California legislators expressed frustration over the state's fuel transition
strategy during an energy committee oversight hearing Wednesday in which they
spent nearly four hours probing state agency officials, requesting evidence
that recent regulatory actions have helped the state move toward its climate
goals in a fair way for people living and companies operating in the Golden
State.
Statewide refinery closures have contributed to higher gasoline prices and
impending closures will add to upward pricing pressure, panelists and
legislators said.
"We have a crisis on our hands that may have been self-created," Assemblyman
David Alvarez said.
In 2024, the California legislature gave the California Energy Commission's
Division of Petroleum Market Oversight significant regulatory authority over
the state's fuel supply chain and access to company data and financial
information.
"The facts on the ground have changed significantly. I would say in some ways
very positively," CEC Division of Petroleum Market Oversight Director Tai
Milder said. "But now I think companies are revisiting what kind of return on
investment they want to stay in California."
Alvarez pushed back on that remark, saying he was "frustrated" with the CEC
given the lack of progress in providing consumer relief at the gas pump despite
the regulatory authority given to the agency.
"We cannot sit here and assert that anything we've done on the regulatory
authority we've given you has led to a calming of the markets, if you will,"
proclaimed Alvarez.
Officials stressed the importance of maintaining public trust and creating an
energy transition model that could be replicated by other states and nations.
"If all we're doing here in California is reducing our emissions, which are
like 1% of global emissions, it doesn't matter a damn," said Assemblywoman
Cottie Petrie-Norris. "I would argue that when we're thinking about climate
leadership, we need to make sure that the policies that we're implementing here
in California are affordable and accessible for all Californians. I know what
climate leadership does not look like, and that is $10 gas."
On Thursday, California's statewide average for retail gasoline was $4.818/gal,
according to AAA data. A study published this month suggests gas prices in the
state could increase to $8/gal by the end of 2026 with the closure of Valero's
149,000 b/d Benicia facility in Northern California and the 147,000 b/d
Phillips 66 Los Angeles compound.
Government officials warned during the Wednesday hearing that the state is at a
critical juncture, where it is grappling with direct impacts from its approach
to greenhouse gas reduction.
"We have to take care of what's happening now," Assemblywoman Laurie Davies
said during the hearing. "Today, people can't afford to put gas in their car,
and it's definitely affecting affordability. And that is our job as legislators
here to make sure that those that we represent, can afford to live here."
Additional refinery closures would accelerate job losses and reduce state
revenue, which has already been impacted by business departures in 2023, Davies
said. She highlighted the dramatic reduction in drilling permits, dropping from
over 2,000 in 2019 to less than 100 permits in 2024, blaming "overregulation"
for the decline in oil drilling permits and inability to meet demand.
"We are in a crisis right now...If these refineries leave, that's a lot of jobs.
That's a lot of revenue that comes into our state. This is revenue that we
can't get back. It's not going to come back," Davies said.
Legislators expressed frustration with the lack of a comprehensive transition
strategy, questioning the impact of existing regulations on refinery closures
and fuel prices.
Assembly members pressed state officials about consumer protections and the
potential economic consequences of the ongoing energy transformation.
Strategies must be enacted to help refineries meet demand, be financially
stable and operate safely, California Energy Commission Vice Chair Siva Gunda
said, calling for a "holistic transition strategy."
"It's really important to note that our climate goals and our tax and fees have
an impact on the overall price of the gallon at the end of the day," Gunda
said. "When you take into account what the U.S. average versus California. We
pay about $0.90 higher. And I think that's just a fact of what we can observe
in the data."
CEC's Gunda said that the state is entering a "mid-transition phase" that
requires careful planning to protect consumers, workers and maintain investor
confidence while pursuing climate goals.
Gunda suggested a nuanced transition strategy, such as Australia's approach of
converting refineries into product terminals upon losing half its refining
capacity in the wake of COVID-19.
California Air Resources Board Chair Liane Randolph highlighted the state's
ongoing efforts to reduce greenhouse gas emissions, while maintaining fuel
supply and affordability, and expressed the state doesn't need to choose
between reducing greenhouse gases and reasonably priced gasoline.
A murky fuel transition plan may lead to bankruptcies, loss of worker
protection and improper land remediation, Gunda acknowledged, stressing the
importance of a multi-pronged approach that addresses those concerns while also
maintaining investor confidence.
Valero's financial data showed the company lost $8 million over a decade,
making substantial new investments in refineries increasingly unlikely,
Petrie-Norris said.
Attendees discussed the potential for further refinery closures, with
California currently importing 75% of its oil. The state's strict environmental
regulations and climate goals are contributing to higher gas prices, Davies
said.
State leaders recognized the need to balance environmental goals with economic
realities, while agency officials said they are exploring strategies to
maintain air quality standards, stable energy supply, protect workers and
manage consumer costs during the region's energy transition.
--Reporting by Bayan Raji, [email protected]; Editing by Sydnee Novak,
[email protected]
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