On August 2, 2024, Chevron Corporation, the second-largest oil and gas company in the United States, announced its decision to move its headquarters from California to Texas. This move is considered a significant event signaling the decline of the oil industry in California, attributed to factors such as the state’s energy policies, unfavorable commercial environment for the oil industry, high taxes, and excessive regulations that may have led Chevron to “move up.”
Chevron has been operating in California for 145 years, starting from its founding as the Pacific Coast Oil Company in 1879, then being acquired by Rockefeller’s Standard Oil Company in 1900, and later becoming Chevron Corporation in 1911 when the federal government split up the Standard Oil Company under anti-trust laws. California has been its home for all these years.
Various factors led to Chevron’s departure, including California’s low carbon fuel standards, emission quotas and carbon trading fees, restrictions on drilling and “excessive” refining profits, legal disputes, and hefty fines. Additionally, there is a November municipal measure in Richmond that proposes a $1 per barrel oil tax on Chevron Richmond Refinery over the next 50 years if passed.
The Richmond refinery is one of Chevron’s two refineries in California, with a history of 122 years, primarily producing low-carbon fuels required in California. Chevron has five refineries in the U.S. with a refining capacity of approximately 1 million barrels of crude oil per day, ranking the El Segundo and Richmond refineries as the second and third largest refineries in California, respectively.
The “Polluters Pay” measure approved by the Richmond City Council in May is a refinery business permit tax that, if supported by voters, could generate annual revenue of $60-90 million for the city. Currently, Chevron contributes 25% of the city’s revenue in taxes. If the measure passes, it will increase to 50% of the city’s income.
This revenue has no specified purpose and will go into the city’s general fund. According to local news reports, former mayor and councilmember Gayle McLaughlin stated that this income could be used to promote the “Green-Blue New Deal” plan proposed by the city in 2021, focusing on climate change policies while creating job opportunities, economic growth, and reducing socioeconomic inequalities.
McLaughlin mentioned that there has been a long-standing tax dispute between Richmond and Chevron, with a settlement agreement reached in 2009, valid until July 2025. Chevron has paid $114 million over 15 years according to the terms, with new taxes set to be collected starting next July.
A spokesperson for Chevron stated, “Chevron has been an integral part of the Richmond economy, employing nearly 3,000 employees and contractors.” They also mentioned that “increasing reliance on a single company and industry to boost a city’s revenue is a bad policy.” In late June, Chevron filed a lawsuit against the city under the name of the newly formed “Richmond Future Alliance”, questioning the text of the voting measure as “false, misleading, and biased, violating California election laws.”
Local environmental improvement organization Communities for a Better Environment’s lawyer Kerry Guerin disagreed with Chevron’s statements, pointing out that they are profitable, making $21.4 billion last year, and that the Richmond refinery is just a small part of Chevron’s downstream operations in the U.S. (refining, with upstream operations referring to oil exploration), even smaller on a global scale.
Tully Graves, the director of the Richmond refinery, mentioned in a press conference at the end of July that “it is widely known that California is a hostile environment for doing business,” citing the proposed taxes as making manufacturing more challenging. He claimed that unfairly targeting a single refinery put Chevron’s Richmond Refinery at a disadvantage compared to the other two refineries in the area.
According to the U.S. Energy Information Administration, as of 2022, California ranks fifth in the U.S. in crude oil reserves at around 2.2 billion barrels, with potentially untapped energy in offshore areas. California used to be a major oil-producing state in the U.S., but since the mid-1980s, crude oil production has been declining, now accounting for only about 2% of the total U.S. production. Policy shifts towards clean energy and away from traditional fuels, transitioning to electric cars, trucks, and trains, are significant factors contributing to the oil industry’s decline.
California has also imposed strict environmental policies and legislation, leading to higher gasoline taxes for consumers. As of July 1, 2024, the escalating gasoline consumption tax reached nearly 60 cents per gallon.
The oil industry’s operations have become increasingly challenging. Last September, California Attorney General Xavier Becerra sued Chevron, BP, ConocoPhillips, ExxonMobil, Shell, and five other major oil companies, accusing them of deceiving the public on climate change issues, exacerbating extreme natural disasters, and incurring billions in recovery costs.
In March of last year, California passed the Gas Price Gouging Law. Governor Newsom stated, “California has scored a victory against the oil giants.” Becerra mentioned that “oil companies have been raking in profits, while many Californians are struggling to make ends meet,” emphasizing that the law will introduce accountability and transparency.
According to the law, oil companies exceeding the maximum profit rate set by the Energy Commission will face penalties, and they are required to disclose extensive commercial transaction details monthly.
Following Chevron’s announcement of relocation, Governor Newsom’s office highlighted the growth and opportunities in California’s clean energy sector, stating that employment in this field is six times greater than the traditional fossil fuel industry. According to the Los Angeles Times, a spokesperson stated that Chevron’s move was inevitable, saying, “We are proud that California has become a leading creator of clean energy jobs.”
In addition to Chevron, numerous other industries, including high-tech companies, have also been leaving California. In mid-July, Elon Musk announced the relocation of SpaceX and X from California to Texas, marking a trend of companies moving out of the state.