So Lane Riggs is at the helm of Valero Energy Corporation and during a call about earnings in April 2025, he laid it out pretty clearly.

California’s regulatory environment is the toughest in North America.

Just a couple of weeks later, Valero dropped the news that they would be shutting down the Benicia refinery, which has been cranking out around 170,000 barrels of gasoline a day, covering about 9% of the state’s total supply.

That closure is a big deal for the 400 workers who depend on that place for their paychecks.

The Benicia refinery has been operating since 1969 and Valero has owned it since 2000.

So after 25 years, they’re closing up shop in April 2026.

On top of all that, back in October 2024, California hit Valero with an $82 million fine, the biggest penalty ever from the Bay Area Air Quality Management District.

This fine was over 21 years worth of emissions violations dating all the way back to 2003.

To put it in perspective, the previous record for a fine was $14 million against Chevron.

Valero’s penalty was nearly six times that amount.

Then, just 6 months after that hefty fine, Rigs explained the situation during another earnings call.

He mentioned California’s long-term policies aimed at moving away from fossil fuels over the past 20 years, leading to this incredibly tough regulatory environment.

He specifically mentioned that the Bonich refinery operates in a challenging part of California when it comes to regulations and maintaining that facility costs a lot more than usual.

In fact, Valero took a huge impairment charge of $1.1 billion for its California refineries.

That means these facilities are now worth permanently less than what they were initially valued at, not just a temporary drop.

Out of that $1.1 billion million was specifically for Benicia.

The refinery, which cost Valero hundreds of millions of dollars, is now worth $900 million less.

It’s hard to wrap your head around a billion dollar loss in value from one location.

In the first quarter of 2025, the company reported a total loss of $595 million with 530 million of that tied directly to refining losses.

Their refining margins dropped nearly 30% yearover-year.

Rigs gave a bit more insight into the challenges they faced, reiterating that maintaining Benicia was significantly more expensive than they’d like to admit.

In CEO speak, that means millions in extra costs each year.

It’s interesting to see how costs stack up when comparing maintenance expenses.

It turns out that something which costs $5 million in Texas could end up costing $8 million in California.

The recent timeline really tells a tale.

Back in October, regulators slapped the company with an $82 million fine, and from November through March, they were busy figuring out their options.

By April, they made the tough call to announce the closure of the refinery.

They didn’t mention that hefty fine when sharing the news, but it’s clear that $82 million changes everything.

The Benicia refinery, where around 400 employees work, has a workforce that’s not made up of just anyone.

With an average salary of $95,000 a year, these are skilled positions, including operators, engineers, safety specialists, and maintenance crews.

It’s pretty sobering to think about 25 years of invaluable experience walking out the door.

On the city’s side, Benicia relies heavily on Bolero.

The refinery contributes 20% of the city’s budget, which translates to $12 million out of a $60 million budget.

That’s a significant chunk when considering property taxes, utility taxes, and all those business fees.

So when Valero decides to leave, that’s 1if of the city’s revenue just gone.

Mayor Steve Young described this situation as deeply impactful for the entire community, stressing the need for the city to act fast since 12 months feels a lot shorter when you’re facing such an economic blow.

During an earnings call, Rich Walsh, Valero’s executive vice president, noted that there seemed to be real interest in California to try and prevent the closure, but he emphasized how complicated the regulatory and policy environment is.

This is pretty much how the executive team views doing business in California.

It simply isn’t a profitable market.

When the idea of collaborating with California to keep Benicia open came up, executives acknowledged ongoing discussions, but nothing solid has come from all those meetings.

They did leave the door open for what they called a Hail Mary possibility, but it sounded more like a closure was on the horizon.

The financial repercussions extend beyond just the closure announcement itself.

After the quarterly report, Valero’s stock dropped 1.6% with investors reacting to the losses, $595 million, and the grim outlook on California regulations leading them to sell shares.

It’s worth noting though that Valero is not struggling in general.

They operate 15 refineries worldwide, managing to process a total of 3.2 2 million barrels of oil per day and they’re making money in places like Texas, Louisiana, Oklahoma, and even the United Kingdom.

The real issue here lies solely with California.

Rigs made a point to clarify that none of this reflects a lack of demand.

People in California still need gasoline, diesel, and even jet fuel for their planes.

The demand is definitely there.

So, let’s dive into what’s been happening with Valero and California’s oil scene.

The chief financial officer, Gary Simmons, recently talked about some setbacks they’ve faced and pointed out that their losses are linked to heavy maintenance work at their refineries.

It turns out keeping things running in California costs a pretty penny compared to other places.

Just think about that Benicia refinery, which has become a bit of a money pit.

Oh, and that hefty $82 million fine, that’s for violations stretching all the way back from 2003 to 2018.

15 years of excess emissions.

The hydrogen system was letting out more chemicals than it should, and inspectors found out about it during a check in 2019.

Valero didn’t come clean themselves.

They got caught during the inspection.

It really highlights the tough environment out there that the CEO Rig mentioned, not just with the rules, but also the intense enforcement.

Then there’s the Travis Air Force base, which relies on the Benicia refinery for jet fuel thanks to a direct pipeline.

With the refinery facing closure, the military base is in a bit of a tight spot because according to Rig, doing business in California is just too tricky these days.

When he was asked about Valero’s other refinery in Wilmington near Los Angeles, he mentioned they’re looking at some strategic alternatives.

Now, this refinery pumps out 135,000 barrels per day, making up 5% of the state’s gasoline.

If both refineries end up shutting down, California would lose 14% of its gasoline production.

Rig pointed out that the Wilmington site is cheaper to maintain than Benicia, but he was pretty non-committal about its future.

In corporate lingo, strategic alternatives often hints at considering closures or sales.

So, it raises some eyebrows.

When you look at Valero’s other operations, it’s a stark contrast.

Their Port Arthur refinery in Texas processes 400,000 barrels per day, and their St.

Charles refinery in Louisiana handles 340,000 barrels.

both much larger and profitable with plans for expansion.

Meanwhile, California refineries seem to be on a decline.

Philip 66 decided to close their Los Angeles refinery in October 2024 and Marathon turned their Martinez site into renewable diesel.

Now, Valero is set to shut down Benicia, making it four major refinery closures or conversions in just five years.

That’s 20% of California’s refining capacity that’s disappeared.

And now the state is importing 30% of its gasoline.

After these closures, that number could creep up to 40%, which means more expenses since shipping it from places like Asia or South America adds to the costs.

California’s gas prices are really high, averaging $4.

34 per gallon, while the rest of the country sits at $2.90.

It’s kind of eyeopening when you think about it.

The CEO of Valero, Lane Riggs, made it clear during a recent earnings call that moving away from California isn’t a sudden decision.

It’s been brewing for quite a while.

For the past 20 years, the state has pushed policies aimed at reducing reliance on fossil fuels, and those cumulative challenges have driven them to this point.

Valero spent months weighing their options.

converting to renewable diesel, partially shutting down operations, or passing the baton to another operator.

But none of these solutions made financial sense.

Rigs described California’s operating environment as the most stringent and challenging in North America, which really meant that every option was just not viable.

when Valero bought the Bonich refinery back in 2000, California had 11 major refineries.

Fast forward to April 2026 and only six will still be standing when Benicia closes its doors.

It’s kind of wild to think that after 25 years of trying to make it work, Valero has invested hundreds of millions, employed thousands of people, and paid billions in taxes, all for the sake of supplying 9% of California’s gasoline.

In return, they face the biggest fine ever in the Bay Area and an operating atmosphere that rigs just can’t handle anymore.

Their announcement was laced with the usual corporate nicities, saying they understand the impact this closure might have on employees, partners, and the community.

But the unspoken truth is loud and clear.

California has become too tough, too costly, and just too impractical.

Other companies in the industry are definitely paying attention.

And if Valero, a major player in the refining game, can’t find success in California, then why would anyone else think they could? When Benicia shuts down in April 26, 400 families will lose their jobs.

The city will see a 20% hit to its budget and California will lose 9% of its gasoline production.

All because, as Riggs put it, the state has created the toughest operating conditions