Posted on March 5, 2010
Chevron Meeting will be Bellwether
Richmond city officials will watch closely next
week when Chevron Corp. hosts its annual security analysts
The event is when the publicly held company reviews the results
of the previous fiscal year and discusses its plans, goals
and projections for the coming year, said Lloyd Avram, a Chevron
It's particularly important for Richmond this year because
last fall a Chevron official hinted that state and local government
demands for more taxes and fees from the 3,000-acre refinery
on the city's western border were threatening the plant's viability.
In a November New York Times story, Mike Wirth, an executive
vice president with the company, said the combined total of
state and local taxes exceeded profits at the Richmond facility. "Refineries
that don't make money don't stay open," he told the newspaper.
Chevron's profits fell from $23.9 billion in 2008 to $10.5
billion in 2009 - and that seems to be a far more important
factor in the future of the company's Richmond refinery than
the local tax rate.
The Richmond refinery - which opened in 1902, three years
before Richmond incorporated as a city - employs 1,300 people
and contributed around $32 million in local and property taxes
to the city's $144 million budget for the year ending in June.
The refinery is the No. 3 producer in the company's refinery
fleet, processing 243,000 barrels of oil a day.
In recent years, Richmond city officials have become emboldened,
approving a business license tax that was struck down by the
courts and requiring the oil company to pay a utility tax calculated
by city officials, instead of a flat rate determined by the
company. And with work halted by a court ruling last year that
found a $1 billion retrofit project report environmentally
incomplete, there is speculation that an announcement to close
the refinery could be made soon after the company meeting next
But it is disingenuous to include Richmond's paltry tax bill
in the financial misfortunes of Chevron and other oil giants
that have seen profits plummet as global demand for fuel has
decreased even as global manufacturing capacity has grown.
Some Richmond officials, including Mayor Gayle McLaughlin,
are determined to forge a new tax agreement between the company
and the city, which has an estimated $10 million budget shortfall
this year. [emphasis added]
"The residents, the council and I have made it clear that
we will no longer be dominated by Chevron," McLaughlin said. "It's
a new era and we will not be rolled back. We can co-exist,
but we expect any business that operates in the city to play
by the rules and pay its fair share." [emphasis added]
The Richmond City Council voted to appeal the court decision
that knocked down Measure T, the city business license tax
challenged by Chevron as unconstitutional.
"I totally reject the fact that our taxes have anything to
do with their (Chevron) bottom line," said longtime Councilman
Tom Butt. "No one is trying to drive Chevron out of Richmond,
and what they're going to do is based on a strategic plan.
They may be losing their ass, but it's because of the worldwide
energy market, not our tax rate."
With a population of 102,000 residents amid a thriving metropolis,
Richmond is no longer the distant, rural outpost it was when
Chevron opened its doors. Unless Chevron officials can make
radical changes in their ability to operate in a dense, urban
environment where clean earth and air are as important to residents
as profits are to the company - then perhaps it is time for
Big Oil to pull up stakes and move on down to El Segundo.
Chip Johnson's column appears in The Chronicle
on Tuesday and Friday.
E-mail him at email@example.com.
This article appeared on page C - 1 of the San