According to recent reports, the major oil and gas company Chevron has decided to move its headquarters out of California. A high-ranking executive in the company explained that because Golden State is a difficult place to conduct business, Chevron will pull out and relocate its headquarters to Texas. The move is the latest among prominent business figures, such as Elon Musk, who are moving their businesses out of California to Texas.
“It is a difficult place to do business. It’s a difficult place to be headquartered. And we finally said, ‘Hey, that’s enough. We’ve got critical mass, we’re gonna move.’ We’re also going to improve our performance by getting everybody in the same location,” Andy Walz, president of Chevron Americas products, said, explaining the rationale behind the strategic decision.
The executive claimed that attracting talent in the state is becoming difficult, as employees are reluctant to move there. “California is a tough place to do business. It’s a tough place to recruit people. It’s a tough place to move employees. A lot of our employees move up through the company, they gain experiences in different geographies, different locations, and we have a lot of people that will not move to California,” he said.
Walz further addressed the exorbitant cost of living in California’s urban centers, which serves as a major disincentive to move there. “That makes it difficult. California is a tough place to have a big employee base. It’s tough, its cost of living is expensive, and we were not able to get employees that didn’t live there to move there. And that’s not sustainable for us, to be honest,” he added.
Furthermore, as a very progressive state relative to the rest of the country, especially Texas, California has a hostile stance toward fossil fuels, the basis of Chevron’s business. “California has said, ‘Hey, you cannot buy a new car that has an internal combustion engine in it after 2035.’ So, that’s a headwind against investing in a refinery,” Walz said.
He continued, “On the books, they have a windfall profits tax or penalty, they’re evaluating how to deal with that, they want to cap the amount of profits you can make in your refinery. That is a headwind for anybody that would want to put money into it to try to get a return on their investment. And the third thing that maybe is even a bit more crippling is this: they have a program called cap and trade, where they tax your CO2 emissions in the state of California. And that tax continues to go up every year, and it gets more burdensome every single year. So those three regulations, those three policies, really make it hard for me to want to put more capital into the state of California. Therefore, I think the business case there is really challenging.”
According to the executive, other companies in the oil and gas space have started to ask similar questions. “Our competitors are looking at the exact same equation I’m looking at, and our money is going other places, and California can’t get supplied from Houston,” Walz said. “It doesn’t work.” Watch a video of Elon Musk sounding off on California’s regulatory environment below:
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