Voros: Richmond likely to lose Chevron’s golden eggs
Drew Voros, Contra Costa County Times Business Editor
Posted: 01/19/2010 01:26:53 PM PST
The Richmond City Council, along with fervent environmentalists, could soon see their wildest dream come true: Chevron is poised to shut down its Richmond refinery operations.
Gone, later, hasta la vista. Kiss your economic engine, your tax-revenue generator goodbye, Richmond.
Tuesday’s announcement by the San Ramon oil giant that it would seek a “leaner” refinery division throughout the company with jobs cuts and exiting certain markets does not bode well for the site of Chevron’s first refinery.
Chevron said that workers at its downstream operations, which manufacture, transport and sell gasoline and diesel fuel, had been notified of the decision Monday. Further details are expected in March. Expect those details to include the closure of the more than 100-year-old Richmond refinery.
While Richmond’s green machine did not influence the overall change in corporate policy at Chevron, it certainly will have a hand in whether Chevron continues to operate a refinery responsible for sending millions of dollars to community groups in Richmond and has filled Contra Costa County coffers with literally billions in tax revenue over the years.
Global oil demand is down considerably due to the worldwide recession, and Big Oil is drawing down refinery capacity throughout the world. Shutting refineries is the easiest way to improve industry profit margins. Sunoco and Valero have already announced plans to close refineries in Texas and Delaware this year.
Chevron was in the midst of a major retrofit last summer at its Richmond refinery that would have enabled it to process a larger variety of crude oil, which would improve profit margins at the facility and mean less reliance on higher-grade Middle East crude. But a lawsuit put that on ice.
Last summer Contra Costa County Superior Court Judge Barbara Zuniga gave Richmond city leaders and Earthjustice lawyers a victory, saying that Chevron must clarify in its environmental report whether the expanded facility will process heavy crude oil, which generates more pollution than lighter crude.
Will Rostov, an Earth-justice attorney who filed the suit, said at the time the judge’s decision means the city of Richmond will have to study Chevron’s expansion plans more critically. The circuitous legal argument put forth by Earthjustice that Chevron’s expansion will harm the environment is precisely the type of court fight that will keep the needed retrofit work from being done for years.
Now, with Chevron surveying its own landscape for refinery operations to shed, Richmond is certainly at the top of its list.
But city leaders shouldn’t count on that expansive, waterfront property opening up for development.
Last year, sources at Chevron told me that company has had discussions with Chinese buyers for the refinery, which would be dismantled and shipped to China. The land would be retained for an off-loading facility for refined crude products such as gasoline, employing far fewer people and generating scant tax revenues.
If Chevron had been allowed to complete the retrofit in Richmond, there would be a strong fiscal argument to keep it open. Instead, there is a strong fiscal argument to close it.