California government officials are trying to find a buyer for Valero Energy’s Benicia refinery near San Francisco, three sources familiar with the matter said, an unusual effort as the clock ticks down on the company’s planned closure of the facility in April.
The rare attempt by a state government to broker the sale of privately-owned infrastructure reflects its growing concerns over protecting fuel supplies in the most populous U.S. state and keeping a lid on prices, where California’s nearly 28 million drivers already pay among the highest prices for gasoline in the country.
California’s effort to save the refinery from closing also marks a shift from the focus of government policy in recent years to champion green initiatives and restrict fossil fuel usage, that has led to an often tense relationship between the state and oil companies, including the second-largest U.S. refiner by capacity.
The state’s primary energy and policy planning agency, the California Energy Commission (CEC), has actively sought buyers for the plant, three sources told Reuters, speaking on condition of anonymity to discuss private deliberations.
The CEC declined to say whether it is engaged directly with buyers for the facility but acknowledged it is working to ensure the facility remains open.
“CEC is engaging with market players to explore pathways for the continued operation of in-state refineries,” the agency said in an emailed statement.
Valero, which reports earnings on Thursday, did not respond to comment requests.
Earlier this year, Valero announced its intention to cease operations by April 2026 at the 145,000-barrel-per-day San Francisco-area refinery amid worries about California’s declining fuel supplies and high gasoline prices.
The San Antonio, Texas-based refiner is also reviewing whether to continue operations at the rest of its refineries in California, including the 91,300-bpd Wilmington plant near Los Angeles.
This comes after Phillips 66 said last October it will shut its Los Angeles-area refinery due to “market dynamics” and begin in October winding down operations at the 139,000-bpd plant.
The two refineries, combined, produce roughly 17% of the state’s gasoline supply. Their shutting, alongside other closures and refineries converted to produce renewable fuels, like Phillips 66’s Rodeo facility last year, will leave California even more dependent on more expensive fuel imports that would further drive up prices.
Average regular gasoline prices in California on Wednesday were $4.484 per gallon, the highest in the nation, according to industry group AAA. The average U.S. price was $3.155 per gallon.
Studies by the University of California Davis and the University of Southern California said, respectively, the refinery closures could push average prices to $6 and $8 per gallon.
BUYER UNIVERSE
Industry experts have said getting an agreement in place by the planned April closure of Benicia could be difficult.
A thorough sale process, including adequate time for bidders to do due diligence and negotiate an agreeable price, traditionally takes place over several months. Even once an agreement is reached, refinery sales typically take between three to six months to close.
“It would be a pretty aggressive timeline to get it done,” said Skip York, chief energy strategist at Turner, Mason & Co.
Among the parties contacted by CEC about Benicia is HF Sinclair, a source said. The refiner and fuel distributor was in talks with Valero last summer about acquiring Benicia, but negotiations collapsed over an environmental issue at the plant, two people familiar with the matter said.
HF Sinclair did not respond to requests for comment.
The CEC has also contacted parties that have owned fuel-producing plants in Europe, a source said. The European Union’s strict environmental standards would make them more agreeable to operating in California, multiple sources added.
The state government’s climate-first agenda has brought California into conflict with American energy companies, which have criticized state policies for creating difficult business conditions and pushing up pump prices.
There have also been tensions between California’s green agenda and the federal government. Last month, U.S. President Donald Trump signed a congressional resolution to block the state’s landmark plan to end the sale of gasoline-only vehicles by 2035. California and 10 other states have sued to challenge the repeal.
California’s energy regulator last month recommended new rules to encourage more private investment in fuel imports and a pause on refiner profit limits in response to Governor Gavin Newsom’s call for reliable fuel supplies and a bid to save the struggling refiners in the state.
Newsom’s office declined to comment.
(Reporting by Nicole Jao, David French and Shariq Khan in New York Editing by Marguerita Choy)