Chevron Agrees to Pay California City $550 Million to Avoid Getting Hit With New Tax

A Chevron gas station in Los Angeles, Calif., on May 22, 2023. (Mario Tama/Getty Images)

Chevron has agreed to pay the city of Richmond, California, $550 million over 10 years in a settlement under which the city will drop a November ballot measure that would have imposed a new tax on the company’s Richmond refinery.

The Richmond City Council voted 7–0 on Aug. 14 to approve the settlement agreement, under which Chevron will pay the city $50 million annually for five years starting in 2025, then $60 million a year until 2035.

In exchange, the city has agreed to rescind a resolution that would have placed a proposed $1 per barrel tax on Chevron’s oil refinery in Richmond, while adopting a resolution approving the settlement. The city’s finance director estimated that the tax would have brought Richmond between $60 million and $90 million per year.

The money Chevron will pay under the settlement will go into a general fund and Chevron has agreed not to take credit for how it’s spent. Chevron, which is Richmond’s biggest employer and taxpayer, will continue to pay regular city taxes—the Measure U business license tax, the utility users tax, and property taxes—at regular rates.

Under the deal, Richmond has reserved the right to impose new taxes on Chevron over the 10 years, although the $550 million the oil major has agreed to pay under the settlement will be offset against any new taxes.

The deal comes after a week of intensive negotiations, during which Chevron initially offered $30 million per year for a total of $300 million over a decade.

The company confirmed the settlement in an emailed statement to The Epoch Times.

“Chevron Richmond and the City of Richmond have reached an agreement that settles litigation and removes the Refining Business License Tax measure from the ballot,” the company stated. “This agreement ensures Chevron Richmond can continue to provide Northern California with the affordable, reliable, and ever-cleaner energy the region’s economy needs.”

At the city council’s Aug. 14 special meeting, Richmond Mayor Eduardo Martinez said the settlement “is just the beginning.”

The relationship between Chevron and Richmond has grown strained in recent years, with the city blaming the pollution generated by the company’s oil refining activities for growing health problems in the city.

At the same time, Richmond faces a looming budget gap, with the city’s fiscal year 2024–2025 budget showing a projected deficit of $30.1 billion by 2029 under a baseline scenario, and a $42.5 billion shortfall under a pessimistic estimate.

The shortfall has been a concern for city officials and has driven efforts to secure additional sources, including the proposed refinery tax on Chevron, which the Richmond City Council approved in May.

“What we are proposing is not going to break things or just to make them leave,” Richmond Vice Mayor Claudia Jimenez said earlier this year. “What we are proposing is to make sure that we continue to advocate for such a big business with billions of dollars to pay their fair share to Richmond.”

At the time, Chevron called the proposed refinery tax a “hasty proposal” that had been brought forward by one-sided interests that would impede the company’s ability to invest in improvements at its Richmond facility.