Governors of Nevada, Arizona Ask Newsom to Kill Proposed Oil Regulation Legislation

A man pumps gas into a vehicle at a gas station in Alhambra, California, on Oct. 2, 2023. Frederic J. Brown/AFP via Getty Images

The Republican governor of Nevada and the Democratic governor of Arizona have co-authored a letter to California Governor Gavin Newsom, voicing concerns about legislation proposed for the gas price special session called by Newsom late last month.

Nevada Governor Joe Lombardo and Arizona Governor Katie Hobbs sent the letter on Sept. 10 in response to the special legislative session convened to address “the pernicious problem of gasoline price spikes at the pump,” according to a press release from Newsom’s office.

“Though we may have varying policy agendas as governors, we all share a sincere care for the concerns and well-being of our constituents,” the governors wrote.

“Undoubtedly, we too all share concerns about the high cost of fuel and its impact on communities across our states. However, we’re concerned that mandating refinery inventory would directly raise the cost of fuel for all of our constituencies and create further economic instability in the region.”

At issue is Assembly Bill X2-1, previously introduced as Senate Bill 950—which failed to pass the legislature before a Sept. 1 deadline.

The bill seeks to establish a six-member expert advisory committee with the authority to regulate and impose inventory mandates for refineries. By requiring refiners to withhold fuel from the market, the bill would attempt to mitigate price spikes that occur when planned and unplanned maintenance impacts gas supplies.

Newsom told reporters at a press conference on a different topic Sept. 4 that the legislation is needed because the “greed” of oil companies causes prices to spike at certain times of the year. 

“We are going to make progress to address a vexing issue that impacts every single Californian, and that’s the abuse of the oil companies,” he said.

“This is the time of year that we have planned and unplanned refinery maintenance, which spikes the cost of gasoline and spikes the profits of those that are doing the maintenance ... Five companies have 90 percent of the market share in the refinery space.”

Assemblyman Gregg Hart (D-Santa Barbara), who sponsored the bill along with Assembly Majority Leader Cecilia Aguiar-Curry (D-Winters), said in a press release that the bill will provide a “common sense solution” by “requiring oil companies to better plan for refinery shutdowns.”

The press release from Hart’s office said California’s air quality standards and special fuel requirements make the state’s isolated fuels market “uniquely vulnerable” to supply disruptions.

“Nearly all in-state supply comes from a handful of refineries—three in Northern California and five in Southern California, with only one small refinery in Central California,” it said. “A single refinery outage could drastically reduce refining capacity, by up to 45 percent in Northern California and 35 percent in Southern California.”

Impact to Other States

The governors of California’s neighbors to the east and southeast asked Newsom to rethink the legislation.

“We ask that you reevaluate mandating refinery inventory and delay taking action on this type of legislation until thorough policy conversations are had with industry leaders and our state energy offices,” the letter reads.

“Both the Arizona Governor’s Office of Resiliency and the Nevada Governor’s Office of Energy stand ready to assist in finding viable regional energy solutions that lead to lowered fuel costs.”

Regulations on refineries and inventory mandates could lead to supply shortages, Lombardo and Hobbs suggested, which would in turn cause prices to increase for consumers in some states that depend on gasoline from California.

“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.”

Potential Downstream Shortages

Additionally, the governors highlighted a recently issued report from the California Energy Commission, which listed as potential drawbacks the cost of maintaining additional storage, as well as the risk of rising prices.

“If the refiners withhold stocks to maintain the minimum, it may artificially create shortages in downstream markets [because] refiners may need to hold back a shipment to sustain the legal minimum stocks, which could cause a terminal to run lower than expected,” the report said.

With the possibility that higher costs for refiners could be passed on to consumers, the governors said the report’s findings are alarming.

“This conclusion alone is deeply troubling and warrants bipartisan, regional communication on this legislation before proceeding,” the governors said in their letter.

In a Sept. 10 press release, Nevada’s governor said that achieving lower fuel prices is a goal of both parties and vowed to push back against California’s agenda, which he believes will negatively affect residents of his state.

The governor of Arizona said inflationary pressures are challenging for individuals and called for more to be done from leaders across the southwest region to help consumers.

“Arizonans are struggling with the high cost of living, we can’t afford yet another price hike,” Hobbs said in the same press release.

A Bipartisan Issue

One California lawmaker said solving the gas price problem is a bipartisan issue and warned that drivers in other states are being impacted by the Golden State’s policies.

“People from across the political spectrum are waking up to the dangers of this self-serving plan,“ California Assembly Republican Leader James Gallagher (R-Yuba City) told The Epoch Times by email Sept. 11. ”Newsom’s own administration says his stunt risks fuel shortages and gas price increases—and it’s not just California drivers who would pay the price. California drivers need relief from high gas costs—not dangerous schemes that could make the problem worse.”

Republican leaders in the legislature also sent a letter to Newsom on Aug. 29, citing concerns about the plan to regulate refinery inventories. The letter asked for clarification regarding the bill’s impact on retail fuel prices and Newsom’s plan to mitigate fuel shortages.

The lawmakers also asked the governor to reconcile air pollution policies that intentionally raise prices, with the Energy Commission’s goal of stabilizing fuel prices.

The proposed bill, the letter said, “will do nothing to address the issues causing California’s gas prices to remain among the highest in the nation.”

Newsom did not respond to The Epoch Times’ request for comment by time of publication.