Valero confirms Benicia refinery will shutter, leaving questions of site’s future

The Texas energy company Valero is carrying out a plan to close its oil refinery in Benicia, the company said Tuesday, after Gov. Gavin Newsom reportedly tried and failed to find a buyer. The closure could cut hundreds of jobs and is expected to bruise the tax base of Benicia, a community anchored by the refinery that has also endured toxic pollution.

But the company may replace its gas output with imports by ship, buffering California’s fuel supply from potential shortages and price hikes, according to Newsom’s office. It’s unclear how much gasoline Valero plans to import, and the company has so far offered few answers.

The change would require Valero to convert the site’s port infrastructure, which currently receives crude, not refined, oil. Afterward, it probably employ far fewer workers there, according to one expert.

Valero said in a statement on Tuesday it will idle the Benicia refinery by April. The refinery accounts for about 10% of California’s crude oil capacity. The publicly-traded company first announced plans to close or idle the refinery in April 2025.

At the refinery, workers convert oil to gasoline in an industrial process. California Republicans and some drivers have been worried that fewer refineries in the state would spell higher prices at the pump. That’s a potential political liability for Newsom, who softened his scathing criticism of fossil fuel companies and made overtures to executives last year.

The governor’s office said Wednesday that Valero planned to import gasoline to the Benicia site after the refinery shutters, “a strategy that will help maintain a steady supply and stable prices as discussions continue on a path forward for the refinery.”

Valero said only that it “anticipates importing additional gasoline volumes to the Bay Area in the near term.” Spokespersons for Valero did not return requests for more information. An employee in Benicia who would not identify himself said spokespersons were not available “for now.”

More than 400 people work at the refinery, according to Benicia Mayor Steve Young. But Valero would probably need only 100 workers or fewer to run an import terminal, said Ryan Cummings of the Stanford Institute for Economic Policymaking and a former economic advisor in the Biden administration. Valero said it would alert regulators of layoffs or re-trainings but had not done so as of Wednesday afternoon.

Severin Borenstein, director of UC Berkeley’s Haas School of Business Energy Institute, said the announcements this week confirm what was well-known for a year: Valero would probably close the Benicia refinery, he said. But it’s “good news,” that California is shoring up its capacity to import gasoline, he said.

“I think the only practical way to deal with this is through increased imports,” Borenstein said.

California is an energy island when it comes to gasoline. No pipelines transport crude oil or refined gasoline into the state, and most of California’s crude oil supply is shipped in from foreign nations and Alaska. To import the gasoline, Valero could tap the foreign market, sourcing from South Korea, India or other nations. It could also draw gas from other refineries in California.

If state planners cut some red tape, converting the Valero refinery into a gasoline import terminal could be profitable — and simple to do within weeks or months, said Cummings, the Stanford economist.

The site is near the banks of the Carquinez Strait. The refinery itself could be torn down and sold off, or kept idle, Cummings said, but the site would have to be scrubbed of environmental contamination.

“These are pretty toxic facilities,” he said.

Last year, California’s air quality regulator hit Valero with an $82 million fine for undisclosed releases of toxic pollution in Benicia for more than 15 years. Regulators found that company management had known since 2003 the refinery was emitting large amounts of benzene and other toxic compounds into the air, “but did not report them or take any steps to prevent them.”

Separately, Valero and shipping company Amports agreed to pay $3.3 million to settle a lawsuit brought by an environmental watchdog that found alleged discharge of petroleum coke, which can contain toxic metals, into bay waters.

A spokesperson for the watchdog, San Francisco Baykeeper, said staffers weren’t immediately available to comment.

Sarah Ranney, director of the Sierra Club’s San Francisco Bay chapter, said local refineries “have long burdened surrounding communities with pollution and public health impacts.” In the East Bay, Chevron’s Richmond refinery is among the largest in the state. In Contra Costa County, PBF Energy operates the smaller Martinez Refinery. Air quality regulators have also fined those companies for exceeding allowable pollution levels.

A segment of Benicia’s residents will likely celebrate the refinery’s closure, said Young, the mayor of Benicia.

Young said he was “on the edges” of discussions between Newsom’s administration and Valero to keep the refinery operating. Reuters reported in July that Newsom directed state officials to find a buyer for the facility. There were also talks of Valero receiving a state subsidy to operate, Young said.

“Neither of those things evidently came to pass,” Young said.

Now, his priority is ensuring a smooth transition as Benicia, population 26,000, loses its biggest employer and biggest single taxpayer. The company’s departure could cut up to 15% of Benicia’s budget, he said, which was about $60 million last year.

Young said he’s planning to seek a portion of the $82 million fine handed down by state air regulators. The lion’s share of that funding, $64 million, was intended “to finance projects aimed at reducing air pollution exposure, mitigating air pollution impacts and improving public health in areas surrounding the refinery,” the regulators said last year.