By Wes Venteicher, POLITICO
SACRAMENTO, California — Oil and business groups urged the California Energy Commission on Monday to delay imposing new data reporting requirements on oil and gas companies, arguing the new rules could end up raising gas prices rather than lowering them as intended.
In a workshop, the CEC outlined proposed rules, scheduled to take effect May 20, that would require companies to report more details on their profits, provide advance notice of refinery maintenance schedules and submit more data on oil imports. The rules would expand reporting requirements that Gov. Gavin Newsom and legislators imposed on oil market participants last year in an effort to tamp down gasoline price spikes.
Why it matters: The industry’s calls to delay the rule, which came at the same time as calls from environmental groups to move faster, underscore the pressures on the CEC in its high-stakes effort to keep California gas prices in check.
Background: Newsom called for a cap on oil refiners’ profit margins at the end of 2022, accusing companies of “gouging” consumers after prices at the pump reached $6.44 per gallon that fall. The industry said the high prices were the result of international market forces, California’s environmental standards and limited gas supplies.
Newsom ultimately signed SBX 1-2, which stopped short of imposing a profit cap, instead tasking the CEC with collecting vast amounts of market data to determine whether a profit cap would help consumers. If the agency finds that it would, it has authority under the new law to impose one. The agency has said it could make a decision this fall.
The CEC in February initiated an emergency rulemaking to expand reporting requirements for transactions on California’s oil spot market, where prices are often set, and to regulate maintenance at refineries, where outages have been blamed for price spikes.
The oil industry has argued there’s not an emergency, urging regulators to take more time on complex requirements with unknown potential consequences.
“Many of these rules create some confusion, and ultimately could be counterproductive to the stated goals of the CEC,” said Aaron Flyer, an attorney with Washington, D.C.-based firm Sidley who spoke on behalf of Sacramento-based fuel reseller Idemitsu Apollo Corporation. “This could in turn actually push players out of the spot market and potentially limit supply within the state.”
Business groups including the National Federation of Independent Business also asked for more time, raising concerns that their members’ costs could go up if the CEC doesn’t get it right.
Consumer Watchdog, a leading proponent of a profits penalty, sent the commission a letter today signed by 23 environmental and consumer groups urging the commission to impose a penalty by this summer to try to tamp down the usual summer and fall price spikes.
“The regulation is going too slow, not too fast,” Court said at Monday’s meeting.
Court has called attention to gross margins of more than $1 per gallon reported by oil companies while also accusing them of manipulating net profit figures, which were much lower in last year’s reported data.
The CEC’s new proposed regulations specify a long list of operational costs that may be deducted from gross margins to calculate net profits.
The regulations would also require refiners to report planned maintenance outages 120 days in advance, or if the need for planned maintenance arises in less time than that, the companies would have 48 hours after discovering the need for the maintenance to report it. There’s another form they’d have to fill out within 48 hours of doing unplanned maintenance that halts or slows production.
Representatives from the International Brotherhood of Boilermakers raised safety concerns should “politics” affect maintenance decisions.
What’s next: Jeremy Smith, deputy director of the CEC’s energy assessments division, said the commission was scheduled to vote on the proposed rules at its May 8 meeting, after which the Office of Administrative Law would have 10 days to approve them. If it does, Smith said the agency expects the new rules to take effect May 20.