California Governor Signs Bill Regulating Oil Refiners

Gov. Gavin Newsom signs Assembly Bill X2-1 regulating oil refiners on Oct. 14 at the Capitol. Travis Gillmore/The Epoch Times

California Gov. Gavin Newsom signed a bill on Oct. 14 that grants authority to regulate oil refiners by mandating minimum reserves with a goal of mitigating high gas prices.

“Price spikes have cost Californians billions of dollars over the years, and we’re not waiting around for the industry to do the right thing—we’re taking action to prevent these price spikes and save consumers money at the pump,” Newsom said in a press release. “Now the state has the tools to make sure they backfill supplies and plan ahead for maintenance so there aren’t shortages that drive up prices.”

Newsom said during a press conference after signing the bill that the effects of the new law could be seen as soon as next summer.

Assembly Bill X2-1, introduced by Assemblyman Gregg Hart and Majority Leader Cecilia Aguiar-Curry, permits the California Energy Commission to order refiners to store more fuel and to regulate refinery maintenance schedules.

Refiners that refuse or fail to comply will face fines of $100,000 to $1 million per day.

The law does not establish minimum reserve levels or set maintenance time frames but gives the commission the authority to do so beginning Jan. 13, 2025, until the measure sunsets on Jan. 1, 2033.

While the Energy Commission will be able to order refiners to store more fuel, it cannot require the construction of additional storage.

Annual reports to the Legislature from the commission evaluating the effectiveness of the regulations are also required.

“This landmark legislation is a win for consumers, a win for accountability in the state’s gasoline market ... and will save Californians billions at the gas pump,” said Hart, a Santa Barbara Democrat, in a bill-signing press conference with the governor in the Capitol rotunda.

More than 20 hours were spent on the bill during the extraordinary special session—called by Newsom on Aug. 31—over the past two weeks.

Hart’s co-author said the bill is a step toward reducing gas prices.

“This bill will protect Californians from surging gas prices by requiring refineries to plan their shutdowns and supply chain disruptions,” said Aguiar-Curry, a Northern California Democrat.

Californians pay a total of about $1.42 per gallon in state and federal taxes. As of Oct. 14, the cost of gasoline in the Golden State was $4.68 per gallon compared with about $3.20 per gallon nationwide, according to the automobile membership club AAA.

Members in both political parties expressed concern during special session hearings about the impact the state’s policies and regulations are having on the price of fuel—citing the California Air Resources Board’s plan to vote on a proposal on Nov. 8 that could raise prices by as much as 65 cents per gallon.

The governor said the impact of the proposal remains to be seen but said he believes Californians deserve to know how policies affect them.

“I’ve been pretty honest about this,” Newsom said in response to a question from The Epoch Times during the press conference. “I’ve been very supportive of being as transparent as possible with the taxpayers on what the [low carbon fuel standard] ... the cap-and-trade system ... and what the California regulatory system ... may contribute.”

Gov. Gavin Newsom speaks at a press conference for the signing of Assembly Bill X2-1 at the Capitol in Sacramento on Oct. 14. Travis Gillmore/The Epoch Times

Regulations and state taxes add about $1 to $1.30 per gallon, according to the governor.

“When you get above that, that’s the mystery, that’s the spike,” Newsom said.

Concerns

The bill passed the Assembly in early October with some Democrats voting against the measure.

“The result is our consumers in California are going to pay the price,” Assembly Republican Leader James Gallagher told reporters after the vote. “All this bill really does is create a whole new bureaucracy.

“It’s a travesty that we came back and had a special session of the Legislature to actually do something about gas prices, and we’ve done nothing except increase them.”

Assemblyman James Gallagher speaks to the Legislature at the Capitol in Sacramento on Aug. 31. Travis Gillmore/The Epoch Times

He told The Epoch Times after the vote that some other proposals that sought to offer alternative ways to lower fuel prices were excluded earlier this year.

Gallagher was referring to bills introduced by Republicans that failed to proceed, including proposals to remove fuel production from the state’s cap-and-trade system—which fines companies for exceeding carbon emissions limits—and temporarily repealing the state’s gas tax, among others.

Critics of the bill said the measure could cause a “permanent rise” in gas prices because refiners could be forced to keep reserves at a certain level by limiting supply.

“California’s policy choices have led to a gasoline shortage by driving suppliers away,” said Chevron executive Andy Walz in a letter he sent to the Legislature on Oct. 8. “We have a shortage of incentivizing policy for additional refiners and supply. California, stop making consumer conditions worse.”

The governors of Nevada and Arizona wrote a joint letter in September to Newsom expressing concerns about the legislation, saying that it could negatively affect drivers in the West if passed.

“With both of our states reliant on California pipelines for significant amounts of our fuel, these looming cost increases and supply shortages are of tremendous concern to Arizona and Nevada,” they wrote. “Further amplifying our concerns, refiners have raised the alarm that refinery inventory mandates could result in supply shortages and potential refinery shutdowns, which would have grave impacts to our shared economies and transportation infrastructure across the West.”