California Democrats Push Reforms to Prevent Refinery Shutdowns
A bill introduced by seven of the state's Democratic senators would require the energy commission to transition by 2027 to a less-stringent gasoline specification that's in line with other western states, replacing California's unique Carbob fuel. Nearer term, the measure would suspend rules requiring more environmentally friendly, but more expensive, fuel to be sold in the warmer months.
The bill marks a reversal from years of regulatory scrutiny by Governor Gavin Newsom and the California Energy Commission that contributed to plans by Phillips 66 and Valero Energy Corp. to shut refineries that account for about one-fifth of the state's crude-processing capacity. The shutdowns prompted Newsom to adjust course in April and urge the state's energy regulator to collaborate with fuel makers to ensure affordable and reliable supply.
'Details of the policy are up for negotiation, but I will be fighting to ensure that we get needed change for Californians who are fed up with our fuel economy,' Senator Tim Grayson, one of the seven democrats who introduced the bill, said in an emailed statement.
The limited number of refineries that can make California's artisan gasoline grade is one reason why the state's drivers pay more at the pump than the rest of the country. Among those were Phillips 66's Los Angeles refinery, which the company said in October that it would shut later this year, and Valero's San Francisco Bay Area plant, which the company said in April it is looking to close within a year.
Bill SB 237 was introduced in January, passed the California Senate in May and is working its way through the state's assembly with a mid-September deadline of the current legislative session. If approved, it would pass to Newsom's desk to be signed into law.
The bill would also establish a 'one-stop shop' for air, water and hazardous waste permitting for the state's refiners, who have long argued that a glacial permitting process and heavy regulation have raised costs and dissuaded companies from operating in the state. The bill's streamlined permitting process would be available to refiners only if they commit in a 'binding and enforceable agreement to continue to operate and to provide transportation fuels at an affordable price to consumers for the duration of the permits' issued through the process.
To be sure, California's fuel makers are still making solid profits. The latest data from the California Energy Commission shows refiners made $1 a gallon gross margin in April, down from 2024 but well above the US average.
More stories like this are available on bloomberg.com
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