California’s oil empire, it seems, is cracking, if not yet crumbling.
The once-dominant industry, which in California dates back more than 150 years ago, has long been on the decline. Oil fields once carpeted the landscape, from Brea to Signal Hill, but have since been whittled down or, in some cases, erased entirely — replaced by parks or houses.
Despite being third in refining capacity, the state was seventh in crude oil production in 2024, the most-recent year with available data, according to the U.S. Energy Information Administration, behind traditional powerhouses Texas, North Dakota and Alaska, but also New Mexico and Wyoming.
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Advocates for the oil industry have long blamed California’s rigid environmental regulations for the decline. And Gov. Gavin Newsom has made further reforms a particular target of his administration.
But the most ominous — or, depending on your perspective, auspicious — sign that the state’s oil industry will likely continue waning came on Oct. 16, 2024:
That’s when industry titan Phillips 66 announced it would close its Los Angeles-area refinery, one of the largest and oldest such facilities in Southern California, by the end of the following year.
That time has come. The massive Phillips 66 Los Angeles Refinery, which comprised 659 acres across two facilities in Carson and Wilmington, connected by a 5-mile pipeline, officially closed on Dec. 31.
The closure has further threatened an industry car-centric California has relied upon for generations. That’s because it’s not the first closure in recent years and it won’t be the last. The Marathon Martinez refinery in Contra Costa, in fact, is now idling and the Valero facility in Benicia is also anticipated to shutter. Combined with the Phillips 66 refinery, which produced about 139,000 barrels of crude oil and 85,000 barrels of gasoline per day, California is set to lose nearly 20% of its refining capacity.
And overall, state and Los Angeles County data shows, California has seen the number of active refineries decrease by 60% in the last 34 years: from 25 in 1992 to 10 currently.
The Phillips 66 closure, though, is different.
This is the first time one of the largest refineries in the state will be fully decommissioned and redeveloped. Many of the other crude oil refineries were either only partially closed or promptly converted to a bioenergy facility. Refineries also lack the rules on shuttering operations that are common for other energy industries, because they predate those regulations.
So the future of the Phillips 66 refinery represents uncharted territory.
Phillips 66 officials, for their part, have publicly announced that they are working with real estate development firms Catellus Development Corporation and Deca Companies to explore commercial development opportunities.
But there are dozens of unknowns about how to safely and equitably shut down a century-old refinery and redevelop the land. That’s left communities, cities, regulators and even state agencies in the dark, for now at least, when it comes to safety regulations, remediation costs and the future of those communities.
“Any time a major industry closes down in a community that has come to depend on that industry,” environmental attorney Ann Alexander said in “Before the Last Drop,” a December report outlining the unknowns surrounding refinery closures, “there will be economic and social repercussions.”
When seven refineries shut down in the U.S. from 2019 to 2022, for example, they cost their communities $21 million combined in local property tax revenue annually, according to research by the World Resources Institute. For California, the prospect of more refineries closing would also bring significant economic concerns. The oil and gas industry’s total economic output in 2022, the most-recent year with available data, was $338 billion, according to a 2025 report from the Los Angeles Economic Development Corporation. Of that, $167.6 billion was in Southern California.
That’s why oil industry advocates and some economic experts have rankled at the state’s attempts to further regulate the oil and gas industry in recent years. (The Trump administration, for its part, has also been determined to increase oil and gas production nationwide.)
“Current legislation, while well intended, will have economic implications for the state economy,” the LAEDC said in its report, “impacting the oil and gas industry workers, user industries, and end users/consumers.”
But if the current trends continue, it seems more likely than not that additional refineries will shutter — and the oil industry’s empire will continue to wane.
Experts, state officials and regulators, and industry lobbyists say the effects of the refinery closures will be myriad: Less fuel supply for the state. Thousands of jobs gone. A major tax base diminished. Communities left waiting for lengthy environmental cleanups to be finished — a process that can take years.
“These transitions invariably impact both workers and communities, inextricably and in tandem,” Alexander said, “as they struggle together to find new direction in the absence of the industry they were dependent upon.”
What becomes of the Phillips 66 refinery, then, has the potential to show the way forward – what comes next when a once-indispensable industry ends.
A century of contamination
In 1994, Los Angeles County’s water quality watchdog made a troubling discovery:
Beneath the Phillips 66 refinery’s Carson site, there was a lake — of oil.
This lake of oil, Alexander wrote in her report, was 6 million square feet and 13 feet thick.
While the extent of the contamination may be surprising, the pollution itself is not.
For more than a century, after all, the refinery polluted the surrounding groundwater and air by producing toxic chemicals such as gasoline, diesel, aviation fluid, petroleum coke, propane, butane, elemental sulfur and food-grade carbon dioxide.
Air pollution in the area surrounding the Phillips 66 Los Angeles site, for example, is not only higher than other parts of the South Coast Air Basin, but is also among the highest pollution burdens in the entire nation, said Rainbow Yeung, a spokesperson with the South Coast Air Quality Management District.
Yet, the refinery operated for decades before any regulatory body stepped in to require environmental remediation.
The lake of oil finally changed that.
The regional watchdog, the Los Angeles Regional Water Quality Control Board, ordered Phillips 66 to clean up the lake by pumping out the toxic waste and treating contaminated water. Those remediation efforts continue to this day.
More recently, in 2024, a federal grand jury returned an indictment charging Phillips 66 with illegally dumping close to 800,000 gallons of toxic wastewater from the Carson facility into the Los Angeles County sewer system. Last month, Phillips 66 entered into a deferred prosecution agreement and has paid an $8 million fine, as well as $28,572 in restitution to the LA County Sanitation Districts.
Refinery officials, however, say protecting the environment and the community is paramount.
“The safety of our communities and the environment is our company’s top priority,” a Phillips 66 spokesperson said in a statement. “That priority will continue to guide us as we maintain safe operations through the facility site conversion and continued operations of our pipelines and terminals.”
But the refinery, Alexander said, is nowhere near finished cleaning up what was discovered in 1994, which itself may pale compared to what could be discovered once the equipment is removed from the facility.
The Shell Carson refinery, for example, operated as a refinery for almost 70 years before converting to a distribution terminal in 1992, and cleanup efforts are still ongoing.
About 1 million pounds of petroleum hydrocarbons, 205,000 cubic yards of contaminated soil, 989,000 gallons of oil, and more than 900 million gallons of contaminated water and other liquids have been removed from the Shell site since 1992, said Los Angeles Water Board spokesperson Ailene Voisin.
But there is still no estimated date, Voisin said, for when the cleanup effort will be done.
Cleaning up the Phillips 66 sites, Alexander said, could also take years, or even decades.
“Phillips 66 is legally and financially responsible under a Cleanup and Abatement Order (CAO) issued by the Los Angeles Regional Water Quality Control Board to clean up environmental impacts at the facility,” the Phillips 66 spokesperson said in a written statement. “Environmental investigations and cleanup measures have been ongoing since the 1980s. Significant progress has been made removing contaminants from groundwater.
“Future redevelopment of the properties and removal of refinery equipment,” the spokesperson added, “will allow additional investigation and cleanup activities, including cleanup of impacted soils.”
But remediating the site, Alexander said, will be costly, even unprecedented.
No one else has attempted such a large-scale cleanup and redevelopment of a massive, century-old crude oil refinery, Alexander said. And the full extent of the contamination won’t be known until the equipment is removed. It’s unclear when the equipment will be removed.
Phillips 66 estimated about $205 million in refinery closure costs in its Securities and Exchange Commission filings earlier this year. That cost, however, only covers the removal of equipment and asbestos.
The cost of all other remediation is unknown, at least to the public.
Transparency
On Oct. 27, 1911, the Nestor Film Company launched the first motion picture studio in Hollywood. From that was born an industry that would go on to shape Southern California’s economy, culture and global reputation to this day.
By then, the first Southern California oil well was 35 years old. The Torrance refinery, now owned by PBF energy, opened in 1907.
“You have to think about the end from the beginning. Refineries have never been asked to do that.”
–Ann Alexander, environmental attorney
The oil industry has been so entrenched in California’s history that many thought refineries would be here forever. And because they have been around so long, the regulatory framework for refineries is, at best, archaic, with many of them predating any sort of oversight.
Some refineries don’t even have land-use permits.
And when it comes to closing a refinery, there does not appear to be a set way to do so, Alexander said.
“There are currently no publicly available standardized guidelines defining the default best technologies,” she wrote in her report, “and what they generally cost to implement or long-term cleanup cost estimates and timelines based on those default technologies.”
Other major energy industries, meanwhile, have detailed plans and regulations on how they are going to remediate the contamination created and safely idle their facilities.
“The thing to keep in mind there is that many other industries have already planned for these sorts of problems,” Alexander said. “The issue with refineries is that unlike other sectors of the energy industry, they’re not required to really do any planning at all for their end of life.”
Solar, wind, nuclear and even oil well drilling companies are required to create a decommissioning plan before they break ground on a facility. When drilling an oil well, the company has to file a bond to ensure it can finance the well’s eventual decommissioning, whenever that may be.
But not refineries.
“While the water boards have been requiring investigation and remediation activities at California refineries for decades,” Alexander said, “in practice, as at the Phillips 66 refinery, the activities are generally stepped up and fully defined long-term following closure — again, resulting in limited information being available to communities and the state to support an accurate cleanup cost estimate at the point of a closure announcement.”
All other major energy industries are also required to have an asset retirement obligation, through which they publicly disclose what it will cost them to shut down.
But again, refineries have no such obligation.
“You have to think about the end from the beginning,” Alexander said. “Refineries have never been asked to do that.”
Closing refineries, she said, is the “Wild West.”
That’s why there’s no official estimate, for example, of how much it will cost to remediate the Phillips 66 refinery’s Carson and Wilmington sites, or how long it will take. (Financial think tank Carbon Tracker, however, calculated decommissioning larger refining companies would cost about $34 billion.)
And now, state lawmakers — after facing years of pressure from environmental activists and those who live near refineries — are scrambling to create rules that would, in part, create more transparency.
Earlier this month, in fact, state Sen. Catherine Blakespear, D-Laguna Hills, introduced legislation that would require the State Water Board to develop guidelines for estimating the costs and timelines for refinery decommissioning and remediation.
“Refinery closures are extremely complex and impactful to California,” Blakespear said in a written statement. “We need to know in advance of all the potential costs and consequences when oil refineries close so we can be prepared and limit the negative impact to communities, workers, local governments and the state as a whole.”
Senate Bill 1259, if enacted, would require oil refiners to submit reports to the state identifying the expected costs and obligations should their facilities close.
“SB 1259 helps communities, and the state, prepare and plan for these coming closures, instead of scrambling to respond only after finding out a closure is coming,” a press release from Blakespear’s office said. “By directing the State Water Board to establish standards and then requiring oil companies to disclose their financial obligations for decommissioning and remediation, the bill is one important piece in managing California’s transition to a carbon-free energy future.”
The bill, though, does not currently set a deadline for when refineries must submit this information or if it would retroactively apply to already idled refineries like Phillips 66 in Carson and Wilmington.
And there’s already opposition.
The Western States Petroleum Association has said requiring documentation such as an ARO could hurt California’s economy.
“Private property and free enterprise have made California the fourth-largest economy in the world,” WSPA spokesperson Jim Stanley said in a written statement. “Adding a government mandate to speculate about hypothetical future costs would add to the disastrous anticompetitive policies that have caused consumers to suffer on the West Coast.”
And, Stanley said, California’s strict carbon-neutral policies and ambitious climate goals are what caused refineries to close in the first place.
How did we get here?
Newsom stood on a soccer pitch on a hazy Wednesday as oil rigs pumped behind him.
It was Sept. 25, 2024, and Newsom, less than two years into his second term as governor, was at the Kenneth Hahn State Recreation Area, in Los Angeles, to sign three new bills into law.
The location wasn’t a coincidence. That park abuts the Inglewood Oil Field, and the three bills were intended to further regulate oil in the state, particularly when it comes to the environment.
“California’s leadership in the low carbon, green growth area demonstrably proves that the old binary is no longer in play,” Newsom said at the bill signing. “We can grow our economy and reduce our greenhouse gas emissions.”
Those bills were the latest attempt to further regulate the oil industry, efforts that state legislators have been working on for the past decade. These efforts skyrocketed in 2021, when Newsom set a target to phase out the approval of new oil fracking permits by the end of 2024 — and a larger goal to end oil extraction in the state completely by 2045.
In 2023, Newsom also signed a bill increasing regulatory oversight of refineries.
State Senate Bill X1-2 allows the State Energy Resources Conservation and Development Commission to set a maximum gross gasoline refining margin — essentially capping how much a refinery can mark up the price of gas — and establish a penalty for any refineries exceeding that threshold. The bill also increases the reporting requirements of refineries.
The responses to the new laws have been predictable, with environmentalists lauding them and oil executives denouncing them.
“We are losing refineries because of state policies that have made it uneconomic to operate here,” Zachary Leary, the chief lobbyist for the Western States Petroleum Association, said during a Senate Environmental Quality hearing on Feb. 18. “That’s not necessarily market failure; that’s policy choice.”
Legislators, Leary said, need to act now to prevent gas prices from skyrocketing for consumers as demand outpaces supply.
And gasoline-fueled cars, to be sure, remain dominant in California, though not as much in recent years. From 2019 to 2025, for example, total sales of new zero-emission vehicles increased 300%, according to the California Energy Commission. Last year also saw new zero-emission vehicle sales top 2.5 million. But even then, in the fourth quarter of 2025, ZEVs represented less than a fifth of new car sales, the CEC said in January. There were about 31.3 million gasoline-fueled cars registered in California in 2024, according to the U.S. Department of Energy.
“The policy aspirations don’t fuel the cars; the fuel does,” he said. “If refineries continue to close, it will worsen the affordability crisis. It will likely hurt our neighbors in Arizona and Nevada who are dependent on California and California refineries for the fuel that their consumers use.”
WSPA seems to be doing its part to persuade legislators to change tack.
The organization, in fact, reported more than $17.3 million in advocacy costs over the last year, spending more in state lobbying than any other group.
WSPA has also had a nearly 100% return on success rate when it came to bills they supported or opposed in 2025.
That has drawn the ire of environmentalists.
“It’s a question every Californian should ask their legislators: why are you letting oil corporations call the shots,” said Faraz Rizvi, policy and campaign manager for the Asian Pacific Environmental Network (APEN). “We’ve seen the petroleum industry use every opportunity to squeeze more profits from Californians.”
Phillips 66 officials, however, seem to agree with the WSPA about the cost of operating in California. They have routinely cited “market dynamics” as the reason for closing the Los Angeles Refinery.
“California crude production is down 75%,” Phillips 66 CEO Mark Lashier said during the Morgan Energy Power, Renewables and Mining Conference in June. “The base cost of operating a refinery in California is probably two times what it is on the Gulf Coast.
“This was one of our highest-cost refineries, with a very low contribution to the bottom line,” he added. “All those things conspired to the conclusion that we needed to cease operations this year and start a process to redevelop the land for a higher-value use.”
But it’s not that simple, at least according to Deborah Sivas, a professor of environmental law at Stanford University.
Aging infrastructure, she said, could also cause oil production costs to increase, as could dwindling supplies of oil in the ground.
“We are losing refineries because of state policies that have made it uneconomic to operate here. That’s not necessarily market failure; that’s policy choice.”
— Zachary Leary, chief lobbyist for the Western States Petroleum Association
After a century of pumping oil, Sivas said, there isn’t much left in California. So refineries will put steam or hot water into the ground to make the oil viscous enough to pump.
Regardless of the reasons, however, it seems those on both sides are bearish about the future of oil refining in the state.
And if more refineries will close, dealing with the fallout is key, environmentalists say.
State and local governments, Rizvi said, need to prioritize creating a refinery phaseout plan and implementing oversight committees, instead of scrambling to keep refineries in California.
Refinery phaseout plan
Blakespear seems to agree with Rizvi.
The legislator convened the Feb. 18 meeting of the Senate Environmental Quality committee, which she chairs, to hear from numerous groups on how the state should handle the recent refinery closures.
“We need a real plan for how to get through this,” Blakespear said. “It’s clear we need to think hard about how to approach this transition strategically and holistically.”
Siva Gunda, the vice chair of the California Energy Commission, was even more blunt:
“It’s not about if they are going to close,” Gunda said, “it’s about when.”
And there’s a lot to figure out before “when” happens, both economically and environmentally – concerns that are not mutually exclusive.
“The closure of refineries creates novel and major challenges for communities and workers,” Alexander said in her report. “But these challenges are not insurmountable.”
Numerous reports over the past few years – from environmental groups, universities and scientists – have provided recommendations for a statewide refinery phaseout plan.
Almost all of these reports have a few of the same main points, including:
- State and local governments should work together to create a “transition safety net” for refinery workers in order to help them find new employment.
- Lawmakers should pass legislation requiring ARO disclosures for refineries, in addition to outlining the required oversight and remediation of the land and which entity will be responsible for enforcement.
- State and local governments need to work together to find solutions for replacing the lost tax base, and ensure the safety and priorities of the community when it comes to redevelopment and future operations.
APEN and the advocacy organization Communities For a Better Environment have also argued for partial shutdowns to ease the transition, instead of the sudden end to a century-old industry communities have come to depend upon.
But the Phillips 66 refinery did shutter completely. And now, it seems, the facility is poised to be the test case for future closures.
“The issues raised by the Phillips 66 refinery closure,” Alexander said, “also highlight multiple opportunities at the state and local government level to meet the challenges head-on with policy solutions.”
But for Carson and Wilmington, the closure is more than a test case, it’s a seismic change for those communities.
The refinery’s closure displaced nearly 1,000 employees, with many forced to move or take lower-paying jobs, Alexander said in “Before the Last Drop.”
There’s also the reduced tax revenue, which will likely hit Carson harder than Wilmington, since the latter is part of Los Angeles and has a much greater and more diversified tax base.
That’s why Carson will insist that any new development be fruitful enough to replace the tax base, City Attorney Sunny Soltani said. To ensure this commitment, the city entered into a deal with Phillips 66 in September that requires the latter to apply for and negotiate in good faith on a development agreement, Soltani said in a written statement.
“The Development Agreement,” Soltani added, “shall provide for Phillips 66 to pay or otherwise provide to the City significant community benefits.”
The City Council also passed a general plan amendment, giving Carson final approval of redevelopment plans, and establishing a community taskforce to oversee and provide input on remediation and redevelopment.
Phillips 66 has submitted a development application, Soltani said, but it is incomplete and not yet available to the public.
The Wilmington portion of the site, on the other hand, already has a plan.
Los Angeles has largely taken a backseat, letting Phillips 66 dictate redevelopment as long as it complies with the state environmental, development and zoning regulations. Los Angeles Councilmember Tim McOsker, whose 15th District includes Wilmington, did not respond to multiple requests for comment. But when the refinery’s closure was first announced, in 2024, McOsker said Los Angeles will work “closely with Phillips 66, their employees and our community to make sure that we’re supporting all who are impacted.”
The proposed plan is a massive mixed-use project, called Five Points Union, which would feature retail, outdoor space, indoor sports complexes and much more.
“The proposed redevelopment of these properties transforms industrial properties that have been inaccessible to the public for nearly a century into a publicly accessible Town Center with restaurants, playgrounds, outdoor gathering spaces and sports facilities,” the Phillips 66 spokesperson said. “In addition, a Commerce Center will provide new jobs to fuel economic prosperity.
“Redevelopment maximizes the value of the land for both shareholders and the community,” the spokesperson added, “(and) creates potential synergy with their proximity to the Port of Los Angeles and reduces emissions.”
But this large and potentially profitable project is unlikely to take shape for years, Alexander said.
And then, of course, there’s the question of how to deal with the remediation, which, Alexander said in her report, “would likely occur somewhat in tandem” with redevelopment.
But none of this is simple — and neither are the rules for doing so.
“The process of winding down refinery operations, decommissioning and remediation, and redeveloping the site,” Alexander said, “is subject to a complex web of interlocking federal, state and local laws.”
Compounding the challenges is that the state wasn’t expecting a refinery the size of the Phillips 66 site to happen so soon, said Jeremy Martin, senior scientist and director fuels policy with the Union of Concerned Scientists, a nonprofit whose mission is to create a “safer, healthier and more just world,” according to its website.
“Managing the transition from California’s history as a major oil and car state to its future as a leader in clean transportation,” Martin said, “is a complicated job that will play out over coming years.”
The oil industry, for its part, is not likely to go quietly.
“Communities everywhere not only depend on our energy products and services but deeply rely on the tax revenue and other community investments our industry and its companies deliver,” Catherine Reheis-Boyd, WSPA’s president and CEO, said in a statement early last year. “With such an integral impact on hundreds of thousands of families and communities across the state and nation, we need policies that support our workforce and the vital energy we provide as we continue to advance toward a more sustainable future.”
But if California’s oil empire keeps crumbling, as environmentalists predict and industry advocates fear, then more refinery closures are on the horizon. And the sate needs to be prepared, Martin said.
“The world is watching,” he said, “and with smart policies, California can manage the phaseout of petroleum while protecting the health and welfare of its people.”
As the differing approaches of Carson and Los Angeles illustrate, however, there aren’t any consistent policies – let alone smart ones.
But the Phillips 66 refinery could provide a glimpse into what lies ahead.
By the numbers
205 million: The estimated cost, in dollars, to remove equipment and asbestos from the Phillips 66 Los Angeles Refinery.
6 million: Size, in square feet, of a lake of oil discovered beneath the Los Angeles Refinery in 1992.
1,000: Approximate number of workers who lost their jobs when the Phillips 66 refinery closed.
424: The size, in acres, of the Wilmington portion of the refinery.
235: The size, in acres, of the Carson portion of the refinery.
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