California Might Pay Valero to Prevent Refinery Shutdown
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California legislators are considering giving Valero Energy Corp. hundreds of millions of dollars to cover refinery maintenance costs in a bid to prevent the closure of a San Francisco-area fuel plant.
Under such a deal, the state would pay Valero to continue operating its Benicia refinery, according to people familiar with the negotiations who asked not to be identified discussing private deliberations. The plant is slated to close by April, the latest in a string of recent California fuel plant shutdowns.
Between $80 million and $200 million of state funds would likely be earmarked for routine maintenance work, although the terms of the arrangement could be subject to change, the people said. Maintenance is one of the biggest operating costs for refiners, and the expense of major overhauls typically performed every four or five years can be a catalyst for closure.
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Discussions with lawmakers over keeping the Valero facility open were held as recently as this past weekend. Absent a deadline extension, legislators have until late Sept. 9 to submit bills for consideration.
Valero didn’t respond to requests for comment. Neither California Gov. Gavin Newsom’s office nor representatives for state senate and assembly leaders respond to inquiries left outside of normal business hours.
Newsom has in recent months taken a new tack with refiners and encouraged regulators to work with the industry to maintain fuel supplies in a state that often has the nation’s highest gasoline prices. The California Energy Commission has since walked back plans to impose a profit cap on refiners, a key factor in spurring recent plant closures.
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The commission declined to comment on whether it is involved in the Valero discussions.
The municipality of Benicia faces a $10 million budget hit if Valero shuts the refinery as planned, said Mayor Steve Young.
“We can’t absorb that without serious consequences for our public services,” he said.
