Assembly hearing: agencies warn refinery exits could tighten California fuel market; agencies promise a transition plan

SACRAMENTO — State energy, air-quality and market‑oversight officials told the Assembly Committee on Utilities and Energy on Oct. 26 that California faces a narrowing cushion between refining capacity and fuel demand and that recent refinery closure announcements make planning for the transition away from petroleum more urgent.

The hearing, led by Assemblymember Cottie Petrie‑Norris, brought together California Air Resources Board Chair Leanne Randolph, California Energy Commission Vice Chair Siva Gunda, and the newly created Division of Petroleum Market Oversight director Ty Melder to brief legislators on supply, price spikes and planned agency work. “We need a real plan,” Petrie‑Norris said in opening remarks, describing the session as an effort to lay out the state’s options.

The agencies emphasized three priorities: increase market transparency, plan and coordinate a statewide “fuels transition” strategy, and evaluate narrowly the permissive authorities the legislature gave regulators in SBX1‑2 and ABX2‑1 to stabilize supply if benefits exceed risks. Gunda said the agencies were “digging through the analysis” to decide whether to use those tools and would be “prudent” about imposing requirements that could raise costs for consumers.

Why it matters: California’s refining system serves local demand and parts of Nevada and Arizona. Regulators said in‑state refining capacity has declined over the past decade while imports and supply chain outages have played a growing role in driving short‑term price spikes at the pump. Phillips 66’s announced conversion of its Wilmington units to a product terminal and Valero’s announcement about Benicia were cited by panelists as a pivotal moment that requires an updated, implementable plan to avoid disruptive gaps in supply.

What the agencies said

- California Energy Commission (CEC): Vice Chair Gunda described a multi‑agency Petroleum Strategy Task Force set up after last year’s special session to “desilo” oversight and to examine how transparency and limited regulatory tools could be used. The CEC has completed a fuels assessment and is drafting a fuels transition plan that the commission intends to refine through additional stakeholder consultation. Gunda warned that as refining capacity falls, the system becomes more exposed to outages and spot‑market spikes.

- California Air Resources Board (CARB): Chair Leanne Randolph framed the shift as both a climate and public‑health challenge. “Fossil fuel use in vehicles is the single biggest source of climate and air pollution in the state,” Randolph said, and she defended the state’s fuel and vehicle programs — including the Low Carbon Fuel Standard — as essential to reducing emissions and public‑health harms while cautioning that federal litigation over California’s Clean Air Act waivers could complicate some policies.

- Division of Petroleum Market Oversight (DPMO): Director Ty Melder described newly available data streams and early DPMO findings (see separate article). DPMO’s economics team has identified an unexplained price differential they call a “mystery gasoline surcharge” and flagged the role of market structure and vertical integration in amplifying retail prices.

Numbers and supply details clarified at the hearing

- Panelists said roughly 25% of crude feeding California refineries comes from in‑state production and about 75% from imports. They estimated California’s total crude refining nameplate capacity at about 1.7 million barrels per day, of which roughly 900,000 barrels per day produce gasoline-type products.

- Agencies described a common “value chain” from crude to refinery to terminal to truck to station. They warned that any single choke point — a pipeline outage, a refinery turnaround or a storage shortfall — can reduce “days of supply” locally and trigger spot price spikes.

Policy tools under review

The CEC reminded the committee that the legislature created permissive tools in SBX1‑2 and ABX2‑1 (including reporting and, under defined conditions, inventory or resupply requirements) but directed agencies to use them only if benefits outweigh risks to consumers. Gunda said the commission is analyzing: targeted reporting requirements, minimum inventory/resupply options, and other market‑stabilizing ideas, and that any use of those tools would be accompanied by cost and impact analysis.

Community, workforce and investor concerns

Panelists said a successful transition must balance three priorities: protect air quality and public health; shield consumers from volatile costs; and maintain investor confidence long enough to preserve necessary infrastructure and jobs during a multi‑decade shift to cleaner energy. Gunda highlighted the need for funding and plans to support communities and workers in host cities, and for adaptive land‑use strategies for former industrial sites.

Legislators’ questions and next steps

Assemblymembers pressed agencies for concrete timelines and analyses. The CEC said it would deliver a near‑term response to Governor Newsom by July 1 (as requested in the governor’s recent letter) and continue work on a fuller fuels transition plan later in the year. Panelists said they meet regularly with industry, labor, environmental justice groups and local governments and pledged to return with more detailed recommendations that would include assessable cost/benefit information.

Ending

Panelists closed by urging urgency and broad stakeholder engagement: regulators described the situation as “not a small thing” and said that failing to plan could turn manageable transitions into abrupt crises that would harm consumers, workers and neighboring communities. The agencies said they will continue investigations into market behavior, press for clearer data from industry, and develop options — including some the legislature authorized, used prudently — to stabilize the market while California pursues its air‑quality and climate goals.