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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--After ending 2023 as a state ranking third in terms of refining capacity, California now faces the prospect of becoming a net importer of refined products after Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) said it plans to close its Benicia refinery by the end of April 2026.
Valero told the California Energy Commission on April 16 that it plans to "idle, restructure, or cease" operations at its 157,000 barrel-per-day (BBL/d) refineries in Benicia, situated just north of San Francisco. Valero operates both the 13,000-BBL/d Benicia Asphalt Refinery and the 144,000-BBL/d Benicia Refinery. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Plant Database can click here for related plant profiles.
On Thursday, the company confirmed in its first quarter earnings report that it planned to "cease refining operations by the end of April 2026."
From upstream to downstream, energy companies are facing headwinds due to uncertainty over U.S. economic policies, policies the International Monetary Fund said would create substantial obstacles to global growth.
"We remain focused on the things that we can control: pursuing excellence in operations, deploying capital with an uncompromising focus on returns, and honoring our commitment to stockholder returns," said Valero Chief Executive Officer Lane Riggs in the company's earnings report.
"When you think about the West Coast, California has been pursuing policies to move away from fossil fuels really for the past 20 years," Riggs said during the company's earnings conference call with investors on Thursday. "The consequence of that is the regulatory and enforcement environment is the most stringent and difficult of anywhere else in North America."
He continued: "Benicia operates in the more difficult part of California with respect to the regulatory and the enforcement side of this."
Riggs also pointed out high maintenance costs for the Benicia refinery.
The company reported a net loss of $595 million during the first quarter, compared to net income of $1.2 billion in first-quarter 2024.
The state of California fined Valero $82 million in 2024 for emissions violations stemming from a hydrogen system at Benicia.
Also, California Governor Gavin Newsom signed legislation last year, AGX201, that mandated refiners in the state maintain fuel storage levels that would be enough to stave off any supply-side issues that would lead to price spikes at the consumer level. Phillips 66 (NYSE:PSX) (Houston, Texas) said later that "market dynamics" were in part behind its decision to shut operations at its Los Angeles plants by the fourth quarter. The company operates two facilities that can yield as much as 85,000 BBL/d in gasoline production. For more on that, see October 17, 2024, article - California Gas Policy Under Scrutiny after Phillips 66 Closure.
Should other refiners follow suit, the Energy Information Administration, the statistical arm of the U.S. Department of Energy, said California may be forced to import fuels to meet the state's transportation demands.
Hillary Stevenson, vice president of energy intelligence at IIR Energy, said that California could go from processing around 1.6 million barrels per day (BBL/d) on average at its refineries to a maximum capacity of 1.3 million BBL/d as a result of refinery closures.
Stevenson added that once the Valero and Phillips 66 facilities close, "there will be basically no slack in the system."
Newsom, for his part, said in a letter to the California Energy Commission that state leaders need to work with suppliers to ensure adequate fuel supplies.
Addressing the closure, meanwhile, Rick Walsh, the chief operations officer at Valero, said during the earnings conference call he recognized the state's concerns.
"We're working with them to minimize the impacts that would result from the loss of the refinery," he said. "I do think there's a genuine interest in California to avoid the closure, but it's also a really very complex regulatory and policy driven environment that we're dealing with."
In its letter to the California energy board, the company said it was continuing to evaluate its options in the state. Valero added in its investor call that it would maintain West Coast refinery throughput at around 240,000 to 260,000 BBL/d during the second quarter.
Republican opponents of Newsom, an early name on the list of Democrats who may run for president in 2028, said refinery closures were the result of his tough environmental policies.
Because of elevated state taxes, California has the highest retail gasoline price in the Lower 48 states. As of Friday, travel club AAA reported a state average retail price of $4.80 for a gallon of regular unleaded gasoline, some 52% higher than the national average.
Perhaps adding to the supply and demand strains from refinery closures, Newsom said that California recently passed Japan to become the fourth-largest economy in the world.
"And, while we celebrate this success, we recognize that our progress is threatened by the reckless tariff policies of the current federal administration," he said. "California's economy powers the nation, and it must be protected."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
Valero told the California Energy Commission on April 16 that it plans to "idle, restructure, or cease" operations at its 157,000 barrel-per-day (BBL/d) refineries in Benicia, situated just north of San Francisco. Valero operates both the 13,000-BBL/d Benicia Asphalt Refinery and the 144,000-BBL/d Benicia Refinery. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Plant Database can click here for related plant profiles.
On Thursday, the company confirmed in its first quarter earnings report that it planned to "cease refining operations by the end of April 2026."
From upstream to downstream, energy companies are facing headwinds due to uncertainty over U.S. economic policies, policies the International Monetary Fund said would create substantial obstacles to global growth.
"We remain focused on the things that we can control: pursuing excellence in operations, deploying capital with an uncompromising focus on returns, and honoring our commitment to stockholder returns," said Valero Chief Executive Officer Lane Riggs in the company's earnings report.
"When you think about the West Coast, California has been pursuing policies to move away from fossil fuels really for the past 20 years," Riggs said during the company's earnings conference call with investors on Thursday. "The consequence of that is the regulatory and enforcement environment is the most stringent and difficult of anywhere else in North America."
He continued: "Benicia operates in the more difficult part of California with respect to the regulatory and the enforcement side of this."
Riggs also pointed out high maintenance costs for the Benicia refinery.
The company reported a net loss of $595 million during the first quarter, compared to net income of $1.2 billion in first-quarter 2024.
The state of California fined Valero $82 million in 2024 for emissions violations stemming from a hydrogen system at Benicia.
Also, California Governor Gavin Newsom signed legislation last year, AGX201, that mandated refiners in the state maintain fuel storage levels that would be enough to stave off any supply-side issues that would lead to price spikes at the consumer level. Phillips 66 (NYSE:PSX) (Houston, Texas) said later that "market dynamics" were in part behind its decision to shut operations at its Los Angeles plants by the fourth quarter. The company operates two facilities that can yield as much as 85,000 BBL/d in gasoline production. For more on that, see October 17, 2024, article - California Gas Policy Under Scrutiny after Phillips 66 Closure.
Should other refiners follow suit, the Energy Information Administration, the statistical arm of the U.S. Department of Energy, said California may be forced to import fuels to meet the state's transportation demands.
Hillary Stevenson, vice president of energy intelligence at IIR Energy, said that California could go from processing around 1.6 million barrels per day (BBL/d) on average at its refineries to a maximum capacity of 1.3 million BBL/d as a result of refinery closures.
Stevenson added that once the Valero and Phillips 66 facilities close, "there will be basically no slack in the system."
Newsom, for his part, said in a letter to the California Energy Commission that state leaders need to work with suppliers to ensure adequate fuel supplies.
Addressing the closure, meanwhile, Rick Walsh, the chief operations officer at Valero, said during the earnings conference call he recognized the state's concerns.
"We're working with them to minimize the impacts that would result from the loss of the refinery," he said. "I do think there's a genuine interest in California to avoid the closure, but it's also a really very complex regulatory and policy driven environment that we're dealing with."
In its letter to the California energy board, the company said it was continuing to evaluate its options in the state. Valero added in its investor call that it would maintain West Coast refinery throughput at around 240,000 to 260,000 BBL/d during the second quarter.
Republican opponents of Newsom, an early name on the list of Democrats who may run for president in 2028, said refinery closures were the result of his tough environmental policies.
Because of elevated state taxes, California has the highest retail gasoline price in the Lower 48 states. As of Friday, travel club AAA reported a state average retail price of $4.80 for a gallon of regular unleaded gasoline, some 52% higher than the national average.
Perhaps adding to the supply and demand strains from refinery closures, Newsom said that California recently passed Japan to become the fourth-largest economy in the world.
"And, while we celebrate this success, we recognize that our progress is threatened by the reckless tariff policies of the current federal administration," he said. "California's economy powers the nation, and it must be protected."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
