Chevron, one of the largest U.S. energy companies, announced on August 2 that it would be moving its headquarters from California to Texas. For a company that was once named Standard Oil of California, the move is significant, and emblematic of California’s hostility to the energy industry.
Andy Walz is president of Chevron’s American products group, which covers North, Central, and South America. He spoke to journalists in an online meeting on Thursday about the headquarters move and energy policy more broadly.
“I think California is playing a dangerous game,” Walz said. “I’ve said this many, many times, and I’m going to keep saying it.”
All California businesses face higher taxes than they would in other states, and employees face higher costs of living. But the problems are especially severe for energy companies.
California is on an “energy island,” Walz said. It is isolated from the national pipeline network. “You can’t take a ship from the rest of the U.S. to California because of a thing called Jones Act shipping,” he said. As a result, Californians pay higher prices for energy than residents of other states, and the cost of doing business for energy companies is higher as well.
“Chevron has a proud history in California. We have two big refineries, we have a large retail network,” Walz said. But the shift of the firm’s headquarters from California to Texas has been underway for years. Last week’s announcement made it official.
Walz said Chevron’s strategy for developing leadership within the company involves moving people around to see all angles of the firm’s business. He said he has had probably 15 different roles within the company, and that exposure to the company’s headquarters is always going to be part of that journey.
“We have a lot of people who will not move to California,” Walz said. He cited cost of living and the tax environment as deterrents to employees wanting to live in the state. He said that although Chevron has many lifelong California residents as employees, and will continue to, the company was having a hard time getting employees who did not already live in California to move there.
“In Texas, we’re welcome. Our industry is welcome,” Walz said. “The policies are welcoming of energy companies.” Walz said he has lived in Houston for about a year, and the cost of living there is more appealing to Chevron employees.
“This isn’t politically motivated,” he said of the headquarters move. “We are trying to create better business outcomes.” He pointed to three California policies that have made the state uncompetitive for energy companies: the phased-in ban on internal-combustion-engine cars set to arrive in full in 2035, the windfall profits tax, and cap-and-trade.
“Those three regulations, those three policies, really make it hard for me to want to put more capital into the state of California,” Walz said. “Therefore, I think the business case there is really challenging.”
“California can’t get supply from Houston,” Walz said. It’s easier for California refineries to get oil from Korea, China, or India than it is to get it from elsewhere in the U.S., he said.
Walz said there were 40 refineries in California around 1980. Today there are nine. And the regulatory environment isn’t hostile only to major, dirty projects like refineries. “It’s hard to build a gas station,” Walz said.
“We supply 60 percent of the jet fuel for San Francisco airport from our Richmond refinery,” Walz said. If that were to close in the future, the most likely alternative would be imports from abroad, because of government policy preventing the transportation of American petroleum products from the Gulf Coast to California.
Chevron CEO Mike Wirth has said in the past that he doubts a new refinery will ever be built in the United States. No major ones have been built since the 1970s. Walz echoed Wirth’s sentiment, though he noted that Chevron is investing in improvements on existing refineries in Texas.
That doesn’t mean the oil industry is going away, in Walz’s view. “We see the demand for energy continuing to grow,” he said.
He brushed aside concerns about peak oil demand that some have raised as a deterrent to industry investment. “I’ve been in this for a long time, and I’ve heard people talk about peak oil for a long time, and it just seems to keep getting pushed out,” he said.
“Today there are 2.5 billion people living below the poverty line,” Walz said, speaking of global poverty standards. “Those people are going to want to enjoy the things that you and I enjoy,” he said, and those things require affordable and reliable energy. He also pointed to the increased energy demands from new technologies, such as artificial-intelligence data centers.
On federal policy, Walz said, “We would like consistent policy from both parties that we can rely on. When the policies move around, people get nervous.” He said the length of a presidential term is not enough time for major investments in the energy industry to pay off, so policy can’t shift with each administration.
Texas had net migration of over 7,000 firms in the 2010s, according to the Federal Reserve Bank of Dallas. Chevron is one of the largest and most recent examples of this long-running trend. It’s a free country: If some states want to be hostile to business, firms can and will move to other states that welcome them.