Chevron, Richmond strike $28 million deal for refinery
By Katherine Tam
West County Times
Posted: 02/18/2009 05:47:22 PM PST
The Chevron Richmond refinery
underpaid on its utility taxes and has reached a $28
million settlement with the city of Richmond to make up
for what it owes.
The oil company will pay $13 million now, City
Attorney Randy Riddle said; the remaining $15 million
will be issued over the next three fiscal years.
The deal includes $3 million earmarked for a 0.6-mile
public path at the refinery that would close a gap in
the San Francisco Bay Trail between Point Molate and the
San Pablo Peninsula, City Manager Bill Lindsay said. The
city will continue to hunt for other trail funding, he
"We thought the settlement was fair in terms of
dealing with the litigation risk. It brings in money now
at a time when money is very tight," Lindsay said.
The first settlement payment will be funneled into
the 2009-10 budget, a year when city leaders anticipate
losses in property tax, sales tax and other revenue as
the recession deepens.
The settlement grew out of a dispute over how much
Chevron paid in utility taxes. For two decades, the
refinery paid its utility taxes based on a flat-rate
method known as a "cap," which averaged about $14
million a year. In 2006, the oil company switched to
paying an actual rate, which varies depending on the
amount of energy that's used.
The change translated into a $4 million annual
reduction in what the refinery paid, city officials
estimated. They weren't sure if what Chevron was paying
because the refinery, which
generates some of its own power, does not publicly
disclose its energy production or usage information.
In late 2006, the city hired a law firm to obtain and
analyze the refinery's data and verify if the utility
tax payments were accurate. Both parties signed a
confidentiality agreement to keep the data private
because Chevron was concerned about releasing trade
The audit spanned 2006 to 2008, and concluded last
year. The two sides negotiated a settlement, which the
City Council approved in closed session Tuesday night.
Chevron has reverted to calculating its utility tax
using the flat-rate method, Lindsay said.
Refinery General Manager Mike Coyle said in a
prepared statement that the settlement "allows us to
resolve one of the outstanding issues we've had with the
city while also helping us to maintain financial and
economic predictability going forward."
Meanwhile, Bay Trail supporters applauded the city
for securing funding for the walking and bicycling path
in the utility tax settlement.
Trails for Richmond Action Committee and others had
lobbied the State Lands Commission to require that
Chevron provide trail construction money as part of its
30-year lease of state tidelands where oil tankers moor.
State commissioners in January granted the lease with a
commitment from Chevron to provide land north and south
of Interstate 580; it did not require construction
Design and construction is an estimated $11 million,
said Bruce Beyaert, head of the Trails for Richmond
In a statement issued Wednesday, Chevron pegged its
Bay Trail commitment at $12.5 million, which includes
the $3 million from the utility tax settlement and $7.5
million worth of land. Spokesman Brent Tippen said the
company reached those land values using its assessors.
But Beyaert said Chevron's figures are heavily
inflated and amount to "smoke and mirrors." A 2001 joint
trail study found the easement south of I-580 worth
$280,000, not the $3 million figure Chevron gives,
Beyaert said. And the land north of I-580 was at one
point under discussion to be given for free under an
East Bay rail to trails project and is not worth the
$4.5 million Chevron says, he added.
Reach Katherine Tam at 510-262-2787