U.S. crude oil refiner Valero Energy Corp said on Thursday it is considering a range of options that could include selling its two California refineries due to growing regulatory pressure in the state.
Chief Executive Lane Riggs said during a conference call “all options are on the table” for the company’s two California refineries because of increasing regulatory pressure on refiners in the state, which is the largest U.S. motor fuels market.
“Clearly the California regulatory environment is putting pressure on operators out there and how they might think about going forward with their operations,” Riggs said.
Valero is the second largest U.S. refiner by capacity and operates two refineries in California, including the 145,000 barrel-per-day (bpd) Benicia refinery and the 91,300 bpd Wilmington refinery.
California Governor Gavin Newsom signed a bill earlier this month requiring the state’s oil refiners to maintain minimum fuel inventories, and authorizing the state’s Energy Commission to ensure that refiners have a plan to prevent shortages during maintenance outages.
The state is home to the nation’s highest average gas prices, leading to an often tense relationship between the policymakers and oil companies.
Earlier this month, Phillips 66 announced plans to shut down its large Los Angeles-area oil refinery late next year due to poor profits.
California has seen two other refineries close since 2020, including one by Marathon Petroleum.
The San Antonio-based company plans to operate its 14 refineries up to 94% of their combined total complete throughput capacity of 3.2 million barrels per day (bpd) in the fourth quarter, according to plans announced by Homer Bhullar, vice president of investor relations at Valero.
During the third quarter, Valero’s refineries ran at 90% of their combined total throughput capacity, Bhullar said, adding the third-quarter results reflect a period of heavy maintenance at its refineries in a “relatively weak margin environment.”
Chief Operating Officer Gary Simmons said gasoline sales in the third quarter were similar to 2023 while diesel sales increased slightly year over year.
Looking ahead, the refiner expects to get “significant tailwind” from tax incentives for the renewable fuel market including the Clean Fuel Production Tax Credit (PTC), which will come into effect early next year, executives said.
Riggs also said the company’s joint venture Diamond Green Diesel renewable distillate plant at the 360,000-bpd Port Arthur, Texas refinery was completed on schedule and under budget and is in the process of starting up.
(Reporting by Nicole Jao in New York and Erwin Seba in Houston; editing by Diane Craft)