Adds details on refinery operations, California regulations.
US refiner Valero is planning to shut or re-purpose its 145,000 b/d refinery in Benicia, California, compounding the state's fuel market challenges.
The company submitted a notice to the California Energy Commission (CEC)today of its intent "to idle, restructure, or cease refining operations" at the refinery by the end of April 2026.
Valero also said it continues to evaluate strategic alternatives for its remaining operations in the state, namely its 85,000 b/d Wilmington refinery.
Valero said previously west coast refinery closures were likely, citing the high cost of doing business in the state given its environmental and financial regulations.
California refiners in recent years have faced what the industry views as a restrictive environment for processing crude. Phillips 66 last year said it would shut its 139,000 b/d Los Angeles refinery, saying that the long-term sustainability of the refinery was uncertain and affected by market dynamics. The Phillips 66 refinery will be shut by October.
Growing legislative barriers
California governor Gavin Newsom last year signed two laws, SB X1-2 and AB X2-1, which added regulations in an effort to reduce retail gasoline price volatility. The measures authorized the CEC to develop and impose requirements for in-state refiners to maintain minimum stocks of gasoline and gasoline blending components. They also authorized the CEC to determine an acceptable refining margin in the state and penalize companies that exceed it.
The agency is currently in the rulemaking process on some of the measures including a requirement for refiners to submit "resupply plans" 120 days before planned maintenance that must be approved by the state. Non-compliance could carry a civil penalty of $100,000-$1mn per day.
Separately, the city of Benicia recently approved a safety ordinance that applies to industrial facilities that handle hazardous materials including the Valero refinery. The ordinance included new air quality monitoring programs.
California air regulators in October 2024 levied an $82mn fine against Valero for emissions violations at the Benicia refinery.
The Bay Area Air Quality Management District and California Air Resources Board announced the penalty for "egregious emissions violations" stemming from a 2019 inspection that discovered unreported emissions coming from the refinery's hydrogen system.
Since the 1980s, 29 refineries in California have been shut or integrated with other refineries that eventually closed or converted to renewable fuels production, according to CEC data. About half of the shut refineries were smaller operations, producing less than 20,000 b/d.
Chevron, the US oil major that has long complained about a hostile regulatory environment in its home state of California, is relocating its headquarters to Houston.
Valero said this week it recorded a pre-tax impairment charge of $1.1bn for the Benicia and Wilmington refineries in the first quarter as it evaluates strategic alternatives. The impairment will be treated as a special item and excluded from first quarter earnings, Valero said.
The Benicia refinery produces jet fuel, gasoline, diesel, and asphalt and has more than 400 employees.
