful for our entire community," Benicia Mayor Steve Young said in a statement Wednesday. "While this potential transition raises many questions, I want to reassure our residents that the city is committed to transparency, collaboration, and careful planning. We will be working with Valero, regional partners, and state agencies to better understand the path ahead."

California Gov. Gavin Newsom responded to the news at press conference early Wednesday.

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"Beginning last night, we had all hands, and we are in the process of addressing any anxiety that may be created or any market disruption by that announcement," he said.

Guiliani said news of Valero's possible departure will impact the city's budget process for next year, which will begin in May. In addition to possible loss of jobs and revenue is the impact on the city at large.

"I think it would be a major hit on the city. I think it would very much, like Mare Island closing in Vallejo. And I am worried that the city of Benicia would eventually become the same," he said.

Brittany Hodgkinson manages Elviarita's Cantina and Catering in downtown Benicia. Valero employees are a huge customer base, but she says the refinery is so much more, such as playing a big role in fundraising for school events and youth sports.

"Just hoping that someone comes in and buys the refinery and keeps us going. That's about it. That's just my biggest hope. I gotta stay optimistic," she said.

Meanwhile, some Republican lawyers fired back at Newsom.

"Our millionaire governor might not worry about gas prices while he's chauffeured from his mansion in Marin to his podcast studio, but working people are getting crushed by the cost of his out-of-touch agenda," said Assembly Republican Leader James Gallagher. "Once again, Californians are paying the price for Newsom's incompetence and self-serving attacks on energy producers. Unless the state changes course, the job losses and gas price increases are only going to get worse."

Bay City News contributed to this report.