Chevron is moving its headquarters from California to Texas after calling the Golden State home for 145 years.
This huge decision has already prompted some California business leaders to blame Governor Gavin Newsom and the state’s increasingly strict environmental policies and regulations.
Chevron Flees California
For years now, Chevron and California haven’t been getting along. Chevron officials and executives have long hinted at difficulties with the state’s regulations and environmental moves.
Now, all of that has seemingly come to a head, as Chevron has announced it is moving its headquarters to Texas.
Closed for Business
Chevron is the latest major company to leave California for Texas. It is also the latest to do so after complaining about excessive regulation.
Chevron, the second-biggest U.S. oil company, said clashes with authorities over climate policies and penalties have made operations in the Golden State unworkable. Chevron has said these policies have rendered California “closed for business.”
Considerable Losses
Chevron’s financial situation requires action, given that they have faced substantial losses this year.
The oil company reported earnings of $4.4 billion in the second quarter of this year. This equates to $2.43 per share. In the same quarter of the previous year, Chevron made $6 billion. Chevron has also announced the retirement of three executives.
Deep Ties to California
Chevron has deep historical ties to California.
Their shared history dates back to the establishment of the Pacific Coast in the 1870s. The group was later absorbed into JD Rockefeller’s Standard Oil. After this corporation broke up, it became Standard Oil of California in 1911. The company was based in San Francisco for decades before moving its corporate offices to San Ramon in 2001.
To the Lone Star State
Chevron said chief executive Mike Wirth and vice-chair Mark Nelson would also relocate.
The headquarters will move from the Californian city of San Ramon to Houston by the end of the year. Chevron said this relocation will “enable better collaboration and engagement with executives, employees and business partners.” The company anticipates “minimal immediate relocation impacts” from this move.
Abbott Applauds Chevron Move
Texas Governor Greg Abbott has already applauded this massive move. Abbott welcomed Chevron to what he calls its “true home.”
Chevron’s move comes after many other major companies have decided to leave California behind for the business-friendly state of Texas.
Drill Baby Drill
Texas has made efforts to attract companies to the Lone Star State.
Texas does not have a corporate tax and functions with minimal government intervention on businesses. Texas is a lot more attractive to Chevron than California, with a 9% corporate tax. Abbott welcomed Chevron on X, where he wrote: “WELCOME HOME Chevron! Texas is your true home. Drill baby drill. Chevron, in snub to California, to move its headquarters to Houston.”
Newsom Dismisses Move
Meanwhile, California Governor Newsom has dismissed this move, insinuating it has nothing to do with his policies, as many critics have suggested.
Instead, Newsom said this was a “logical culmination” of many years of Chevron transitioning away from California.
Was This Driven By Politics?
Many critics of Newsom and California’s strict environmental policies have already come out to suggest that this massive change has occurred because of politics.
However, Chief Executive Officer Mike Wirth has explained that it has nothing to do with politics. Instead, he said, “It’s really to be closer to the core epicenter of our industry.”
A Corporate Exodus
According to the Financial Times, more than 300 big companies have moved to Texas since 2015.
Most of these corporations are coming from California. Other major companies include HP, CBRE and Tesla. The economic boom these relocations have caused has made Texas the eighth-largest economy in the world, ahead of Canada, Italy and Russia.
Chevron Pushes Back Against Allegations
Wirth completely pushed back against these allegations that they’ve moved headquarters because of politics.
“We’ve had some policy differences with California,” Wirth said. “But this isn’t a move about politics. It’s a move about what’s good for our company to compete and perform.”
A Logical Move
Wirth, as well as Newsom, have explained that this move is completely logical, as much of Chevron’s business is already located in Texas.
“Houston is the energy capital of the world,” Wirth stated. “It’s a natural place for companies in our industry to have their home office and headquarters.”
The Energy Hub
There are other reasons that it makes sense for Chevron to leave California for Texas. Houston’s thriving economy for energy companies makes it a good home to more than a third of the publicly traded oil and gas groups in the U.S. Exxon-Mobil, Chevron’s biggest rival, is also based in Houston.
Chevron said it will gradually move all corporate operations to Houston over five years, with only positions supporting functions in California remaining.
Past Disagreements Between Chevron and California
However, this isn’t to say that Chevron and California haven’t battled because of policies and politics before. They have — and often publicly.
Recently, Chevron has even slashed brand new investments in California refining, as the company has stated that it can no longer complete these investments because of “adversarial” government policies.
A Dangerous Game?
Meanwhile, refining executive Andy Walz warned California back in January that they were playing a “dangerous game.”
According to Walz, California’s strict climate policies could threaten gasoline prices, forcing them to skyrocket around the country.
Clashes With California
While Chevron and Newsom deny that the big move to Texas has anything to do with political clashes, they have butted heads.
Chevron criticized California’s “increasingly harsh regulatory environment” in January. California has also sued oil companies for allegedly deceiving customers over the risks of climate change and calling on groups to surrender their profits. One of these oil companies was Chevron.
New Laws
California is bringing in new legislation, causing problems for oil companies like Chevron. The new law penalizes oil companies for supposedly “price gouging” consumers. The law limits the profits oil refiners can make in the state. California has among the highest gas prices in the country.
“Setting a margin penalty would absolutely discourage investments here,” said Andy Walz, president of Americas products at Chevron, in a letter to the California Energy Commission in December.
Chasing Jobs Out of California
Many business leaders in California have increasingly criticized the state for what they see as restrictive business regulations.
Jim Wunderman, the president and CEO of the Bay Area Council, stated, “Chasing jobs and employers out of California is no way to run the economy. It’s an embarrassment.”
A Statement to Businesses
In his letter to the California Energy Commission, Andy Walz said that the new margin penalties would show that business owners are not welcome in California.
“These arbitrary attacks on a disfavored industry do more than this — they signal to every industry, entrepreneur, manufacturer and employer that California is closed for business,” Walz wrote.
The Long Decline of Oil
Chevron’s move to leave California has been a long time coming, especially as the Golden State’s oil industry has been declining for years.
In previous decades, California’s growth was based on the aerospace industry, petroleum and agriculture. It has since left manufacturing to other countries overseas. For now, California remains the seventh-largest producer of oil among the 50 states.
Swapping Gas for EVs
While California is still one of the biggest producers of oil in the States, its production of crude has been steadily falling since the mid-1980s.
In fact, it now accounts for just 2% of the U.S. total. California is prepared to sacrifice the rapid economic growth from oil refineries to become America’s center for the electric vehicle industry. At least, Newsom’s long-term renewable energy goals and margin penalties on oil companies suggest that.
Why Businesses Are Moving to Texas
Many businesses have increasingly decided to move from California to Texas, as the Lone Star State offers business-friendly regulations and light taxation.
Chevron, meanwhile, already has about 7,000 workers in Houston, Texas. By comparison, before this move was announced, the company had 2,000 in California.
A Sad Outcome?
Some have questioned whether Chevron’s move to Texas was the best decision for the environment.
Sarah Elkind, a San Diego University history professor, said: “It’s unfortunate corporations will relocate their workforces in places that have fewer environmental regulations rather than working in ways that lead to healthy and vibrant communities.” Others have said that oil and gas shaped California into what it is today, and it will be sad to see the industry leave the Golden State.
Newsom Isn’t Concerned
Alex Stack, a spokesperson for the governor, released a statement suggesting that Newsom isn’t concerned by this move.
“This announcement is the logical culmination of a long process that has repeatedly been foreshadowed by Chevron,” Stack explained. “We’re proud of California’s place as the leading creator of clean energy jobs – a critical part of our diverse, innovative, and vibrant economy.”
