Assembly hearing reviews CEC stabilization plan as refinery closures threaten California fuel supply

A joint informational hearing of three California State Assembly committees in Sacramento focused Tuesday on near- and long-term steps to stabilize the state's transportation fuels market after recent refinery closure announcements and the recommendations in a June 27 letter from the California Energy Commission (CEC).

Why it matters: Lawmakers, state regulators, industry representatives, labor leaders and community groups warned that a string of refinery exits could force more imports, raise pump prices and shift pollution burdens — even as the state shifts toward cleaner vehicles and fuels. The CEC and CalGEM (the Department of Conservation's oil-and-gas regulator) presented a multi-part stabilization proposal; CARB reviewed air-quality tools such as the Low Carbon Fuel Standard and the ports "at-berth" rule; industry and labor pushed different fixes; and environmental justice advocates urged stricter protections for frontline communities.

The hearing opened with Assembly Chair Petri Norris reading from the CEC letter and urging the committees to focus on both urgent short-term fixes and long-term planning. "The recommendations in the June 27 letter from CEC vice chair Gunda sought, and I quote, to ensure that Californians continue to have access to a safe, affordable, and reliable supply of transportation fuels," Chair Petri Norris said, quoting the CEC document.

CARB chair Liane Randolph outlined the air- and climate-policy framework that shapes state fuel rules and defended the Low Carbon Fuel Standard (LCFS) as a central tool. Randolph said vehicle emissions remain the state's largest source of greenhouse gases and NOx, and described LCFS impacts: "LCFS has displaced over 31 billion gallons of petroleum fuels and is generating about $4 billion annually to support low-carbon investments," she told the committees. Randolph also noted litigation over federal actions and CARB's Clean Air Act waivers and said the agency is continuing work on complementary rules and incentives.

CEC Vice Chair Siva Gunda summarized the market picture the commission used to frame its recommendations: in recent years in-state gasoline demand has begun to decline while California refining capacity — and in-state crude production — have declined faster. Gunda said that mismatch increases the state's reliance on imports and creates risk of localized price spikes and infrastructure fragility. He summarized the commission's approach as three "and" buckets: stabilize parts of the legacy system that are brittle, scale emerging zero‑emission technologies, and plan proactively for community and worker impacts.

CalGEM Director Jennifer Lucchese described the administration's "Petroleum Market Stabilization" package, presented to the committees as a single proposal with four components: codify the existing regulatory prohibition on well-stimulation treatments (commonly discussed as hydraulic fracturing), validate the environmental impact report (EIR) and ordinance that govern permitting in Kern County so local permitting can proceed, create a temporary CEQA exemption for a narrow subset of new well permits paired with a 2-for-1 "plug and abandon" requirement (two wells sealed for each new well drilled), and strengthen spill-prevention, financial-responsibility and pipeline-safety requirements.

Lucchese said the administration is using a working target of roughly 125 million barrels per year of in‑state crude production as an anchor to keep three key interstate pipeline arteries operating at sufficient throughput; the proposal's supporters say the target would slow declines in in-state crude and avoid the sharp loss of pipeline throughput that can raise transport costs. Lucchese and CEC staff cautioned that the projection depends on many variables including oil prices, operator choices and rig availability and that the proposal is intended as temporary and targeted rather than an open-ended expansion of drilling.

CalGEM officials described limits on the 2-for-1 component: proposed new wells would be limited to existing, historically established onshore oil fields, be sited outside legislated health-protection setbacks, not be eligible where an individual take permit or streambed alteration permit is needed, and require that one of the two plugged wells be within a health-protection zone. The proposal also includes a 10-year sunset for the temporary CEQA exemption and language intended to prevent operators from using the program to meet other plugging commitments.

The proposed CEQA exemption and the 2-for-1 mechanism drew the sharpest pushback from environmental justice advocates. Cesar Aguirre (introduced to the committees as a representative of the Central California Environmental Justice Network) pressed that Kern County and other extraction communities already shoulder disproportionate air-pollution burdens and that increased new drilling without stronger fence‑line monitoring and the repeal of exemptions in California's oil-and-gas rules would worsen health outcomes. "These devastating impacts are real and they are preventable," Aguirre told the committees, citing community inspections and infrared surveys that the network said found frequent leaks.

Mayor Steve Young of Benicia, representing a city that hosts Valero's Benicia refinery, described the local fiscal and employment stakes if the company proceeds with a planned April 2026 closure. "The closure ... will result in losses to the city directly of about $10 million to $12 million a year," Mayor Young said, and said his city has formed task forces to study economic, neighborhood and redevelopment impacts for the roughly 900 acres the refinery owns.

Industry and labor offered sharply different emphases. Mike Smith of the United Steelworkers urged steps to retain domestic refining and protect jobs, saying the union represents thousands of refinery workers and warning that plant closures can push workers into lower-paying jobs or unemployment. Zach Leary of the Western States Petroleum Association said industry needs clear, stable rules and pointed to two near-term items that he and members say undermine investor confidence: the CEC's margin-cap and penalty authority and CARB's at-berth rule for ships. WSPA asked either repeal or a long pause on the margin-cap authority and urged the administration to ensure practical compliance pathways for ports and vessels covered by CARB's at-berth regulation.

Jeremy Martin of the Union of Concerned Scientists offered a different market-focused proposal to increase short-term flexibility while protecting air quality: allow U.S.-spec gasoline (rather than California‑spec gasoline) into the state when California‑spec product is unavailable, but only in exchange for a voluntary contribution by suppliers to a fund that would help drivers of the oldest, highest‑polluting vehicles (those sold before about 2004) replace those vehicles with electric alternatives. Martin argued the net public-health outcome could be positive because older vehicles contribute a disproportionate share of tailpipe pollution.

Several procedural and near-term steps were identified as follow-ups. CEC staff said they have opened a rulemaking and informational proceeding on minimum inventories and resupply obligations; Vice Chair Gunda said CEC staff plan a business meeting to propose a temporary pause on the margin cap and penalty at an upcoming board meeting. CalGEM said validation of Kern County's EIR would allow the county to resume local permitting if the state proceeds; CalGEM emphasized it will continue technical review of any new well permits and that enforcement resources have been strengthened.

Members of the three committees repeatedly pressed agencies on core assumptions used in the models: the pace of vehicle electrification, the magnitude and timing of demand declines, and how quickly imports and storage could ramp up in the event of further refinery exits. CARB and CEC officials said their analyses include both a faster, high‑electrification pathway and a more conservative forecast; both agencies said the state must plan for uncertainty and be adaptive.

The hearing included extensive committee questioning and did not produce formal votes. Lawmakers signaled interest in short-term interventions the administration can carry out and in more detailed, legislatively led work this fall to shore up data, reporting and planning for worker and community impacts.

What happens next: Agencies said they will continue interagency work, technical rulemakings and stakeholder meetings through the summer and fall. Several committee members requested additional data and follow-up briefings on the reserve/inventory rulemaking, the CEC crude-production assumptions, and the public‑health implications of any changes to CEQA or local permitting rules.

The hearing demonstrated the competing policy priorities at the center of California's fuels transition: protect affordability and market reliability now; avoid shifting pollution burdens or creating new environmental liabilities; and accelerate the long-term deployment of zero‑emission vehicles and cleaner fuels so the state can reduce demand for liquid fossil fuels over time.