LATEST NEWS-- Deal ends opposition to $140 million Valero upgrade

» Want a Reprint? » Printable Version June 4, 2003 East Bay Business TimesAlan Doyle

Intense daylong negotiations brokered by Benicia Mayor Steve Messina yielded an agreement Wednesday between Valero Energy Corp. and environmentalists that saves the company's $140 million refinery upgrade.

In a written settlement, a coalition of the Benicia-based Good Neighbor Steering Committee, the Solano County Green Party and Solano's Sierra Club chapter withdrew its appeal of the Planning Commission's decision to issue permits for the Benicia refinery's upgrade. The group dropped its opposition, which could have killed the project, in exchange for Valero's commitment to install anti-pollution equipment sooner than previously planned.

The agreement lays out a set sequence for installation of a wet scrubber to remove air pollutants and a water treatment plant. Valero also obtained what is known as an SB 25 air monitor for free through the Bay Area Air Quality Management District and the California Air Resources Board. Valero also agreed to a second, high-tech monitor that will track a wide range of pollutants.

The Valero Improvement Project, as the company has dubbed the upgrade, encompasses a cluster of renovations and expansions that Valero says it needs to complete over the next six years to remain competitive by processing a higher percentage of "sour" or more pollutant-laden crudes.

The Benicia refinery, with a throughput capacity of 165,000 barrels per day, provides about 25 percent of the Bay Area's gasoline and jet fuel. Valero says it must be able to switch to a greater percentage of Latin American crudes as cleaner Alaska North Slope supplies dwindle and become more expensive.

Valero says it can complete many of the individual components of upgrade without overall approval from the city, but it would not be able to install the wet scrubber that it needs to switch to the less costly crudes.

Valero says the project will generate hundreds of jobs and millions of dollars for local government and schools, as well as reducing air emissions.

Opponents claimed the environmental impact report approved April 28 by the Benicia Planning Commission was so flawed that it needed to be redone, which would take months and cost thousands of dollars.

Valero and environmentalists had been meeting for the past week to avert a showdown before the City Council. Dana Dean, a leader of the environmental coalition, and refinery General Manager Bill Buckalew credited Messina and his staff with brokering the deal, which was sealed minutes before the City Council was scheduled to consider the appeal.

If the City Council had overturned the Planning Commission's approval or opponents had sued to block Valero from proceeding, company officials had planned to abandon the project.

The refinery upgrade must still be approved by Valero's corporate headquarters in San Antonio, Texas. The project reportedly is competing against several projects for funding, including the possible purchase of a 280,000-barrel per day refinery on the island of Aruba near Venezuela.

Reach Doyle at adoyle@bizjournals.com or 925-598-1404.