After years of legal dispute over local tax payments, the City of Carson and Marathon Petroleum have reached a settlement in which Marathon will pay $370 million to the city.
Carson city leaders formally announced the agreement Thursday, after approving it last week at a city council meeting.
“This agreement represents a major investment in Carson’s future and an important outcome for our residents,” said Carson’s Mayor Lula Davis-Holmes in a statement. “We have worked to protect the interests of our community, strengthen our financial position and make sure Carson receives the resources it deserves.”
Marathon operates two linked refineries spanning Carson and Wilmington that are responsible for about 27% of the state’s oil refining capacity.
The settlement results from a fight over how much Marathon, and its subsidiary Tesoro, which Marathon acquired in 2018, owe Carson in taxes.
Carson has a special tax on refinery business and sales in the city which voters approved in 2017. In 2022, the city audited Marathon and discovered that the company owed around $70 million more than it had paid.
Marathon paid the additional amount, while arguing that they were being overcharged and taxed for business that did not occur in Carson, but rather in other jurisdictions. After the city denied a refund, Marathon sued in the Los Angeles County Superior Court.
Carson’s lawyers argued that the company was not allowed to sue before it had completely exhausted the city’s own process for appealing a denial. A trial judge and an appellate court agreed, but Marathon appealed to the California Supreme Court which ruled on August 11 that the city’s local process was preempted by a California law.
The ruling “did not determine that Carson improperly assessed the tax, establish the amount of any refund or resolve the underlying merits of Tesoro’s tax dispute,” said the city in a statement.
Yet that very same day the city provisionally agreed to settlement with Marathon at a council meeting, and finalized the details the next day. As part of the agreement, the city pulled a measure from the November ballot that would have allowed Carson to charge refineries up to $1 for every barrel of oil processed in the city.
City leaders celebrated a victory. Under the agreement, Marathon will drop its lawsuit and pay the city $120 million up front, of which $70 million are the disputed taxes that were being held by the City in escrow. It will pay out an additional $16.7 million annually over the next 15 years, while continuing to pay Carson’s oil business tax, bringing the total value of the deal closer to $430 million, said Carson’s lawyer Sunny Soltani.
The tax going forward has been recalculated now that Marathon has restructured and moved more of its business out of the city, said Soltani.
“This is what responsible government looks like, protecting our taxpayers while making sure major corporations doing business in our community meet their obligations,” said Davis-Holmes.
Marathon, the one refinery left in the city after Phillips 66 closed in 2025, is also happy with the deal. “Marathon is pleased to have come to an agreement with the City of Carson to resolve prior and current tax matters, providing stability and predictability to both the City and the company,” said the company in a statement.
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