Environmental activists seek a 'buck a barrel' tax on Chevron refinery

Richmond City Council to vote on refinery tax

Richmond city leaders are taking aim at the Chevron refinery with a crucial vote that could make the citys largest employer subject to a major tax.

RICHMOND, Calif. - By evening's end, we should know whether Richmond's Chevron refinery will be subject to a huge tax that could be on the November ballot.

But could this so-called buck a barrel tax actually cut refinery jobs or raise gas prices? It's a lot of money, and it's hard to figure out who will ultimately pay.

Every dollar increase in crude oil prices adds two-and-a-half cents per gallon at the pump. Should Chevron choose to take this buck a barrel tax, the City of Richmond is considering that would permanently add 35 cents to the final price of an average-sized 14-gallon tank of gas.

So, in the Bay Area, the current average cost to fill-up a car at $69.86 would climb to $70.81.

"That, of course, would be paid not just by Richmond drivers, but by drivers everywhere," said energy economist, Professor Severin Borenstein of the UC Berkeley Haas Energy Institute, who also says it could backfire on the city. "If you tax the oil going in, instead of the pollution, you actually don't give the refinery an incentive to produce in a cleaner way. You just give them an incentive to run less oil through it," said Borenstein.

The Chevron Richmond Refinery produces one in five gallons of California gas and three in five gallons of jet fuel; a critical asset to California's energy profile. Even though Chevron Corporation made $21.3 billion in profits last year, lower production at Richmond could lower refinery employment.

Richmond collects about $46 million in taxes each year from Chevron, which the company says is already 25% of the city's budget.

The buck a barrel tax could raise as much as $90 million more a year.

"The city should reject the ballot initiative this evening," said Chevron executive Brian Hubinger who blames activists, namely, Communities for a Better Environment and Asian Pacific Environmental Network Action, who have asked the city council to put this buck a barrel proposal on the November ballot. "This comes on the heels of a tax increase two years ago by the city that worked to reduce the competitiveness of all the city's businesses," said Hubinger.

"The worst-case scenario is probably if the refinery is able to raise its price by cutting back its production enough to cover this tax," said Prof. Borenstein.

Chevron would not answer whether it would cut employees or raise prices.