Chevron, after 145 years in California, is relocating to Texas, a milestone in oil's long decline in the state

With the announcement Friday that it was moving its headquarters from California to Texas, Chevron Corp. became perhaps one of the last dinosaurs to slip into the tar pit, a symbol of California’s monumental transition from a manufacturing and production state to the brave new world of services.

In the popular imagination, California has long been seen as Hollywood, sunshine and beaches that attracted millions of new residents and built its sprawling cities. But in reality the great magnet of growth for decades was the production of things: think the aerospace industry, petroleum and agriculture.

The transition away from manufacturing has been going on for decades, exemplified by Silicon Valley, which churns out the ideas for high-tech devices but leaves the actual production to others, overseas, and the sprawling ports of Los Angeles and Long Beach, which offload the vast flow of manufactured goods from abroad.

Now, it’s Chevron’s turn.

The oil giant was founded in California 145 years ago at the beginning of an era when the state became one of the world’s leading suppliers of oil and its byproducts.

But in recent years, the company has been butting heads with Sacramento over energy and climate policies, which now loom larger than manufacturing in many people’s minds. On Friday, the company said it is moving its headquarters from the Bay Area to Houston.

The move is part of a long, steady exodus of not only Chevron’s operations, but also the larger petroleum industry from California, which in its heyday early last century produced more than one-fifth of the world’s total oil.

While California remains the seventh-largest producer of oil among the 50 states, its production of crude has been sliding since the mid-1980s and is now down to only about 2% of the U.S. total, according to the latest U.S. Energy Information Administration data.

The downshift reflects just how far the state has staked its fortunes away from fossil fuels to renewable forms of energy and, in particular, away from gas-powered cars to become the center of the electric vehicle industry

“Oil and gas has shaped California into what it became, but it has been in a tremendous decline,” said Andreas Michael, an assistant professor of petroleum engineering at the University of North Dakota. Chevron’s move out of the state, he said, “is a milestone in that decline, and it’s very sad to see.”

Sarah Elkind, a San Diego State University history professor who has chronicled the profound impact of oil production on people’s health and industry overall in Los Angeles, wondered out loud whether Chevron was leaving California to get away from regulatory scrutiny.

“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,” she said.

Chevron, the second-largest U.S. oil company, based in San Ramon, didn’t respond to interview requests Friday. In a statement, the company said that the move to Texas would allow the company to “co-locate with other senior leaders and enable better collaboration and engagement with executives, employees, and business partners.”

Chevron has been steadily shrinking its footprint in the Bay Area. It moved Chevron Energy Technology, a subsidiary, to Texas last decade, and two years ago the company sold its San Ramon campus as it began shifting jobs to Houston. The company already has about 7,000 employees in the Houston area.

Chevron has some 2,000 employees in San Ramon. It is the latest high-profile departure of a California company to another state.

Recently Elon Musk said he is moving his companies SpaceX and X from California to Texas, and over the last decade there have been scores of other California companies in tech and other industries that have fled the state, with many attributing it to the state’s high operating costs and other policies that they see as not supportive of business.

Last fall, California’s attorney general sued Chevron and several other big oil companies, alleging that their production and refining operations have caused billions of dollars in damage and that they deceived the public about the risks of fossil fuels in global warming.

Chevron’s chief executive, Mike Wirth, has pushed back against the suit and California’s approach to climate change, saying that planet warming is a global issue and that piecemeal legal actions aren’t helpful.

Gov. Gavin Newsom’s office downplayed the significance of Chevron’s relocation news Friday and highlighted the growth and opportunities in clean energy for California, which it said already has six times more jobs than fossil fuels employment.

“This announcement is the logical culmination of a long process that has repeatedly been foreshadowed by Chevron,” said Alex Stack, a spokesman for the governor’s office. “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.”

Wirth and Chevron’s vice chairman, Mark Nelson, will move to Houston before year’s end. “There will be minimal immediate relocation impacts to other employees currently based in San Ramon,” Chevron said in its statement.

Some operations will remain in San Ramon — along with “hundreds of employees,” Wirth told CNBC on Friday — but the company said it expects all corporate functions to move to Houston over the next five years.

“We’ve got a proud history in California,” Wirth said, noting that the company began in 1879 in the Pico Canyon oil field just west of Newhall, the site of the state’s first huge flow of oil three years earlier. But he said Houston is the industry’s epicenter and where Chevron’s suppliers, vendors and other key partners are located.

Chevron started out as Pacific Coast Oil Co., incorporated in 1879 in San Francisco, and later was long known as Standard Oil of California. With other companies, it rode the drilling boom in Los Angeles in the early 1900s when big oil fields were discovered in places like Long Beach and Santa Fe Springs, spurring the region’s industrial development but also creating increasing concerns about its impact on especially working-class neighborhoods, with uncontrolled gushers, fires, oil spreads and loud diesel pumps, said Elkind. In the 1920s, a full 20% of the oil produced in the U.S. came from Los Angeles County.

California’s relationship with the oil and gas business survived well into the 1960s. But at the end of that decade the Santa Barbara oil spill helped spur a huge environmental movement, said Michael, the University of North Dakota petroleum expert. With the state’s aggressive pursuit of zero-carbon policies, production of crude has fallen to less than 300,000 barrels a day, about one-fourth of what it was in mid-1980s.

“And I don’t think we’ve hit bottom yet,” said Uduak-Joe Ntuk, an industry expert who until this year oversaw oil fields for the California Department of Conservation’s energy management division. Los Angeles County alone still has thousands of oil wells. “We have billions of barrels of recoverable oil in California, but they’re just in the ground.”