One of the most prominent American oil companies, Chevron, will relocate the company’s headquarters from San Ramon, Calif., to Houston, Texas, beginning at the end of this year. This was a significant decision considering that in California the company operates crude oil fields, technical facilities, and two refineries and supplies more than 1,800 retail stations.
A Wall Street Journal’s editorial asks a question that no Democrat in the state can answer. “Chevron on Friday joined the growing club of California corporations moving to Texas, and the wonder is it took so long. The company has been in the state for more than 140 years [1879], but Democrats in Sacramento want to put it out of business. Why would anyone stay?”
A noteworthy corporation like Chevron, which ranks 15 on the Fortune 500 list, needn’t stay since greener grass is found in many other states.
The Daily Caller, addressed Chevron being the target for many years of adversarial Democrat policies: “The company’s decision to leave California follows years of aggressive environmental policymaking from California Democrats that hurt Chevron’s business. In the first week of 2024, Chevron announced that it wrote down its existing interests in California by more than $4 billion thanks largely to the state’s onerous environmental regulations.”
“’For well over two decades now, politicians like Governor Newsom have hammered California’s conventional energy producers, both large and small, with excessive taxes, regulations, and threats of profit taking,’ Tom Pyle, president of the American Energy Alliance, [said]. ‘These types of policies have outsourced jobs to other states and increased California’s reliance on oil and electricity imports — all with little or no environmental benefit.’”
Let me provide additional perspective about why companies leave California.
Thirty years ago, California was a friendly place for businesses. Today – according to many credible sources – it’s the worst state. To cite just one study, The Hoover Institution, in its report Why Company Headquarters Are Leaving California in Unprecedented Numbers, found that businesses forced to flee are taking billions of dollars in revenue, thousands of jobs and future opportunities with them.
There are many reasons why this is so.
Taxes: The state’s business tax structure is among the worst in the nation (only New York ranks lower), and with politicians like Gov. Gavin Newsom in charge, there’s no hope for improvement with astronomical spending on foolish programs like the so-called high-speed train system (it’s no longer high speed), on illegal immigrants and 234 state agencies. With companies leaving and reckless spending by Democrats, It’s fair to presume that California’s colossal $73 billion debt will worsen.
Regulations: The regulatory structure is extreme and excessively adversarial. That’s true at the state level, especially labor laws, but also in local jurisdictions. For example, a company wanting to build a new facility will feel the pain of permitting procedures that are extraordinarily expensive because of confusing, extraneous and harsh requirements and the excessive time required before a permit is approved.
Energy: Costs for electricity, natural gas, diesel fuel and gasoline are among the highest in the nation. Energy expenses will increase as more “green” projects are built despite excessive costs, low energy output and their rarely mentioned environmental damage.
Lawsuits: The legal environment demonizes companies. In many cases, national companies must dedicate a portion of their legal budget to California that is disproportional to the extent of their business in the state. Labor costs are higher than in other states because the cost of living is so high – the highest in the country – so that employees understandably demand higher compensation.
Failing Schools: Many public schools are under-educating students despite spending record amounts of tax dollars demanded by teachers’ unions. Statewide test scores show that two-thirds of California students failed to meet math standards, and more than half did not meet the state’s English standards. A workforce-related result is that many companies are hit with extra outlays for training programs for new hires, programs like remedial English. Meanwhile, California Democrats oppose school choice, leaving children, particularly poor ones, in classroom hellholes.
Quality of Life: The overall standard of living continues to deteriorate as housing costs are at record high levels, unemployment remains a serious concern, crime has skyrocketed not only in cities but in rural areas, roads deteriorate, and water shortages will return since the state hasn’t built more storage capacity in decades and indeed diverts rainfall to the ocean instead of to Central Valley farmers.
Small Business & Entrepreneurship: Having run my professional practice for many years, I sympathize with others whose enterprises are small and have to deal with overwhelming challenges. For example, the price to create an LLC in California is $800 the first year and every year after that – but increases with revenue to where if it is $5 million or more, the annual fee is $11,790. In Texas, I paid $100 for my LLC for the first year, and it’s free every year after that.The Small Business & Entrepreneurship Council said in 2022 that “California’s elected officials seem to be doing everything they can to make it very difficult – if not impossible – for entrepreneurs to start businesses and for small businesses to operate and grow in the state.”
Many companies preceded Chevron in relocating their headquarters out of state. The most recent have been Verily (an Alphabet/Google company), X (Twitter), Space X and Blaze Pizza.
Earlier moves include McKesson Corp., Tesla, Oracle, Hewlett Packard Enterprise (HPE), CBRE Group, Charles Schwab, KLA Corporation (HQ2), Parsons, AECOM, Kaiser Aluminum, Symantec and Woodward Inc. One of these days, I will publish a list sourced from different reports of the hundreds of companies that have fled the no-longer-golden state.
Feel free to call me confidentially at 469-907-4544 for a no-obligation exploration of whether a relocation, expansion or consolidation in a new community makes sense for your company. Joe Vranich, The Business Relocation Coach – “Helping Businesses Grow in Great Locations.” (Disclosure: I co-authored the Hoover report linked above. – Joe.)