Valero Energy: Blocking Climate Solutions, Taking Handouts

by Tim Donaghy

September 21, 2020

Valero Energy, the second largest oil refiner in the country, has received millions in bailouts while benefiting from Trump’s reckless environmental rollbacks.

© Mannie Garcia / Greenpeace

While 2020 has laid bare the overlapping crises of public health threats, systemic racism, and urgent climate impacts, it’s important to note that many companies receiving a bailout have also been lobbying to keep these failing systems in place and block solutions.

Valero Energy is one of them. The second largest oil refiner in the country, Valero received millions in bailouts while benefiting from Trump’s reckless environmental rollbacks. Valero’s current business model is not fit for a stable climate, but it stands to reap a windfall from Trump’s approval of the Keystone XL pipeline, his gutting of fuel economy standards, and other giveaways.

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Born in Crisis

Valero Energy is a corporation born out of the OPEC energy crisis. In the 1970s, the Coastal States Gas Corporation was forced to curtail delivery of fossil gas to cities in Texas, leading to skyrocketing energy bills for its customers. Following years of lawsuits, a $1.6 billion settlement led to the formation of Valero Energy in 1980. The name Valero itself comes from the original name of the Alamo.

Today, Valero owns 15 crude oil refineries in the United States, Canada, and Wales with a total capacity of 3.1 million barrels per day. The company also operates 14 ethanol plants, a handful of pipelines, and one “renewable” diesel plant. Valero also owns a 50 megawatt wind farm that provides electricity to its refinery in Sunray, TX.

Valero spun off its retail gasoline segment in 2013 — meaning that Valero branded gas stations are typically owned by other entities but may purchase fuels wholesale from Valero.

Government Lifeline

While the pandemic downturn hit the oil industry hard, Valero has taken advantage of many of the bailout programs in the CARES Act. Through the Secondary Market Corporate Credit Facility, the Federal Reserve has purchased $6 million in Valero bonds and another $11 million via its purchases of Exchange Traded Funds (ETFs). Valero also reported a tax benefit of $117 million for the first half of 2020 thanks to a CARES Act provision that allows them to apply any net operating losses to previous years’ tax burdens.

In April 2020, Trump named CEO Joseph Gorder to his “Opening the Country” industry task force. Gorder has also met with the President personally to “seek concessions” regarding the EPA’s Renewable Fuels Standard (RFS). Gorder received over $28 million in total compensation in 2019 — roughly 103 times the median Valero employee’s pay.

Valero also stands to benefit from one of Trump’s most high-profile environmental rollbacks: the Keystone XL Pipeline. Valero has long been considered a prospective shipper and “anchor customer” for the troubled project, which was designed to move Alberta tar sands oil down to the Gulf Coast. The southern segments connecting to refineries in Port Arthur and Houston have already been completed. Despite Trump’s efforts to revive the misguided project, Keystone XL remains stalled after a Supreme Court decision earlier this year revoked key permits.

Video of a 2013 anti-Keystone XL protest at the Valero sponsored Texas Open.

Refineries and Environmental Justice

Like many oil refiners, Valero’s facilities often have a disproportionate impact on low-income and Black, Indigenous, and communities of color. Valero is the 36th worst air toxics polluter in the U.S, according to an analysis of 2017 Toxics Release Inventory data by PERI. Of the “total population health risk” from Valero’s facilities, PERI calculates that 66% of the risk is borne by people of color and 21% is borne by people living below the poverty line.

A number of Valero’s refineries are located in low-income and communities of color, and experience elevated risks from cancer and respiratory hazards, according to data from the EPA’s EJ Screen tool. These facilities include:

  • Port Arthur, TX: Valero’s Port Arthur refinery dates back to 1901. Of the roughly 3,000 people who live within 2 miles of the plant, over 90% are African-American and 60% are low-income. Located directly next door is the country’s largest oil refinery (owned by Motiva, a subsidiary of Saudi Aramco). Exxon Mobil and Total also operate refineries in the region. The neighborhood ranks above the 95th percentile nationally for both the EPA’s air toxics cancer risk and respiratory hazard metrics.
  • Houston, TX: Valero’s Houston refinery, built in 1942, is one of eight oil refineries along the Houston shipping channel. Roughly 26,000 people live within 2 miles of the Valero plant. More than 80% are Hispanic, and more than half are low-income residents. Refineries operated by Chevron, Kinder Morgan, and Access Industries are located nearby. The area ranks above the 95th percentile nationally for air toxics cancer risk, and in the 80-90th percentile for respiratory hazard.
  • Norco, LA: The St. Charles refinery is located along the Mississippi River in Louisiana’s infamous “Cancer Alley.” Shell also operates a refinery nearby. Marathon’s Garyville refinery is a few miles upriver. The 4,400 residents living within 2 miles of the refinery are about 84% white and 26% low-income. According to the EPA, this area has extremely high health risks, ranking above the 95th percentile in both air toxics cancer risk and respiratory hazard.
  • Other Valero refineries located in low-income communities of color include facilities in Wilmington, CA, Corpus Christi, TX, and Memphis, TN.
Valero Energy Refineries

Location of Valero Energy’s U.S. refineries. Circle size represents refinery capacity. Circle color represents the EPA’s Environmental Justice Cancer Risk Index for the 2 mile radius surrounding the facility, with redder colors showing areas that rank higher on this index.

Living next to an oil refinery is likely related to elevated health risks, as well as periodic fires, explosions, accidents, and toxics releases. For decades, communities near these facilities have been organizing to demand cleaner air and greater accountability for environmental racism.

Recent events illustrate the danger to local residents. Just last month, Hurricane Laura hit Port Arthur and other Gulf communities hard. Safety shutdowns at several regional refineries led to increased flaring and air releases into the communities.

Violations and Community Resistance

Since 2000, Valero and its acquired companies have paid out over $1 billion for a variety of environmental, worker safety, and employment discrimination violations. These include two large settlements with the EPA — for $711 million in 2005 and $230 million in 2007 — to address violations of the Clean Air Act by Valero refineries. Despite past settlements, many of Valero’s refineries have continued to pollute surrounding communities.

In May 2019, the Port Arthur Community Action Network, Environment Texas, and the Sierra Club announced their intent to sue Valero. The groups alleged in their complaint “over 600 violations of numerous hourly and annual limits on emissions of sulfur dioxide (SO​2​), volatile organic compounds (VOCs), hydrogen sulfide, nitrogen oxides, particulate matter, and other air pollutants over the previous five years” in addition to improper flare operations. In response, the Texas Attorney General took up the suit, alleging “at least 38 violations since 2014, including 13 instances that the Texas Commission on Environmental Quality issued orders against the company.”

In Houston, the group t.e.j.a.s. (Texas Environmental Justice Advocacy Services) has led a campaign to stop Valero from receiving a permit to continue emitting high levels of hydrogen cyanide (HCN) — a gas that has been used as a chemical weapon and is also a byproduct of Valero’s refining processes. Valero’s refinery is located in the Manchester neighborhood of Houston, where a 2016 report found residents carried significantly higher cancer and respiratory risks than elsewhere in the city. In 2019, Harris County also announced plans to sue Valero for Clean Air Act violations.

In California, local opposition defeated Valero’s plan to increase crude-by-rail shipments to its Benicia refinery, a plan that drew criticism from then-Attorney General Kamala Harris. A 2019 incident at that same refinery led to a large release of air pollution, and was found by investigators to be related to a “long list of shortcomings and inadequate procedures” at the facility.

Lobbying and Campaign Cash

Analysis by Influence Map has rated Valero’s climate lobbying an abysmal “E-” (the second lowest scoring band) for their “active and negative engagement with climate change policy.”

Time after time, Valero has opened its wallet to halt or delay the critical policies we need to address the climate crisis. In 2010, Valero — along with Tesoro and Koch Industries — led the charge to suspend California’s landmark climate law, AB 32, by pushing for the passage of Proposition 23. Despite at least $4 million in financial backing from Valero, the repeal movement failed. In 2018, Valero shelled out nearly $1 million to defeat Washington State’s ambitious carbon tax initiative.

Valero has also worked in concert with industry associations of which it is a member, including the American Fuel & Petrochemical Manufacturers (AFPM) and the Western States Petroleum Association (WSPA). For example, Valero and AFPM lobbied states to pass “critical infrastructure” bills that criminalize pipeline protesters. In 2019, the Intercept published emails from a Valero lobbyist to Oklahoma Governor Mary Fallin, asking her to sign such an anti-protest bill.

Valero has also taken aim at regulations designed to reduce the use of oil and petroleum products, such as President Obama’s fuel economy and CAFE standards. While the Trump administration was in the process of repealing those standards, Valero disclosed lobbying on those topics and AFPM mounted a concerted campaign to support the rollbacks.

However, Valero’s big prize has been lobbying for changes to the EPA’s biofuel standards. In addition to meeting directly with Trump, Valero has supported the campaign of Sen. Ted Cruz (R-TX) who has pressured the EPA on the Renewable Fuel Standard issue. While the RFS is a misguided approach to climate change, Valero’s attack is self-serving — shifting the burden away from refiners onto retailers — and would lead to increased profits for Valero and prominent investors such as Trump advisor Carl Icahn.

In addition to extensive lobbying, Valero and its executives have opened their pockets for Republican Congressional candidates. CEO Gorder personally donated $25,000 to a Super-PAC supporting Cruz’s 2018 re-election campaign, and has supported key oil patch Senators such as Jim Inhofe (R-OK) and John Cornyn (R-TX). Valero has donated $1 million to a super PAC dedicated to electing Republican House members, as well as a whole slate of strategically chosen House members.

Valero’s founding CEO William Greehey, who led the company from 1980 to 2006, was at the center of controversy in 2019 when his maximum donations to Donald Trump were publicly called out by Rep. Joaquin Castro (D-TX).

Inundated Valero facilities in Manchester, Texas a week after Hurricane Harvey slammed into the area.

A Reckless Business Model for the Climate

Like many companies, Valero has begun disclosing more information about climate risks in its reporting to investors. In its 2018 report, Valero highlights forecasts that show rising demand for oil in the coming decades, even though limiting global warming to 1.5°C would require steep declines in oil demand. While Valero does consider the resiliency of its business in a “carbon-constrained” world, it relies on an inadequate scenario that doesn’t reflect the Paris Climate agreements and hedges its bets by touting the possible expansion of ethanol, petrochemicals, and fuel exports.

Valero’s climate carelessness is already putting their facilities — and surrounding communities — in peril. For example, in 2005, following Hurricane Katrina, a refinery in Meraux, LA spilled more than 25,000 barrels of oil, flooding city streets and canals. Valero acquired the refinery in 2011. A UCS analysis found that a Category 3 storm could “put parts of the facility under 10 feet of water,” while projected sea-level rise would “make the facility vulnerable to Category 2 hurricanes.”

Say “no” to fossil fuels and Trump’s toxic, anti-environment agenda. Vote for the Climate this November, and join our volunteer team!

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Tim Donaghy

By Tim Donaghy

Tim Donaghy is a Senior Research Specialist with Greenpeace USA. He writes frequently about climate change, offshore oil drilling, energy production, and the Arctic.

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