|Richmond Confidential on Chevron Divorce
December 31, 2009
A political showdown between the city and its biggest taxpayer continues to unfold, and no one is quite sure how it will end.
On one side is Chevron Corp., the nation’s second-largest oil company and a multibillion dollar, multinational corporation. Among its vast global network of petroleum facilities, Chevron has maintained a refinery in Richmond since 1902. The facility has grown to 2,900-acres and generates a significant portion – some have estimated more than 40 percent – of the city’s $144 million general fund budget.
On the other side is a mayor, city council and part of the local constituency of this town that say the corporation must do more to recompense the people of Richmond for the environmental burdens – including airborne pollutants – placed on the city and its residents due to the refinery.
And now speculation has begun to swirl that this century-long partnership between the oil company and Richmond may be in its final throes. Some of the speculation is being fed by Chevron itself: In a recent National Public Radio report, Mike Coyle, the refinery’s general manager, used the word “divorce” in describing Chevron’s long relationship with Richmond.
But some city officials think the corporation’s leaders are prone to floating such ideas in efforts to gain political leverage and concessions.
“Every time Chevron has been in some kind of a dispute with the city, they always threaten to leave,” said Councilman Tom Butt, the city’s longest-serving legislator. “They’ve been doing this for years, but the bottom line is whether they continue to operate a refinery in Richmond or not has nothing to do with local tax disputes and everything to do with the corporation’s macro economic strategic plans.”
Chevron spokesman Brent Tippen said the refinery in Richmond faces higher tax and environmental burdens than its other facilities around the world, and even higher than other refiners in California. While not directly threatening to leave if Chevron doesn’t prevail in its local tax and legal battles, Tippen did suggest that the continued existence of the Richmond facility is not a guarantee.
“One part of the corporation does not subsidize other business units,” Tippen said. “Chevron business units that cannot compete effectively must adapt successfully to meet their challenges, or they are sold or shut down.”
The problem revolves around a series of measures the city has taken under the leadership of Mayor Gayle McLaughlin. A Green Party mayor elected in 2006, McLaughlin ran on a tough-on-Chevron platform, and wants to get Chevron to pay more in taxes and fees.
Last year, voters passed Measure T, which levies an additional quarter-percent tax on the value of manufacturing materials. Chevron responded to the tax hike – which amounted to more than $20 million in additional taxes on the refinery this year – by filing a still-unresolved lawsuit alleging that the tax measure violates state and federal law.
This year, the company has been dealt two additional blows. In February, the company paid the city $28 million in a legal settlement after a city-commissioned audit found the company had under-paid taxes for years.
In July, Chevron’s multimillion dollar effort to retrofit its refinery was halted by a Contra Costa County judge. Judge Barbara Zuniga ordered the stoppage on grounds that an environmental review needed to further explain how the new petroleum refining technology would affect surrounding communities.
Chevron is the biggest employer and taxpayer in the city. It employs 1,300 people locally, although how many of those employees are Richmond residents is unknown.
Chevron banked $23.9 billion in 2008, according to public company reports, continuing a period of record profits this decade. The global reach and record profits reaped by the corporation have come amid persistent poverty and crime in the city.
This year, Richmond’s violent crime edged up, punctuated by 47 homicides, an inordinately high total for a city of just over 100,000 residents. City statistics have the local unemployment rate hovering at nearly 20 percent, far higher than the state average.
To McLaughlin these circumstances, and the pollution emitted by refining operations, call for a bigger commitment from Chevron to the city in which it operates. Like Butt, she dismisses insinuations that the corporation may move operations elsewhere.
“Chevron has all its infrastructure permanently in place here in Richmond,” McLaughlin said. “They are located right on the water where the crude gets unloaded from ships and piped right into the refinery. This is really an ideal situation for them.”
Tippen did not characterize the refinery’s situation in quite so effusive terms, but did emphasize the corporation’s connection to Richmond and the broader area. He also noted Chevron’s philanthropic efforts, which have roughly doubled this year to more than $3 million and helped fund 80 local nonprofit organization, a move some critics see as an effort to curry community favor.
“As the largest taxpayer and one of the largest employers in Contra Costa County, our business needs to remain healthy in order to help support the community and the people who live and work here,” Tippen said.
McLaughlin said Chevron’s contributions to the community are not enough.
“We believe that we have every right to expect more from mega-billion dollar companies operating within our city’s boundaries,” she said.