By Noah Baustin, POLITICO
OIL SLICK: The California Energy Commission is less than three days away from a pivotal vote to delay oil refinery regulations. The approach the agency takes to the delay, especially how long it lasts, will be a crucial market signal to oil and gas industry investors.
So what’s the exact language the commission is putting forward for Friday’s vote? It doesn’t exist yet. At least, not in final form.
CEC staffers were still working Tuesday toward finalizing the language to postpone the implementation of SB X1-2, the 2023 law Gov. Gavin Newsom signed during a special session to give state regulators more power over the oil industry in a bid to control gasoline price spikes.
The move is the final peg in the coffin of Newsom’s erstwhile push to cap refiners’ profits. Driven by two refineries’ plans to shutter in the next year, Newsom is now endorsing proposals to help refiners instead, including by floating legislative language to streamline more crude oil extraction in Kern County and statewide. The refining margin cap, the specific policy at play in Friday’s vote, would have penalized refiners that raked in profit above a ceiling set by the CEC.
Usually, when an agency decides to slow-walk a rule, it just fails to act. So the oil industry is relishing the CEC’s active repudiation of its legislative authority — and pushing for it to go away for as long as possible.
“This margin cap is the thing that investors that are looking to put capital into California with our members are very, very concerned about,” said Catherine Reheis-Boyd, CEO of the Western States Petroleum Association, which represents large oil companies including Chevron, ExxonMobil, and Valero.
To show the oil companies that the state is serious about keeping their business, WSPA has put its stake in the ground that it wants the margin cap stashed away for at least a decade.
“Anything less than that will not send a market signal,” said Reheis-Boyd.
After the CEC delayed its Aug. 13 plan to vote on the issue, Siva Gunda, the agency’s vice chair, told POLITICO that the key issue still at play was how long the delay should be.
But some of the policy’s earliest advocates are still fighting for the margin cap. Jamie Court, president of Consumer Watchdog and longtime advocate for cracking down on refineries, believes the threat of the CEC pulling out the regulation is what’s been suppressing gas price spikes that plagued the state in years past.
“It’s feeling like a total concession to the industry,” Court said. “Without the hammer of the gross margin penalty, there’s not going to be anything to keep the companies from price gouging.”
Others point to another tool in the CEC’s box: ABX1-2, the 2024 bill that gave the agency the ability to require refiners to keep a minimum amount of fuel on hand when they go offline for repairs.
Environmental justice advocates have been surprisingly muted on the margin cap delay, apparently instead throwing their weight behind those storage requirements.
Faraz Rizvi, policy and campaign manager for the Asian Pacific Environmental Network, said that it’s unfortunate that the CEC would be giving up a tool to regulate the oil industry.
But “as long as we’re ensuring that there’s a stable fuel supply and that we are creating a managed transition away from fossil fuels,” Rizvi said, “continuing to proceed or accelerate even the rulemaking around the minimum storage requirements, I think for us, those are much more important.”
The CEC will release its language on the margin cap Wednesday afternoon at the earliest, according to agency spokesperson Niki Woodard. — NB
