How a refinery and the Industrial Park shaped the city

In Benicia’s not-too-distant past, its financial situation was so dire that employees who were handed checks on Friday were told not to cash them until Tuesday.

That was before the U.S. Army announced in the early 1960s that the Benicia Arsenal would be the first military installation to close after World War II, Dr. James Lessenger, a student of local history and a contributor to The Herald, said.

That announcement would lead to moves by city officials that led to the creation of the Benicia Industrial Park and the pursuit of a large-scale anchor that would attract businesses here.

That anchor was the Humble Oil refinery that today is Valero Benicia Refinery.

Among the topics Lessenger has researched has been the old Arsenal and subsequent development of the Benicia Industrial Park that was built on former Arsenal land.

The Arsenal, which predates the Civil War, was a factor in 15 American military campaigns, up to the Vietnam War, he said.

The military installation contributed to Benicia’s economy in many ways, Lessenger said — including support of the town’s bordellos that in turn helped pay for city services and improvements in the late 19th and early 20th centuries, until a crackdown on patronage of brothels, open bars and gambling houses occurred in the 1950s.

Until then, “the tax base was vice,” he said.

This also meant that more refined organizations, such as some of the churches in the city, had plans for larger campuses with big buildings and views of the Carquinez Strait.

But that changed in 1961, Lessenger said, when John F. Kennedy was sworn in as president and shortly afterward the Army began to announce its closures, based in part on studies of how the Allies won World War II.

Results of the studies of what went right and what went wrong during the war surprised many, Lessenger said. They found that the victory didn’t come from successful strategic bombing, but because “our 19-year-olds killed better than theirs.”

He said Benicia citizens were understandably shocked by the threat of the Arsenal’s closure.

City Attorney John A. Bohn knew Robert McNamara, Kennedy’s secretary of defense, since the two had been Boy Scouts in Piedmont, Lessenger said.

Mayor James Lemos, Gov. Pat Brown, Bohn and other officials lobbied McNamara in hopes of averting the closure. When they learned their effort was in vain and the president wouldn’t change his mind, McNamara promised his childhood friend he would do what he could to help the city.

“On the flight back, Bohn and Lemos came up with the Industrial Park,” Lessenger said. The city attorney developed the park’s master plan, and city officials began negotiating with Benicia Industries, originally named Santa Cruz Oil Company, and sending out copies of a master lease to companies in hopes they would want to move to Benicia.

But the businesses declined, Lessenger said, because they didn’t want to become partners with the city.
Santa Cruz Oil Company was founded in 1938 by Stanley Hiller and Joseph Coney and specialized in distributing internationally the fish oil that was a byproduct of the fishing industry, Lessenger said. It changed its name to Benicia Industries in the 1950s.

About the time of the name change, Coney and Hiller bid for a redevelopment contract and partnered with the city of Benicia to use public and private money and the public power of eminent domain to obtain properties and redevelop them. Their first property — now Rancho Benicia and city ball fields — “was a fetid mess of junk,” Lessenger said.

Another project would become the Industrial Park.

The plan, developed by Benicia Industries, Bohn and Lemos, would be to have the federal government sell the Arsenal to Benicia. The city in turn would partner with Benicia Industries, the only company interested in the project, to develop the Industrial Park.

A sticking point was that under normal circumstances the federal government wouldn’t sell land on an installment plan, and Benicia was in no position to buy it any other way. By state law, borrowing the money was prohibited, and “The city couldn’t go into debt because it was a sixth-class city,” Lessenger said.

So Lemos, Bohn, City Councilmember Michael FitzGerald and Carsten Johansen formed the Surplus Properties Authority, and that agency and the federal government’s General Services Administration negotiated a price of $4.5 million for the Arsenal property.

“The General Services Administration was happy as a clam,” Lessenger said, particularly since many of the aged Arsenal buildings were deteriorating. “The GSA was tickled pink” because the government would be paid many more times what it might have gotten by breaking up the property.

He said additional agreements sold the wharf for $80,000 and Pine Lake and the water system for another $80,000. The money was paid by Benicia Industries through an escrow account, and the deal was finished by 1964.

“The city had not paid a dime,” Lessenger said. It couldn’t. By that time, he said, Benicia was hours away from bankruptcy.

The city’s churches were falling apart, other parts of the municipal economy were hurting — and complicating matters, a lawsuit was filed claiming the Surplus Properties Authority and the city officials had acted improperly.

Lessenger said he has examined GSA files and “I saw two confidential files that were opened for the first time” involving appraisal of the Arsenal.

Ultimately, the city won the lawsuit, Lessenger said, noting that both the GSA and the courts found there had been no graft or corruption connected to the deal.

By 1966, Benicia’s ownership of the Arsenal was settled. Cabot, Cabot and Lodge, a company that matched industries to potential land sites, began securing tenants, such as Coca Cola, Ace Hardware distribution and Humble Oil, which began building in the future Industrial Park.

“Half the companies in the Industrial Park did business with the refinery,” Lessenger said.

Humble began building in 1966. John Matthews, a Benicia resident, was instrumental in the design to assure it would be a functioning plant. He also remained on duty for the refinery’s startup, said Reg Page, who began working at the refinery in 1968 and who is a contributor to the book “Great Expectations, the Story of Benicia, California,” by Richard Dillon.

The design of the refinery took into account the topography of the land — its hills and coloration — and the plant was designed to complement the site, Page and Lessenger both said.

“They went out of their way to provide that the refinery blended with the topography they were presented,” Lessenger said.

“It’s hidden,” Page said. “The process equipment and tankerage … is nestled into the hillside. They took advantage of that.” Only later would the refinery own land west and south of its original property, which it now uses as a buffer.

The refinery obtained oil by pipeline from the San Joaquin Valley and Bakersfield, which has more sulfur. Later, sweeter crude would be brought in by tanker ship from Alaska.

“Alaska crude wasn’t on line until 1976,” said Page, a project engineer at the refinery in 1974.

Contrary to popular belief, he said, “It’s not always profitable.”

Humble officials would visit Benicia and examine their refinery, and like many companies that start a new venture, they had hoped it would be “a cash cow.”

“More than once, I heard the company wasn’t happy with returns,” Page said. Talk about selling the refinery grew louder. He said that if a refinery doesn’t produce enough revenue, a company will close it down. “At some point, they’re too expensive to operate.”

In the meantime, Humble became Exxon, and the new incarnation of the company learned the same thing. “The message was, the refinery was not making a lot of money,” Page said.

In fact, for 10 to 15 years the Benicia refinery wasn’t “all that profitable,” he said. “A refinery is expensive. It’s fine if it’s doing well. It’s not fine if margins are not good.”

But the impact to Benicia of the refinery being built was huge, Page said. One teacher told him the biggest raise she ever got was when the refinery was built.

He saw the change himself. “I was here in 1964-66,” he said. He had a summer Caltrans job when it was building Interstate 680. “Benicia didn’t look so good. It had ‘ghost town’ written all over it.”

But the refinery did more than affect the city’s economy. It affected its water system, too.

Among the discoveries made at the time of the land purchase was that the Arsenal, which had good water sources from Contra Costa County and East Bay Municipal Utility District, had been dumping its raw waste water directly into the Carquinez Strait.

And that wasn’t the only problem. This coastal town was having trouble getting drinking water to its residents. At one time, Lessenger said, the city got its water from area creeks and Lake Herman. A water connection across California Highway 29 brought water to the city, until it turned brackish.

Benicia then started buying its water from Napa’s system, Lessenger said. But when Benicia wasn’t able to pay its bills, Napa threatened to turn off the water supply.

But a refinery needs water to operate. The Solano Project has water in Lake Berryessa, and an agreement with Benicia led to construction of a 36-inch pipeline from Cordelia to here, Lessenger said.

Benicia and the refinery partnered on a bond project, he said. “Half the bonds were paid by Humble, and Humble paid for valves, pumps and equipment outright,” he said, which meant not as much money needed to be borrowed.

Page said there was “a fluke in the agreement with Humble.” It specified where the water would be delivered. The city changed the delivery point, but for 20 years, until the 1980s, the refinery paid the entire cost of the bonds, he said.

“The company discovered this in the 1970s and said ‘we got a raw deal,’” Page said. The city’s response was ‘a deal is a deal.”

“If it weren’t for the oil refinery, there would be no stable water source for Benicia,” Lessenger said.

Through the refinery, the city also was able to contract with the State Water Project. “If we had relied on the Napa system, that wouldn’t have supported Southampton,” Lessenger said, referring to the city’s residential and commercial subdivision development.

The actual boundaries of the Industrial Park have changed through the years, Lessenger said. Among the changes was a 1974 land exchange in which Benicia Industries got 295 acres, including the wharf, “fee simple,” and Benicia got several properties, including the Clock Tower, the Commanding Officer’s Quarters, Francesca Park, and land on First through East Fifth streets, including the site that would become the city’s marina.

Negotiations gave the “Camel Barns” that are now the Benicia Historical Museum to the city, and Benicia Industries received the Arsenal’s hospital building.

“The only fly in the ointment is the land underneath the wharf,” Lessenger said, referring to the city wharf that was built by the Army.

Lessenger knows his research conflicts with that of others, including Dr. Tom Campbell, Benicia’s vice mayor. The two disagree over the details of wharf ownership.

Lessenger said that in 1964, the actual water-covered land went to the California Land Commission, which agreed Benicia could use the land in perpetuity as long as it was used as an international port. In 1966, Benicia leased the land and wharf to Benicia Industries for exactly that use.

Lessenger said his studies indicate that Benicia holds the land under both Arsenal area wharfs, the one that belongs to the refinery as well as the one used by the company Benicia Industries has become, AMPORTS, operator of the Port of Benicia. That lease runs out in 2031. “If the city does not operate it as an international port, the ownership reverts to California,” he said.

Another change could happen in the Benicia Industrial Park if Valero Benicia Refinery succeeds in its quest to extend existing railroad lines so it can have crude oil brought in by rail car in addition to by tanker and pipeline.

Page retired from the industry after working there 29 years on the refinery’s environmental and reliability projects, leaving before Exxon chose to sell the Benicia refinery when the company merged with Mobil and was told it must sell one of its California plants for the deal to go through.

“Benicia was more readily salable,” Page said, explaining that the company had been poised to sell the plant before in a deal that had fallen through.

“It sold for a lot of money. Exxon and Valero have put more money in than what it cost to build — I guess 10 times (as much). It makes clean fuels,” Page said.

He was involved in the 1980s acquisition of buffer land northwest of the refinery, which prevented people from building homes that would have looked down on the refinery’s processing equipment the way stadium bleachers look down on a football field.

He hasn’t worked at the refinery since 2003, but he still has observations about the plant.

He said “people need to understand” that California’s higher gas prices are caused in part by the challenge of bringing crude into the state, where gasoline has a different recipe than it does in other states. “We don’t have pipelines the way other parts of the country do,” Page said. “Getting product is limited.”

He said the most reliable way to deliver crude is by pipeline, a contention Lessenger supported. “The more transfers, the more risk of a spill,” Lessenger said.

But Page said there are problems with pipelines, too. For instance, “inappropriate digging” and “inconsiderate digging” can damage a pipeline, leading to spills and other problems.

Lessenger is a supporter of the proposed Valero Crude-by-Rail Project. He said the Lac-Megantic tragedy in which a runaway train carrying crude oil derailed at high speed in that Quebec city, killing 47, “was due to criminal negligence.”

And he said that since 1878, the Benicia Arsenal has been home to chemicals “far more volatile than Bakken crude,” and those chemicals also traveled by train.

“Bakken crude in North Dakota and Canada is probably the largest field in the history of the United States. It has a lot of oil, making us independent and liberating us from the Middle East oil,” Lessenger said.

As a physician, he said, he follows industrial safety and health, and said all accidents are investigated. Despite the dangers of the refinery and Union Pacific Railroad, the company Valero would hire to make the deliveries, he contended those workplaces are safer than some offices.

The local refinery has the Occupational Safety and Heath Administration’s Voluntary Protection Programs Star Rating, a designation difficult for an industrial site to be awarded, Lessenger said. “In the workers compensation area, it’s a big deal. It’s a process and a commitment. That’s how you create a safe environment.”

He has heard the concerns by those who live elsewhere along the tracks where these trains would travel, particularly Roseville, near the site of a 1973 train explosion.

That train wasn’t carrying crude oil. It had 18 cars carrying thousands of bombs headed for the Vietnam war. Blasts continued from the morning of the accident into the next day.

“That’s why the Southern Pacific started drug testing 30 years ago,” Lessenger said. Southern Pacific eventually merged with Union Pacific Railroad.

“You’re not going to be able to guarantee an absolute safe environment to everybody all the time,” Lessenger said. “I’ve seen people who are in a job they thought was minimal risk, and to everyone’s surprise, something happened.” He said he’s seen more injuries in office accidents than in railroad and refinery accidents combined.

Page has economic concerns, and said Valero is in competition to obtain North American crude. If competitors can get it and Valero can’t, “there’s a problem,” he said.

He also is worried that some California business costs are “hurting the 99 percent” and creating a stratified society that impacts those who can’t afford the higher costs of doing business here.

“People are hurt — the prices at the pump and so on. Economics is important if you care for the 99 percent,” he said.

Lessenger said the Industrial Park definitely was a boost to Benicia’s economy, and city studies continue to point out the financial importance of that commercial and industrial development.

“Schools,” Lessenger said. “There was a dramatic improved quality of schools, and there is a demand for improved quality.”

He said churches also have benefited from the Industrial Park and its companies’ operations. Before Humble and other companies moved in, churches were shelving their expansion plans. “You saw a reversal of that,” he said.

The area also has helped city government, he said. “It was a tremendous financial coup,” he said, and provided “a substantial influx of cash that started coming in in 1966. “It financed what we take for granted every day,” Lessenger said. “It furnished parks and buildings, and it happened overnight.”