Senate Extraordinary Committee on Energy, Utilities and Communications

Communications of the First Extraordinary Session will come to order. Good afternoon. The Senate continues to welcome the public in person and via the teleconference service. For individuals wishing to provide public comments at today's hearing, the participant number is 877-226-8163. That's 877-226-8163, and the access code is 736-2834. Again, 736-2834. We're holding our Committee hearings here in the O Street Building. I ask that all Members of the Committee be present in Room 1200 so we can establish our quorum and begin today's hearing.

Today we have one bill on our agenda, and before we hear our first bill, our only bill, we need to establish a quorum. So we're going to wait for a few minutes. We're far from that. And if our author is ready, we will allow her to begin her presentation for SB X12. Senator Skinner, whenever you're ready, you may begin.

Turn it on. Okay.

Whoops. Thank you, Mr. Chair and Members. I'm very pleased to present SBX 12, a bill which is designed to protect Californians against oil company practices that we feel have or may in the future lead to outrageous gasoline price hikes.

What we witnessed last summer and fall was that there were weeks when Californians were charged 6, 7, 8, and one, some places in the state, the very rural areas far north, $9 a gallon. Amounts that were, on average, $2.61 higher than what residents of any other state paid. So let me repeat that, we Californians, no matter where you lived, were charged more than anyone in any other state. Now, these shocking prices cannot be explained.

Senator Skinner, I'm going to just ask that we establish a quorum real quick, and then we'll let you continue your presentation. Consultant, please call the roll.

[Roll Call]

A quorum has been established. Senator Skinner, you may continue.

Thank you. So, as I was saying, these shocking prices cannot be explained by the normal higher cost of gasoline that we expect in California. And we expect that due to our clean air fuel blends and our infrastructure, road, and street maintenance revenue measures that we have built into the price of a gallon. But on average, those tend to be a much smaller amount where our gas price is higher than other states. Nothing in the order of $2.61.

Now, during this time that Californians were charged these prices, oil companies were pocketing record profits. In 2022 alone, oil companies reported more than 200 billion in profits. Exxon, for example, set a company record by hauling in, believe, this is an accurate number, 6.3 million an hour every hour of the year 2022. Now, if you or I made 98 a million a year for 2000 years, we still wouldn't make as much as the oil companies did last year.

Californians deserve and expect to be protected against any business that unscrupulously pads its profits at our expense. Now, we know that one of the roles of government is to provide consumer protection regulations that safeguard us against industries' practices that may do us harm, whether it is an unsafe product or it is pricing activities or any other number of activities that we have good laws for.

What we don't have yet is any type of law or regulation that can help protect Californians against this kind of price hike. And SBX 12 is exactly that. And now I will just go through the specific components of the bill. Specifically, this bill creates a new independent watchdog agency within the California Energy Commission, the name of which is the Division of Petroleum Market Oversight. That entity will be responsible for monitoring California's petroleum market to ensure market participants play by the rules.

Additionally, there will be an Independent Consumer Fuels Advisory Committee made up of experts appointed by the Governor and the Legislature that will advise both the Energy Commission and the new division. The bill also establishes new data reporting requirements on oil companies and refineries to provide us the information that is necessary for the new division to conduct its analysis and for those experts in the advisory group to help them so that they can advise the Commission.

It gives the new division subpoena power to ensure that we receive that data and any records that are needed to determine if there is a pattern of misconduct or price manipulation. It gives the division authority to refer violations of law to our California Attorney General for prosecution. It also authorizes the CEC, that's the Energy Commission, to establish a maximum gross gasoline refining margin based on analysis provided by the new division, again, based on those transparency measures.

It enables the CEC to set a penalty after undertaking a public rulemaking process that can be levied if the price of gasoline is determined to exceed the gross refining margin, gasoline refining margin. And I will give a little description of this in a minute, but it does not require the CEC to set a penalty. It does not fix a penalty, but it gives the ability to if the data so warrants.

It also establishes a Price Gouging Penalty Fund in the State Treasury, and it ensures that the Legislature appropriates the monies, if there are any monies, in the penalty fund, to address, the purpose for which to address the consequences of price gouging. It also provides for an annual report to the Legislature that includes a review of gasoline prices for that year. And to address this concern that has been expressed. And I would like to remind us all that the Legislature is the policy making body.

We are the ones who set laws. It is our state agencies and departments that implement them. But to ensure that we have some way to intervene if we feel that there is anything that we have questions about how this is working, the bill requires the State Auditor no later than March 1, 2033 to complete an audit of the program and make a determination as to whether the program is achieving the intended goal of reducing gasoline price spikes and stabilizing the gasoline fuel supply market.

And if the Auditor concludes that the program is not working as intended, then the Energy Commission will be required to cease implementing both the maximum gross refining margin and the penalty provisions within 180 days. SBX 12s transparency measures alone have the potential to deter excessive pricing by oil companies because the very nature of being able to make this information public, that will be requested.

If that information would indicate to the public watching that Californians are not being treated fairly, perhaps oil companies on their own would behave differently. That is often the result of transparency measures. But if not, then SBX 12, in its design, will allow us to hold big oil accountable to prevent future excessive profits at the expense of hardworking California families. And now I would like to have the sponsors of the bill speak in support.

And I have Lauren Sanchez, the Senior Climate Advisor from the Office of Governor Gavin Newsom, Amy Alley, who is the Legislative Director for the Office of our Attorney General, Rob Bonta, from DOJ. And we also have on hand Ellie Bloom, who is the Special Assistant to the Attorney General for any technical questions. Lauren.

We're going to afford each witness three minutes for your presentation. Thank you.

Great. Thank you, Senator. Good afternoon, Chair and Members of the Committee. Thank you so much for having me here today. My name is Lauren Sanchez, and I serve as the Governor's Senior Climate Advisor. I join you today on behalf of Governor Newsom. As the Senator outlined clearly, last fall, gas prices in this state spiked to $6.41 statewide. In many of your districts, prices were toppling $7 or even $8 per gallon. That was a record $2.61 above the national average.

California gas prices increased 84 cents in just 10 short days. Energy and market experts, economists, industry partners, and state government itself could not explain why. In fact, no one knew why these five companies that control 97% of our market had let inventories drop to decade low levels or how their changes in production were impacting prices. But what we do know is just a few weeks later, big oil reported historic profits, $63 billion in 90 days.

That's $700 million a day. For the Governor and for every single one of us who were paying record prices at the pump, enough was enough. We had to take action. He called a special session to hold big oil accountable and demand that they stop fleecing Californian families. Since last fall, we've worked tirelessly and collaboratively with Members of the Legislature, experts, and stakeholders on how to address this problem. And it keeps coming back to one issue.

Unlike electricity and other many other markets, commodities, issues that the Senator has outlined, this is an industry that has been allowed to operate in the shadows. It has lacked the accountability, transparency, and oversight that we have long required of other critical sectors. The state doesn't yet have the data, the information needed to protect hardworking Californian families from being taken advantage of at the pump. This proposal does just that.

The amendments you see today that the Legislature contributed to through a collaborative process make this a better bill. It provides the Administration and the Legislature with the tools needed to mitigate these price spikes going forward with the transparency measures to finally look under the hood and ask, what are these companies hiding? It empowers the Energy Commission to set a price gouging penalty and establishes an independent watchdog that will provide the oversight of this multi-billion dollar market that has evaded these measures for too long.

And it does so while protecting confidentiality and developing the plan to transition off of petroleum while ensuring reliable and affordable fuels for Californians. Thank you for pushing us to make this proposal better, for questioning our staff, and digging into the smallest details. On behalf of the Governor, thank you for taking a bold stance for your constituents and for our communities. I will be available for any questions you may have.

Thank you. Next witness.

And good afternoon, Mr. Chair and Members. I'm Amy Alley, a Deputy Attorney General and the Legislative Director for the Department of Justice. On behalf of Attorney General Rob Bonta, I want to thank Senator Skinner first for authoring this historic legislation and also share that the AG is proud to stand with Governor Newsom as a co-sponsor of this bill to take on big oil and protect California consumers. Last year, oil companies raked in record profits while Californians struggled to make ends meet.

High gas prices and the excessive profits reaped by the oil industry have come at the expense of hard working Californians, and the financial burden of skyrocketing prices has been shouldered disproportionately by lower income Californians. This bill would authorize the Energy Commission, through a public process, to impose a price gouging penalty to curb excessive profits and return the funds to hard working California families.

It would also improve transparency into California's petroleum market and create an independent watchdog within the Energy Commission to investigate the industry's market activities and refer violations to the Attorney General's Office for prosecution. For decades, the Attorney General's Office has investigated gas prices, looked for price fixing and market manipulation, and prosecuted bad actors that schemed to drive up the price of gas during previous periods of market disruption.

We are still actively involved in litigation against two multinational gasoline firms for allegedly manipulating California's gas prices and costing consumers more at the pump in the wake of the 2015 explosion at a gasoline refinery in Torrance, California. The Attorney General stands ready to enforce and defend this bill as well, and prosecute bad actors rooted out through the increased transparency and oversight included in this bill. California consumers have been paying too much at the pump while oil companies continue to report record profits at their expense. This has gone on for far too long. Attorney General Bonta urges your aye vote on this historic legislation.

Thank you. Yes.

Chair Bradford, if I may just briefly, before you ask for...

Go ahead, Senator.

Thank you so much. The bill before us is amended. The bill that was, as our representative from the Governor's Office has pointed out, what was introduced was different. And I want to thank both houses and stakeholders for the incredible work that was done over the last couple of months working on this, interacting with folks as to trying to address things. There were concerns about potential unintended consequences in the first draft.

There were a variety of concerns and was a very good process of both houses input that led to the revisions that the Governor's Office has done to the bill and to what we put forward to you today, as was described. And I think that these hit a very important sweet spot of being able to, empowering us, meaning the State of California, to get the data that we need to do the analysis that is necessary, establishing an entity that has the expertise to do that analysis, and then the authority to do a penalty if warranted, but not automatically.

So I just wanted to make those points and also thank Chair Bradford's input and so many other individuals who interacted and gave the different feedback that resulted in the bill that's before you today.

Thank you. Now, our final witness.

Ellie's here for technical questions.

Okay, just for technical questions. Okay. Now let's move to Room 1200. And if there's any witnesses here in support, you can stand there. State your name, organization, your position, please.

Thank you. Kim Stone, Stone Advocacy, on behalf of a large coalition of over 100 environmental, community, and consumer groups in support. I'm not going to read every single one of them. It's more than three pages long, but it is in the analysis. Thank you.

Jamie Court with Consumer Watchdog, passionately in support of this landmark reform.

Thank you. Next witness.

Bill Allayaud for Environmental Working Group, supports. Thank you.

Thank you.

Teri Olle, Economic Security Project Action in strong support. Thank you.

Thank you.

Thank you, Mr. Chair. My name is Dan Jacobson with Calperg and Environment California in strong support. Thank you.

Thank you.

Mr. Chair. Justin Fanslau, on behalf of the California State Association of Electrical Workers, the Western States Council of Sheet Metal Workers, and the California Coalition of Utility Employees. Additionally, on behalf of 75 signatory elected officials, for Elected Officials to Protect America, we're all in support. Thank you.

Thank you.

Christina Scaringe for the Center for Biological Diversity in strong support.

Thank you.

Melissa Romero, California Environmental Voters, in strong support.

Ethan Nagler on behalf of the City of Mountain View, in support.

Melanie Morelos on behalf of the Greenlining Institute, in support.

Christoph Mair on behalf of the American Federation of State, County, and Municipal Employees, AFSCME California, in support. Thank you.

Thank you.

Chris Myers with the California School Employees Association in support. Thank you.

Thank you, Chair and Members. Igor Tregub, Chair of the Alameda County Democratic Party in strong support.

Thank you.

Juan Altamirano with the Trust for Public Land in support.

Thank you. Are there any other witnesses in support in Room 1200? Hearing and seeing none. Now, we're going to move to witnesses in opposition. If there are one or two primary witnesses in opposition, we would ask that we make a seat available for them and then we'll... And we'll provide each of you three minutes to make your presentation.

Mr. Chairman and Members. Eloy Garcia for the Western States Petroleum Association, as you know, representing the state's refiners and all its major oil and gas producers. We continue to oppose this bill for many of the same reasons that we opposed the prior version. This version that you're voting on today has been in print just over 48 hours. It is an extensive amendment, and we appreciate that there was work that was going on somewhere, but it wasn't with industry stakeholder. There was never a stakeholder group.

We were never invited to come in and talk and maybe opine and provide some input. That hasn't happened. Yesterday was our first meeting with the Governor's office. So we do take exception to this rushed approach. This is significant legislation. It is a significant change to our energy policy, to our transportation fuels policy, and it deserves much, much more deliberation and consideration.

We cannot have both, on the one hand, a first of its kind, never been done before bill, and expect it to be done right in 10 days. That just does not reconcile. And I did not intend to speak to this, but I do have to take exception. I've represented this industry for 25 years. I have seen a major change in the industry over 25 years. When I started, we had 21 refineries, and it had just come down from 32. Refiners do leave the state.

California puts policies in place that do chase out energy producers. It has happened. It will happen again. So the idea that refiners will never leave this state, I would ask you to look around, see if the refiners that are here today are the same ones that were here 10 years ago, 20 years ago. That's not the case. Energy policy has consequences. We would ask you to consider that and take it seriously.

10 days for a first of its kind legislation does not suggest that we are fully considering all the concerns. We are still reviewing the specifics, again, just over 48 hours. We're reviewing the specifics of this massive new data reporting requirement. But most immediately concerning is the confidentiality of this market sensitive information. This bill now makes some of the confidential information available to a new, yet to be determined, a politically appointed board.

And with all due respect to your staffs, to legislative staff, we are turning over information about spot market trades, about shipping input pipeline capacity to legislative staff. Former legislative staffer myself. But I do question what staff is going to do with that information except turn it over and potentially make it available unintentionally or intentionally to the public.

You heard an example from the Attorney General of a pending litigation. That is energy markets in the world that are looking for information about California's energy market and fuels market. We have to be extremely careful with that information. So in this case, in this new amended bill, you're asking for a great deal of new information, highly sensitive information. At the very least, we would urge you to keep that to the existing bodies that get that information, that can protect that information.

The Attorney General, the Energy Commission, under strict confidentiality requirements. You're expanding the amount of data into who gets it and how they protect it. That is a bad recipe. We would urge you to reconsider that and take the time to get it right. This bill also delegates authority to the Energy Commission to do something never been done before, and that is to have a regulatory body in a transportation fuels market. This is not a utility market.

This is a transportation fuels market with inputs from global inputs that is susceptible to global events. You're asking a California regulatory body to set a maximum refinery profit margin, and then you're calling that price gouging. You're redefining what price gouging is. That's arbitrary, and it will have consequences.

Now, we appreciate and understand that you have now asked the Energy Commission to make a number of considerations to evaluate the potential impact on supply and demand, to evaluate whether this instrument itself is going to impact supply and demand. You heard from energy economists, most notable energy economists in the state, in your oversight hearing, told you, I believe this Committee, if we have a scarcity issue, if we have a supply and demand issue, this is the wrong tool.

Nonetheless, you're delegating that authority and that tool to the Energy Commission. Again, we would urge you to take more time. And we would actually flip it. We would urge you to have the Energy Commission do that evaluation, come back to you with all this new information, to do a demand analysis and come back to you and assure you that it's not going to affect supply. You're doing it in reverse here. You're delegating them and then trusting them. Once you've delegated, good luck trying to get that back.

So absolute concern with that delegation of authority, another major concern for us, and I will be quick, I know I have time. But another major concern is section three of the bill, entirely new. Here, we are again, delegating authority to a regulatory agency on refinery maintenance. One thing is to understand and to be aware of when maintenance is happening, but to delegate the authority to an unelected regulatory body to tell us, not only when to do maintenance, but when not to do maintenance.

That is a huge concern. That is a safety concern. That is a safety concern for our workforce, for the communities where refineries operate. So we would urge you to delete that section. The information is one thing. Control of the refinery operations is another. So, so again, the bill calls for a number of studies, which we welcome. Supply and demand, we welcome. But those should dictate what tools you use, not come after the fact. So again, we oppose this bill. We urge you to take more time. It is a serious bill and deserves much, much more deliberation. Thank you, sir.

Thank you. Next witness.

Mr. Chair and Members, good afternoon. Brady Van Engelen here on behalf of the California Chamber of Commerce, a coalition of concerned businesses and organizations. This Bill sets a bad precedent and sends the wrong message to other industries here in California. Allowing an unelected body that is not accountable for any one constituency to determine what a reasonable profit margin is sends the wrong signal to the business community and leaves them asking if they will be next.

This measure will not lower the price of fuel, of transportation fuels here in California. To be clear, price is really a byproduct of supply and demand. This measure will not impact either one of those, but rather focuses on setting price caps on refiners that are trying to meet their demand for transportation fuels here in the state. If anything, this could lead to higher prices, which only exacerbate the affordability crisis we're facing here in California.

This will hurt small businesses and those that are likely able to afford it the least. Just a few weeks ago, this Committee heard from many experts that a tax or a penalty, whatever, refer to it as simply won't work. Whether that tax or penalty is implemented by the Legislature or the Energy Commission is irrelevant. With that said, we look forward to working with the Legislature and identifying ways to increase to address the affordability crisis we have here in the state.

However, we believe this measure will not help to lower the cost of transportation fuels here. And for that reason, and for the reasons noted above, we remain opposed. Thank you, Mr. Chair.

Thank you. Now we'll go to witnesses in opposition here in room 1200. We ask that you state your name, your organization, your position, please.

Chairman and other Members, Paul Yoder, on behalf of the Kern County Board of Supervisors. They are adamantly opposed to this Bill and urgent no vote. Thank you.

Next witness.

Mr. Chair and Members, John Wenger, on behalf of the California Fuels and Convenience Alliance, also opposed. We have significant concerns on how our small businesses are going to comply with all of the new reporting requirements.

Thank you. Next witness.

Tobias Wolken with the California Taxpayers Association, also in opposition.

Thank you.

Mr. Chair. Members. Mike Monagan, on behalf of the California State Building and Construction Trades Council, in opposition.

Great. Thank you. Is there any other witnesses in opposition here in room 1200? Hearing and seeing none. Now, moderator, we will go to our witnesses who wish to testify via the teleconference. We would ask that they queue up at this time. We would ask that you state your name, your organization and your position. Moderator, please let us know when they're ready.

Ladies and gentlemen, if you'd like to queue up for opposition or support, you may press 1 then 0 at this time. First we go to line 28. Please go ahead.

Good afternoon. My name is Richard Montego Brown. I represent Comite Civico Del Valle Incorporated. We're an environmental justice organization based in Brawley in the Imperial Valley that serves disadvantaged communities often struggling with economic insecurity. Earlier this morning, we sent in our letter of support for Senate Bill X12 with our thorough opinion. But we did want to take the opportunity to call in and personally register our support for the passage of this price gouging penalty legislation. Thank you for the opportunity. Thank you.

Next witness.

Next, we'll go to line 36. Please go ahead. Line 36, your line is open.

Good afternoon. My name is Belia Ramos. I am a supervisor in the County of Napa. I am calling today in support of SB 2. When you look at Napa County and the agricultural region that is flourishing here, the people who make this region work are our farm workers, our working class people.

The pricing structure of gasoline this last year nearly crippled our working families, and especially hit our farm workers hard, who, given the housing shortages we have in our county and in the neighboring areas, drive long distances to be able to go to work. We encourage the Committee to vote in approval. Thank you.

Thank you. Next witness.

Next, we'll go to line 15. Please go ahead.

Hi, my name is Sarah Wiltfong, and I'm with the Los Angeles County Business Federation, also known as Bizfed, an alliance of over 236 business organizations that represent about 410,000 employers in Los Angeles County. And we are adamantly opposed to this Bill. Thank you.

Thank you. Next witness.

Next, we'll go to line 37. Please go ahead.

Hi, my name is Natalie Boust with the California Business Roundtable, and we are strongly opposed.

Next, we'll go to line 27. Please go ahead.

Thank you. Good afternoon, Mr. Chair and Committee Members. I'm Farrah Khan, mayor for the City of Irvine, calling in support of SBX 12. This is so important for us right now, as big oil refineries in California more than doubled their profits in '22 through pump price hikes, the choice was theirs to increase prices and pocket excess profits that resulted in Californians struggling to fill their gas and pay their bills.

I'm counting on you to do right by our residents, because I'm the one facing them on a daily basis. We need transparency in the oil industry, and we need to let our communities know that they will no longer suffer the consequences of greed at the pumps. This item is not rushed and is much needed today. Thank you.

Thank you. Next witness. Next, we go to line 12. Please go ahead.

Mr. Chair, this is Adam Lane from the Los Angeles Business Council speaking in strong support.

Next, we'll go to line 20. Please go ahead.

Good afternoon. Woody Hastings with the Climate Center. I'm speaking today in support of SBX 12. Standing up to corporate greed is important, but phasing out fossil fuels altogether is what we need for a climate safe future, per the latest United Nations Climate Science Report. We urge the Governor to heed the science and stop issuing permits for new drilling and launch a statewide effort to end California's reliance on polluting fuels for good. In the first three months of 2023 alone.

Thank you.

Approved more than 600 permits for oil and gas drilling. Majority of those permits are within the 3200 foot health.

All right, we're just asking for your position on this Bill, so let's go. We thank the Bill author and upon the Governor for the leadership. Thank you. Thank you. Next author. I mean, next witness.

Next, we'll go to line 11. Please go ahead.

Members of the Committee, my name is Connor Medina with the Orange County Business Council in strong opposition. Thank you.

Thank you. Next witness.

Next, we'll go to line eight. Please go ahead.

Hello, my name is Judy Shure. I'm a volunteer with 350 Bay Area Action. On behalf of our 18,000 supporters, we support SBX 12.

Thank you. Next witness.

Next, we'll go to line 34. Please go ahead.

I'm Leslie Weber, district staff to Marin County Supervisor Eric Lucan, and I'm here on his behalf today to call in support of SBX 12. Supervisor Lucan has heard from many constituents about this issue and supports the price gouging penalty to discourage these price hikes and provide much needed oversight and transparency. Thank you so much for your time.

Next, we'll go to line 22. Please go ahead. Line 22, your line is open.

Good afternoon, Chair and Committee Members, my name is Sonia Bustamante, Chief of Staff for Contra Costa County Supervisor John Joya from Richmond, who also serves on the Bay Area Air Quality Management District board and previously served on California Air Resources Board. He strongly supports this Bill. His support is based on 24 years of experience as a supervisor representing environmental justice communities in Contra Costa County.

And this proposal will provide relief to those communities which have paid the costs of living near the facilities that refine gasoline for drivers throughout our state. We regularly hear from constituents their frustration about how much more they pay in fuel costs despite record oil company profits. This is not fair or equitable. We urge your support.

Thank you. Next witness.

Next, we'll go to line 40. Please go ahead.

Hello, can you hear me.

Hello? Yes, we hear you fine.

Hi, my name is Maribel Nunez. I live in Riverside and I'm part of Inland Equity Partnership Coalition. We are in support of SB 2. It's long overdue. The Committee has been suffering a lot on high oil prices, and so this needs to get done, and we need accountability and please support this Bill.

Thank you.

Next, we'll go to line 38. Please go ahead.

Good afternoon. My name is Mikey Knab, Policy Director with Climate Action Campaign, an organization based in San Diego and Orange County with a simple mission to stop the climate crisis through effective and equitable policy action. Fossil fuel company shareholders and executives have pushed for policies that have exacerbated our climate crisis and worsened public health. SDx 12 is one way to ensure that working Californians are not on the hook to Fund these harmful efforts. And for that reason, I would like to share our strong support for this Bill. Thank you. Thank you.

Next, we'll go to line 21. Please go ahead.

Hello, my name is Katie Collender. I'm the finance manager at Humboldt Transit Authority. Over the past two years, our fuel prices have increased over 80%, which has cut into our ability to fund operations and pay our employees a living wage. So here at Humboldt Transit Authority, we're in strong support. Thank you.

Thank you. Next witness.

And next, we'll go to line 29. Please go ahead.

Hello, my name is Williams Lopez, calling on behalf of the Los Angeles Clean Tech Incubator, and we are in strong support of SBX 12, and we urge the Committee to support this measure.

And next, we go to line 43. Please go ahead.

Hello, my name is Caroline Griffith. I'm the Executive Director of the North Coast Environmental Center, based in Humboldt County, calling in support of SBX 12. Up here on the North Coast, we consistently have some of the highest gas prices in the country, and we are also projected to have the highest rates of sea level rise on the West Coast due to anthropogenic climate change.

And meanwhile, while we are scrambling to prepare and adapt to sea level rise, big oil, one of the major contributors to the climate crisis, is raking in record profits due to lack of oversight and transparency. So we strongly support this effort to hold the industry accountable, not only to protect consumers, especially low income consumers, but also to protect the environment by making this polluting industry tree less profitable so that we can transition away from fossil fuels.

Thank you. Thank you. Next witness.

Next, we go to line 45. Please go ahead.

Good afternoon, Chair and Members of the Committee, my name is Elissa Diaz, calling on behalf of the Los Angeles Area Chamber of Commerce in opposition to SBX 12. Thank you. Thank.

Next, we'll go to line 46. Please go ahead.

Good afternoon. My name is Crystal Martinez, District Staff to Marin County Supervisor, Katie Rice. On her behalf, I'm expressing her strong support of Governor Newsom's Gas Price Gouging Bill, SBX 1-2, which would provide much needed transparency, oversight and prevention that is sorely needed. This Bill will help reduce impact of gas price spikes that hit everybody, but hurts vulnerable residents most especially. Worse still, the negative effects go beyond the spike and ripple at the expense of those that are able to afford it the least. Thank you.

Next, we'll go to line 44. Please go ahead.

Good afternoon. My name is Ulises Cabrera. I'm the Mayor of the City of Moreno Valley in the Inland Empire, here to express my strong support for Governor Gavin Newsom's Price Gouging Penalty, introduced by Senator Skinner as SBX 1-2. We're asking for increased oversight, accountability, and to ensure transparency from big oil companies and to protect our working families from unexplained gas price hikes. Our communities deserve this, and we ask you to vote yes on this bold action. Thank you.

Next, we'll go to line 39. Please go ahead.

Hello, good afternoon. My name is Ces Rosales. I am President of the Asian Pacific American Democratic Caucus of Alameda county. But I am speaking up as an individual, and I want to express my full support for SBX 1-2. Thank you.

Thank you.

Next, we go to line 47. Please go ahead.

Hi, this is Brian Sherwin calling from San Diego. I'm with SD 350, and I am calling to strongly support SBX 1-2. I know it can be challenging and a little scary sometimes to stand up to big oil. They have a lot of money, a lot of power. I urge our Senators to do the right thing. California is a huge market, and we can use that muscle, hold these companies accountable, and let's get on the right track with climate change. Thank you.

Next, we'll go to line 48. Please go ahead.

Greetings, Heidi Epps from Morrow Bay, California, calling to support SB 423, SB 4 and SBX 1-2. Thank you.

Next, we'll go to lines 33. Please go ahead.

Good afternoon, Committee, and Senator Bradford. My name is Reverend Jonathan Moseley, Western Regional Director of the National Action Network in support of SBX 1-2.

Next, we'll go to line 49. Please go ahead.

Good afternoon. My name is Hoàng Nguyễn. I'm the Director of External Affairs for AAPI Equity Alliance. We are a coalition of over 40 community-based organizations that serve and advocate for the 1.6 Asian Americans and Pacific Islanders in Los Angeles County. We are supportive of SBX 1-2, the Price Gouging Bill. It is outrageous that as oil companies hiked prices and raked in a record of $200 billion in profits. Our families and communities are struggling to pay for basic necessities. This Bill would discourage these price hikes from happening in the first place and help provide much needed oversight and transparency to hold the oil and gas industry accountable, because it is very reasonable, in our mind, that if oil companies exceed the Bill's threshold for maximum refining margin, they should be charged and that money should be returned to Californians. Thank you.

Thank you. Next witness.

At this time, there's no others in queue.

Okay. We're going to bring it back to the Committee. Do we have any Committee Members with questions or comments at this time? Senator Rubio?

No. Okay.

You're okay?

All right.

Yeah, I'll start.

All right, Senator Seyarto.

All right, well, we'll get this kicked off a little bit. One of my concerns about this approach, I know we've abandoned going straight to voting to impose a penalty or a tax. When it's a percentage, it sounds more like a tax. But this approach has been tried. I asked this question in Committee before, and the Governor's staff, not these members, but the economic staff, told me that, "oh, yes, there are, there's several countries doing the same thing."

But I didn't phrase my question right because what I left out was "successfully," because they're not successful in doing that. I did some of the research. I read some articles on all of the companies that are doing that, or the countries that are doing that, and a lot of them are backpedaling. Some of them abandon the effort altogether because what happened was domestic supply went down and prices went up. And at the end of the day, this is about reducing prices at the pump.

But here's the other part of this. The rest of the country had ridiculously high gas prices as well, and that's because of energy policy. It's signaling it's taking off production. It's going to foreign oil as opposed to domestic supply. There is a whole big picture there. And it wasn't just gasoline prices. Our natural gas prices were still getting the $500 bills for that. And that's because of what? An increased demand and a less supply? So I'm not quite sure.

And also, I did have a question for Governor's staff. The CEC, they came out with a report recently. Did they find price gouging? And if so, why hasn't there been a prosecution for that? I'm asking a question.

Thank you, Senator, for the question. If you're referring to the report the Energy Commission published after the Governor asked for the investigation in the 2019 gas price spikes, the conclusion that the Energy Commission found was really a large divergence between branded and unbranded retail gas stations. That is why you'll see reflected in the proposal. Part of our transparency and data the Energy Commission will now be collecting is really looking into what could explain that discrepancy.

I'm happy to respond to kind of some of the other points you've made as well, but you may want to add a few more.

Okay.

One of the things that I'm also concerned about is this concept of, I call it the firewall between me and my constituents. If I'm going to vote to impose a penalty, I don't need an organization. I don't need to make another Commission to do it for me, and then have me say, "well, it's the Commission, not me." That's what this appears to be. We are creating a body that stands between our responsibility to vote and be held accountable by our constituents.

If we want to vote to do a gas tax or penalty, then we should just do that. We should not be forming a whole new commission. Our commissions have not been as successful as we would like them to be. We have hearings all day long on the ineffectiveness of a lot of our commissions and committees. So it kind of gives this firewall effect between the Legislature and what we're doing. And we do that enough. And I think we shouldn't be doing that.

So that kind of concerns me. Ms. Skinner, I see you have your hand on the button. You want to respond to that?

Happy to, the Chair. Senator Seyarto, I'd like you to cite one example where the Legislature itself issues penalties or fines on a regular basis.

I would, except for we've created so many firewalls, we don't have to. And that was my point exactly. When we are creating price hikes, when we are creating mechanisms, when we are creating policies, and then telling another agency, "hey, you guys do the dirty work of hitting our taxpayers in the pocketbook," and then telling us that, "hey, you know what? We didn't do it. It was the agency. They're the ones who come up with the 2035, no more gas cars thing. It wasn't us." That's what I'm talking about. So thank you for proving my point.

Well, you clearly are entitled to your opinion. I think that what my point was is that over the years of legislation, and we're calling decades, the Legislature passes statutes which authorize fees or fines or penalties for agencies to levy based on circumstances that there's a violation. And we have not constructed either House of the Legislature to conduct that type of oversight in every aspect of state business. So it was, in effect, my point earlier.

We are the policymakers, the lawmakers, our agencies and our departments and divisions are the implementers.

Yes. Thank you. Thank you for that explanation. A couple more points, but I want to give my colleagues an opportunity to jump in where they would like to. Okay, I'll take a break. Thank you.

Thank you, Vice Chair Dahle.

Thank you, Mr. Chairman. And thank you for the testifying today. I don't have a question. I have a basic comment. We just got this information, really hours ago, but I want to just talk about monopolies for a moment. All of you remember, we had AT&T was the giant monopoly in our nation, quite frankly, when it became to communication, and it was manipulating the ability for any competition. And so that was broken up.

We had the railroads here in California where we had a manipulation of transportation as well. And we have laws on the books for monopolies. In this case. I want to just say the data I had gathered was there was 47 refineries. There are 15 refineries left today, to my knowledge, and somebody can correct me if that's wrong. It's the information I got. 10 of those refineries refine California fuel blends. The five other ones do, from my knowledge, things like road base and not fuels for transportation.

And California has special blends. And of those, I think there's five big producers in there. So to manipulate the market, as AT&T did back in the Ma Bell days, and as the railroads do, you would have to get all of those producers to do that, to manipulate it. So I just want to put that out there. And, look, I'm not here to defend oil. Anyway. I think this is more of about a policy decision that we're making as a Legislature. We are punting.

This Bill is going to give power to the CEC. And just as my colleague talked about, we give that power away. We've given the power to reduce climate change to the California Air Resources Board, just like we're going to do with this piece of legislation. And we have had reports back to the Legislature on the failures of the California Air Resources Board. When it comes to climate change, they haven't really reduced climate. And I sit on the Committee for Sub 2.

I sit on the Energy Committee, and we've had those agencies in here. CPUC, same thing. Failure. And now we even had a Bill yesterday in the Energy Committee to actually force the CEC to come in front of the Legislatures. Senator Laird is carrying the Bill. It's been carried many times, to actually make them come and tell us what they're doing. So do we give power to unelected bodies? Absolutely do. We do. And those bodies are appointed by the Governor and through the Legislature.

And so when we give that power, we give that power to those agencies to find businesses and to regulate. Last year, we had a Bill, AB 257, which created the Fast Foods Council, which is an attack now on businesses to do minimum wage working, minimum wage requirements, working condition, employee-employer relationships, franchisees versus franchisors. We've had an appointed Healthcare Authority Board. We've had Executive orders on a no-bid contract with Kaiser. And we have 16 hospitals that are about to go out of business in California.

My statement is that as a Republican, we don't make the rules here. This Bill will get passed. It's being jammed through in a fast approach. I'm just a watchman on the wall. I'm going to tell you, this is really scary for anybody that's a constituent or business person in California. This is socialism. This is pushing the government to pick winners and losers because we don't like oil in California. So we're going to go after them.

And I'm not saying that I guess maybe 10 of them could have got together and manipulated the market. We have many things already in place. The AG's office commented on their lawsuits, and I looked up the one. This is from Rob Bonta. I'll read. We are currently engaged in litigation against two multinational gas trading companies--trading firms--for allegedly manipulating California's gas prices and costing consumers more at the pump in the wake of the Torrance refinery. Those aren't refiners. Those are trade people who trade.

Now, those of you who, like, if you understand how commodities work, all commodities, I'm a farmer. I have a worldwide commodity that I sell, and it's traded on the futures market, no different than oil or eggs or milk or lumber. All those things are traded. And those markets are manipulated. And they're manipulated by traders at the stock market, not by the people who produce them, like me. So I just want to say, when the Legislature is picking winners and losers, it's really scary.

We've been doing that. This Governor has been very aggressive on Executive orders and the likes, and I think this is being fast tracked. And I think it's scary when we're moving towards socialism. Where we're going to pick winners and losers as a governing body. And the really thing that I think surprises me about this is the Section 3, is where you're going to actually tell these refineries when they're going to shut down and when they're not going to shut down. I'm a farmer.

We change the oil on the tractor every time it's supposed to be changed, but sometimes the engine just blows up. And when it blows up, it's done until we have to fix it right then and it doesn't perform anymore. So you're going to have an agency that's going to come through now and decide how they're going to fix or keep their maintenance up on the refineries. I think that's interesting. And the last point, Mr. Chairman, I thank you for indulging me.

The really ironic part is that nothing happens until 2023--or 2033. The CEC has the ability for--most of us won't be here, who are making these decisions. I surely won't be here, but I think that's ironic. If we're going to do something, let's do it, and let's find out what the heck's going on so we can actually figure it out in a more timely manner.

We have pushed off many of these climate change bills to 2035, and we have no process how we're going to get there. So I think that's fascinating as well. Thank you, Mr. Chairman, for allowing me to have some comments.

Thank you, Mr. Vice Chair. Next up, Senator Rubio.

Thank you, Mr. Chair, and everyone here today. And I'm really encouraged by all the conversations that I've been having every single day. And I want to thank everyone for making this issue a priority. It is extremely important that we really focus on why we're here. And that's because, like all of my colleagues, we've had so many of our residents stressing and expressing their concerns. They have been devastated by so many issues that are going on.

And I know that we cannot just talk about this issue without acknowledging everything else that comes with it. We just came off of a pandemic. My residents are expressing loss of employment. They go to the supermarket, and they don't get the same amount of groceries with the same amount of money. They come out with less. And we can go on and on and on. But the reality is that our residents are hurting, Californians are hurting.

And so we definitely need to take a hard look and have the hard discussions about how do we find solutions and come up with at least a Bill, which I believe we have here before us, that starts that conversation. And I wanted to acknowledge two things. I'm very vocal about trying to ensure that we do what's right and that we're balanced where we're not intending to do something first, that at the end ends up hurting the consumers, which are the people that we intend to protect.

And I know that I heard my colleagues say how fast this is, and I'll be the first one to admit that that's not how I like doing business. But I can at least speak to my experience that I'm very appreciative of the time we have spent. And I think my colleagues will probably chime in. We spent so much time having discussions internally with each other, with our colleagues.

I mean, I don't see the Governor often, and I think I've seen him twice last week, twice this week, and he spent a lot of time in his office with me answering questions and at least expressing what he wants to do and taking time to at least listen to some of our concerns, which to me was really critically important because I know that we hear that things are moving fast. And again, that's not how we do things.

But this is an important issue, and our residents don't want long explanations. They don't want to know all the details. They just want to know what are you doing about it. And right now, this is a time to continue to work on this issue. I was not on board necessarily on the original Bill. I've expressed a lot of concerns. I asked a lot of questions, but that's a testament to the author.

Thank you to the author, the Governor and everyone else that's involved that now we have a different version of the Bill. And that's because we were asking the hard questions, expressing our concerns and telling them what we wanted. And a lot of the concerns that I was expressing I see in this new version. And yes, it's new, and we'll continue to move it through the process. But for me, accountability is very important, but not necessarily accountability, necessarily just for the industry, but for all of us.

And the fact that we have an audit trigger, which was important to me, to be able to come back and analyze to see if this is working, not working, what can we do to improve it, was critically important. I didn't think the first version of the Bill that just automatically penalized people, I don't think that was a good idea, and I expressed it. And again, here we are with the different Bill that addresses that particular issue.

The fact that we have this Commission that's going to allow for different perspectives and different voices was also, that was very important to me. When we had the first original Bill, it was just a trigger, and I don't think anybody had any say so in how it was done. But I think that this allows for a conversation and for many stakeholders to sit at the table and really express what they see.

And so I don't want to belabor the point, but at the end of the day, our consumers, our residents, our Californians are dying. I mean, they're literally stretched thin. Some of my residents were expressing how they have to decide right now how much food they buy because they couldn't afford to drive.

And I have to say a lot of our communities that are low-income, Spanish speaking, like the communities that I represent, have to drive twice as long to get to their jobs because, I think someone already expressed this, the home affordability issue is a big issue, and unfortunately, they have to drive to get to their jobs.

And so again, when I think of this issue and I think of what we're trying to do here is trying to make sure that Californians have a reprieve from everything that's been on top of them recently. And so to the author, I do have a couple of questions, if I may. I think someone was talking about the confidentiality issue, and that was a big concern and it still is.

And so I want to give you a chance, if you please, to really address that issue about just having the information out there. I think it was Mr. Garcia who posed that question, and I really would like to hear your response.

Thank you. As Mr., our representative from WISPA pointed out, there is a set of data that is protected in terms of privacy, and the way the Bill is constructed, any data that meets those privacy concerns would, of course, be only given to the, would be collected first in a form that respects the legal provisions around that, and then secondarily, when provided to any agency like the Energy Commission, would be done in an aggregate form, which is allowed versus identifying a single company.

I can turn to the Governor's Office if Ms. Sanchez wants to elaborate on that. But this was constructed understanding both federal and state law that protects companies and their privacy regarding their business practices. But go ahead.

I'll just add briefly, Senator, that state law that has protected the privacy and confidentiality of this data has done so for 43 years in California, and we intend to continue protecting those confidentiality concerns. I think Mr. Garcia raised the issue of sharing data with legislative staff. And as the author notes, the Bill specifically outlines that that data would be an aggregate and anonymous form, so we do not share the confidentiality concerns raised by the industry.

Thank you. And I do have another concern. I've been very vocal, just as it pertains to anything business in general, just acknowledging just the difference between a big company and a smaller company. And I know that one of the speakers mentioned the difficulty in trying to comply with all the requirements if you were a small business. And I just want to hear from anybody, if there's any consideration, to maybe continue to work the Bill so that we could help these small companies. Anybody like to address that?

The data requirements, for example, would not be levied, as far as I can tell from reading carefully the Bill on any company that is small, what we would consider a small business.

The other thing I wanted to mention in relationship to the privacy, the Market Advisory Committee, the committee of experts, would have to, there would be nondisclosure agreements signed, and additionally, there would be, there is a requirement that once they leave their position, that they not be involved in any business activity related to this for at least a period of a year. So there's both the cooling off period, the nondisclosure agreement, and then the construction that already respects both state and federal law.

So to be clear, that cooling off period would be a year, correct?

Yes.

I appreciate everything that's been done here and just the time and energy put into this. And I know because I've been part of so many of those conversations just privately, but I don't necessarily think this is a perfect Bill yet. I think that there's room for those conversations to continue in terms of the cooling off period, like maybe extending it just a little bit longer.

I mean, there's so much more that we can still do, but I do know that we've come a long way from where we were and where we're now. And I think that a lot of the concerns that I personally had with the initial Bill have been addressed in large part. It's still not fully there, but I want to be supportive.

And as I stated, the amount of time that the Governor has given all of us and the amount of time that our colleagues and all of us have been putting into this, I think it's a testament to why, how important it is and that we want to get it right. And so I will definitely support it. But I want to make sure that we continue the conversations and really continue to take in those suggestions and give it a good look. So thank you so very much.

And there is also included annual reports to the Legislature. So, of course, if the Legislature at any point sees the need to do some adjustments or cleanup, the Legislature obviously has that right.

Thank you. And thank you, Mr. Chair.

Thanks, Senator Rubio. Next up, Senator Becker.

I want to thank the Governor's team, thank our witnesses here today. Most of all, thank the author for all her hard work. We need to make sure that Big Oil is not manipulating the market price gouging or otherwise using its market power to harm everyday Californians or punish California for pursuing aggressive climate policy. These companies collectively made $200 billion in 2022, as we've heard, $200 billion. And so this is really about protecting Californians.

At the same time, we do need to recognize that it is going to be tricky, even if the industry has the best of intentions, to manage a stable supply and demand in the fuels market, to support our continuing need for fuels, even as we aggressively look to decrease demand over time. So I do believe that this Bill tackles both these problems, providing oversight and deterring market manipulation, and also trying to put in place planning efforts to maintain stability during a managed decline in the market.

So I will be supporting the Bill today. I had one other comment and then one question. It is very positive that we're trying to protect consumers from price spikes as we go through, as I mentioned, this expected period of decline and infrastructure retirement. But I'm also concerned about the lack of planning to make sure we actually achieve that transition away from fossil fuels while protecting workers and improving frontline communities' air quality.

So I think that transportation fuels transition plan is great, but I think we'll look to continue to do more to make sure we fully address how California will actually make the transition and make sure we retain this adequate supply and stable supply of these current fuels until we don't need them anymore. My question is really about the planning and distribution, the penalty money that's in the program. Who's going to be planning for the distribution and use of those funds?

If, if, because there's always an "if," there's ever a penalty levied, the funds from that penalty would be placed in this penalty fund in the Office of the Treasury, and it is the Legislature that would appropriate that money. And the language in the Bill is that it would have to be for the specific purpose of addressing consequences of that price gouging.

Thank you. Well, I'll leave it at that for now. I appreciate again, all the author's hard work and look forward to hearing the rest of my colleagues. Thank you. Next up is Senator Durazo.

Thank you, Mr. Chair. I do want to speak to the fact that we have had much information, much conversation over the last several months from the day that the Governor announced there would be a special session on this. We didn't have the details, but you could tell by the title of it, price gouging, you know, what it was about. Ah. Then in December, it became an official session. I've spoken to both governor's office staff, the Governor industry, met with industry leaders, others.

We heard from experts through our panel. So unlike other things that might get pushed through on a faster time frame than I would like, I think the issue, the fundamental issue, there's been no secret. And now we're getting into much, much more of the detail, which, by the way, has changed, has, as some people say, evolved to where it is today. And I will be supporting it because I believe that most of my issues were taken into account.

There's one issue that has not been in the way that I would explicitly like for it to be included. And so I guess the questions to the author or anyone else is the kind of information that we are going to expect specifically from the industry is having to do with pricing and the way the industry functions.

But we're not asking for the kind of information when it comes to addressing how this Bill will address the needs of Californians, Low income Californians, communities of color, who need it the most, who need the protection from the price gouging the most, who need the protections as vulnerable communities who do not have the power on their own and really expect us to address this issue. When Covid hit us and we were facing the pandemic, we were engaged directly with the issue of the virus.

I understand that there's no problem. We had to address that issue. But it took us too long to address and get information about specific communities. How they were being impacted by the virus, where those communities were, why were they impacted by the virus? And we finally got to that, and too many people lost their lives because we were so slow in digging into those particulars. So I think we use the term, we very rarely use the term in the bill itself.

The analysis makes some General reference to equitability. I have a bill right now before CARB to give us more information on the impact of our climate goals on the community, on socioeconomic impact. So I would ask, I've raised this with several people. We need that kind of information. It cannot just be about the industry. It's like, what about the small businesses? What about the people who rely and how much they rely on and what they need.

So I would really like that to be much, much more explicitly addressed and not just sort of left up to chance. Thank you.

Thank you. Senator Min. I'm sorry, I want to respond.

Senator Durazo, appreciate your points, because while it is not explicit in the bill, because part of what, before a penalty could be issued, there would have to be, the data collection is to give the Advisory Committee and the Commission the ability to assess whether the market is being manipulated in such a way or the prices are being manipulated in such a way that would create this threshold of gouging.

Now, obviously, if a penalty is issued the way the language, as I've stated, says that the Legislature would appropriate it to deal with the consequences, at that point, the Legislature would have the ability to direct it because it is not specific here, that if the Legislature were to find, and there is good evidence already that many of our lower wage workers end up having to drive farther to jobs and that at least to date, they are more likely to be still in a gas powered vehicle, for example.

And that also when other prices go up because so in other words, when gas prices go up, it affects all other prices. That given there's less disposable income, they are more affected a lower income family because everything that they are paying for is impacted by such prices. So certainly at that point, and I do not mean to say that it should wait till then, I'm only referencing how it is constructed.

Now, the Legislature would have the ability to direct it in a way that could address that because it gives the Legislature the authority to address it in terms of the consequences of the price gouging. But if the governor's office would also like to speak to it and happen.

The only thing I would add, senators, that protecting low income communities is at the heart of this effort. As the senators outlined, we know that Low income communities are disproportionately impacted by these high prices, and everything you see in the proposal is to root out those pricing issues that we've seen.

I'll also draw your attention to our advisory committee, which has a specific seat for a community member, community organization to make sure that their perspectives are very much heard by the division and by the Energy Commission as they undergo the rule making and to ensure that they're at the table going forward.

Just follow up. I appreciate both of you, your answers, but just like we're not relying on a conclusion that price gouging is taking place right now, we should not rely on our general understanding of what is taking place in our communities. Let's get the same amount of information as we are towards the industry. Thank you.

Thank you. Senator, Minn.

Thank you, Chair Bradford. Thank you to the witnesses here today. So, as I said at the last hearing, I don't believe we have a smoking gun. We don't have actual proof of collusion here. But I also think that's missing the point, because what's become clear as we've looked into this is that this is a fundamentally broken market, and that the primary beneficiaries of this broken market have been the oil refiners. They were making record profits.

In fact, they were issuing massive dividends, engaging in huge share buybacks at a time when California consumers were paying record prices, $7, $8 in my district per gallon. And that really is outrageous. And according to the consumer watchdog, profits from California were 30% higher than anywhere else in the world. Again, I just want you to let that fact sink in. So, again, I don't know that there's proof of collusion here, but the market was broken, and the beneficiaries of it were these oil companies.

And that was on the backs of California consumers. And what happened here was a moral outrage. I share the sentiments of my colleague from Los Angeles. I have constituents even in my part of Orange County who have been struggling through this economy, struggling with rising food prices. And many of them have had to make those tough decisions of filling up their tanks, going to work, and perhaps buying food, having to change some of their habits because of what's happening right now with oil prices.

And I think it's a moral obligation of this body to try to fix this market. It really is fundamentally broken. Now, I don't pretend to have all the answers on why it's broken, but I will note that consolidation over the past several decades has been a key factor in the fact that today, 96% of oil refined in the State of California is produced or refined by five companies. Five companies account for over 96% of oil refined in the state.

Obviously, that creates a massive ability to manipulate markets, to collude, even without explicit collusion or engagement. The fact that we have an opaque and thinly traded spot market also contributes to that. A complex supply chain. There's a lot of factors in California's market that we need to fix. Now, I will be the first to say I don't think this is a perfect proposal, but I do appreciate the strides that you have made in getting it to a place that I feel more comfortable with.

I want to thank my colleagues. Senator Skinner, Senator Bradford, many others for working here. I want to thank the Administration. I know there were a lot of late nights in trying to get this proposal improved based on the suggestions of some of us at the last hearing. I think it's a solid framework that addresses a lot of the major problems with this market. You have made this proposal better. You're addressing some of my concerns around the spot market and its opacity.

You're addressing my particular concern that I think many others share about ensuring a steady supply by authorizing CEC here to create reserves and require reserves from these companies. Having regular reporting from the CEC and audit will help us better understand this market that is very, very complex. And again, I will just emphasize whatever we may think at a 30,000 foot level. There is no question in my mind, or I think anyone looking at this rationally, that the market's not working and we have to fix it.

And this may not fix it in a single shot, but is a damn good start. And I do think that as long as we have a market in which we have 96% of oil being produced by five firms that is thinly traded the way our market is traded, we're going to have some problems with it.

And so I guess my question to you after that is, given that consolidation seems to be a major factor in this really steep concentration here, is that something that CEC, the Administration, is prepared to look into as far as addressing and reversing that trend in consolidation, is that something you're prepared to talk to the Federal Government about as well? Because this is not a problem unique to California, even if we are probably in the most extreme phase of it.

Thank you, Senator, for those comments. We don't explicitly ask the Energy Commission to look at the issue of reversing consolidation, but as Senator Becker raised, there is a comprehensive effort to lay out the transition plan away from petroleum while ensuring reliable and affordable fuels for today and tomorrow for all of those that are still driving gas powered vehicles.

So I would say as part of that plan, looking into what consolidation has done to our market and potential ways to remedy that, discussions that might need to happen with the Federal Government would absolutely be a part of that process. Thank you.

Thank you, Mr. Chairman, if I may, Senator Min. I appreciate the question, and you and I talked a little bit about this. We should be clear as policymakers, the California market is largely California policy created market again. 25 years I've been doing this, I've seen steadily increasing policy demands that are unique to California, from reformulated gasoline in the 90s. We saw 30 to 20 refineries, extreme expensive investments necessary, low carbon fuel, standard cap and trade applying to fuels. There is so much unique about California's market.

That may be for good reason, it may be for climate policy, for air quality reasons, Bay Area Air Quality Management District aggressive policies, South Coast aggressive policies, but very unique to California. We have a unique fuel specification. Is the market broad and thriving? No, it is unique, but you have created a unique market intentionally in California. So to create it and then wonder why it's going on, it's a little bit missing the point. But I would say you're doing it again now.

You're actively doing it now. The airborne just adopted a scoping plan that assumes and requires 94% reduction in refining capacity in California. So we can't have one hearing, one week that say, we got to get to those targets. And then the next week have a hearing saying, holy cow, we don't have refining capacity. They are absolutely related. And that is a California unique, and we should just be aware of it.

But to investigate and wonder why it's going on, it's just missing the point that we have a lot to do in that respect. And that's why we don't have Exxon in California. So to use an Exxon example of their global profits, hopefully it's just a misunderstanding that Exxon no longer operates in California, but it's for that very reason we created a unique refining market that they opted out of and other refiners may opt out of.

By the way, on the consolidation issue, that is the role of the Attorney General. That is what uniquely they have done for the last 20 to 30 years, every time there has been a refinery purchase, consolidation, merger, they investigate. They do it thoroughly, they exercise their authority, and they have. So I don't think that's something that California is lacking in. But thank you.

Administration.

If I'm allowed to respond briefly, chair, Mr. Garcia raises a number of compelling points around the CARB specificity around our fuel, the low carbon fuel standard, the cap and trade program, all of which this Legislature has boldly enacted. I would point out that none of those changed last fall when gas prices spiked to $6.41. Not a single one of those programs or environmental fees. Why did we spike to $2.61 above the national average?

Those fees, when you add them up, maybe explain a dollar difference, not $2.61. That is why what you have before you is a comprehensive proposal to look under the hood and ask those questions. Because we invited all five refiners to the Energy Commission hearing when we were trying to figure out what had happened and none of them showed. They haven't responded. They haven't answered our questions.

We hear the same issues around supply and demand when in fact our refiners have met California demand every year and then they export the rest of the product. Yes, we have a unique operating market. We have required the refiners to make cleaner fuels. They have done that. Why did they charge Californians $8 a gallon?

Thank you. Next up, Senator Gonzalez.

Sorry. I know I've been going back and forth, but thank you so much for this robust discussion. And I just also want to send my thanks and my gratitude to Senator Skinner for doing this incredible work, not just now, but she's been doing this work for a very long time. And of course, our governor's office and many of our colleagues who've done this. It is historic. And what my mind boggles around is why data is such a bad thing.

Data, I think we can all agree is important. As mentioned, none of our environmental fees had gone up, but yet somehow Californians were paying much more at the pump. And so I know we keep saying this, but it needs to be reiterated. I'm just wondering why data is a bad thing. And I would love to hear from you, Mr. Garcia, and that's a good question, but why?

Absolutely, data is a good thing. Understanding, and we would encourage this Legislature and regulators to understand, better understand the market. How you protect that data is the primary concern. Who receives that data and what they're going to do with that data is a concern. Getting data, we've been providing data to the Energy Commission under Pyra for 40 years now has never been a problem. Annually, monthly, weekly, sometimes daily, depending on the conditions in the market. We have provided that information to the Energy Commission.

To sit here and say that we don't know you've had the information. What you haven't had information on is supply and demand. We've encouraged you to get that information for the last 10 years. But data you have that, you want more data? We'll look at the specifics, but we start with who gets it and how do you protect it. And I'll refer you back to the attorney general's existing complaint. Those are not refiners. Those are global market traders that know what to do with the data.

Now, some folks who are going to get an information here, they may not know what to do with it. They may not know how to deaggregate data, but fuels markets, they know what to do with it. And we would caution you to protect the information. That's a starting point.

Right. Okay. Well, I appreciate that answer, and I just think it would even help you with the like, as you mentioned, to the supply demand discussion, as well as the safety and maintenance reporting out. I think that helps all of us, especially the rhetoric you've provided on all of those elements. And then lastly, I just want to get clarification to the price gouging penalty fund addressing the consequences of price gouging. I know we've kind of discussed that, but what would that actually look like for consumers in California?

The way the Bill is constructed? That would be up to the Legislature at the point that there was money in the fund for the legislature to determine. And obviously, there have been different ideas to put specifics in.

But I think we felt in the last construction that rather than mandating a future legislature, you must spend it in this way because you never know what the conditions are at the point that, number one, if price gouging occurs, number two, if the penalty is issued and then there is funds that, what is the appropriate remedy to address those consequences? Is it, for example, rebates to those hit hardest by this price gouging?

Or there's any number of options, clearly, that a future legislature could take, but it allows them to weigh what the circumstances are at that moment in time.

Thank you. And again, I want to thank you, and I look forward to supporting this bill and continuing to work with all the agencies involved.

Thank you.

Thank you. Senator Grove.

Thank you, Mr. Chair. Thank you for the information that you've provided. We've, I've been trying to go through it, obviously, because 70% of the state's oil and gas comes from my district. I just have several questions. I don't have a big commentary or anything like that, other than Californians consume 1.8 million barrels of oil every single day, and we import most of that oil from foreign countries. I do have a couple of questions.

I know because of this issue being so, I don't want to say volatile or so divisive, I guess I do have a couple of questions, and I'm not being condescending. I'm truly wanting to know if you understand what this policy says. And so I'm not trying to be condescending. Can you give me the definition of a producer? Anybody? Go ahead. From the governor. Staff is fine. A producer, someone who produces oil, takes it out of the ground. Again, not being condescending, certainly.

One moment.

Just finding the reference. Thank you.

Yes, sure.

Senator, while we continue looking. I'm not sure we specifically define the term producer. We do specifically define what a refining company is, what a retail station is, the different parts of the supply chain of gasoline production in California. But if you're asking about extraction.

No, I'm asking. This is why I'm asking. It says in the bill several times, producer, oil refiner. I can go through on page, let's just start, I mean, we can start going through the bill in all the language. It says on section B, page eight, line 14, each major oil producer, refinery, it says producer. An another page again, it identifies producer. It's identifying a producer for, so the word producer kind of bothers me, and this is why.

Do you know how a producer sets the price per barrel?

No, that is a globally set price. I just want to be clear that we will clarify this, and happy to follow up with you and your staff. This bill is downstream of the extraction process of oil.

But that's not the way the language reads.

No, I understand, and that's why we'll have to clarify with you later.

The language says producer and I assure you, out of the 70 little oil companies that I have, and some couple of big ones in my district, they don't set the price per barrel, whether it's traded on the global market for $120 or $20. They're a price taker, not a price maker. So to include the word producer in all of this legislation for data reporting, that's what I'm trying to get at. Like, why are producers included in this data reporting? Anybody?

I hear your question, Senator, and we will have to get back to you and your staff on that. I apologize.

Well, the specifics as you describe, page eight B, it references each major oil producer, refiner, marketer, oil transporter, oil store, pipeline operator, or port, or through which refined gasoline is imported or exported, shall annually report information. And of course, the information, what they have to report is more specific later. But I think as the Governor's office has pointed out, this is not referencing extractors.

So staying on the subject matter, is there a way to clarify that? Because in oil country, a producer is someone who extracts the oil from the ground, sells it to the refiner, the refiner refines it and sells it to the retailer. The retailer sells it to the consumer that drives the gas-powered vehicle. So again, when this hit the airwaves yesterday, I believe it was yesterday. I didn't sleep last night. So was it yesterday? It came out yesterday. Somebody helped me out. Oh, Monday. Okay.

Two days ago, a lot of the producers in my area were wondering why they are going to be required to produce data on a daily market trade where price is. Again, they're a price taker, not a price maker. And so one day at 12:15, the market might sell it for $120.19 a barrel, and then 1, 2 minutes later it might change and be something different.

But they're going to be required to provide that data to you if they were to sell to a refinery at, let's just call it 3:15 in the afternoon. And that's one of the concerns I have. So can we get a better definition of the word producer? Because producer in our world means somebody who extracts oil out of the ground. Is that okay?

Yes. You've already heard an answer from the administration.

And then in the language it also says major oil producer. Can you give me a definition of a major oil producer? And I'm not trying to be condescending, I'm just saying because I asked for a definition.

No, appreciate it. And it doesn't specify. Very often bills are written that obviously refer to other points in code that define such things. Not being as conversant with that, I would ask that we can answer you back because then we can look in whether there is that definition in existing code elsewhere.

Okay, thank you, ma'am. I really do appreciate that. Thank you, Senator. So another definition, like I said, I appreciate you getting the producer language. It says major oil producer. When I asked for a definition of major oil producer, I got this quote, major oil producer, close quotes, means any person who produces an oil and amount to determine by the Commission is having a major effect on energy supplies. Then I asked, what is a major effect on energy supplies? And I still haven't gotten an answer.

So I would like answers to that if possible. I had my, I really, I'm going to go to the Bonta thing after this. But my Orange County colleague brought up something that was very interesting. Well, I have this because I'll go to this first. So in November 29th of 2022, November 29th, just recently of 2022, the California Energy Commission held a public hearing to look at the causes of the 2022 gasoline price increases.

At that hearing, the California Energy Commission expert, the California Commission expert, Energy Commission expert on gasoline pricing and supply, Gordon Shremp. I believe his name is. It's S-H-R-E-P sorry. M-P. Excuse me. S-H-E. Excuse me. S-H-R-E-M-P-I have the same issue the Governor has. I'm dyslexic. So you got to just cut me a little slack. Gave the presentation that showed the major price for oil spikes during the 2022 was lack of supply. So he said that in his statement.

However, my concern with that is that if you go to the California Energy Commission's website again, maybe it's inaccurate, it's available to the public. Maybe somebody didn't know what they were doing. When this put this information up, the California Energy Commission reported on their website that the available gallons of refined fuel was 5,684,000 gallons. I'm hoping I've got that correctly, but 5,684,000 in 2022 during that same time period, and in 2021, it was 5,000,400. I took it back 13 years.

We had the highest fuel supplies in that quarter. In that quarter, based on the information that's on the California Energy Commission's website with a graph and numbers to show. So I'd like to know if that information is correct or not correct, because I can only make decisions based on information that's provided by the California State Government, and that's what they gave me and samples. Oh, go ahead, ma'am. I'm sorry.

Senator. Thank you. I don't have those numbers in front of me right now, so I would have to check with our experts at the Energy Commission. I think one of the issues we're all grappling with is the data you see in front of you that the Energy Commission publicly posts does not come to the state directly, is not mandated. We need to make sure that we have better data on inventories, on production levels, on imports and exports of fuel.

The state doesn't have a real-time picture of what is driving those supply issues. And so Mr. Garcia has commented on kind of the need for data and reporting. A lot of that is coming from the EIA or from OPIS, a third-party service that the state would need to subscribe to.

What we're just asking for is for the industry to send that information to us so that we know ahead of time if inventories are dropping, as they did last fall, to the lowest level in a decade, why that's happening, and early enough to have a conversation about importing fuel or any number of other kind of potential mitigation tools.

Okay, so just to clarify, when you said the lowest one, according to the California Energy Commission's website, it was the highest quarter that we've had in 13 years. I'm giving you this. I'll provide it to you so that you can see the differences based on what you said and the data that's on the Energy Commission website. My colleague from Orange County made a statement about big oil making a percentage gross margin of whatever.

I forgot I wrote it down someplace, but I can't find it right this second. So if you were to look at. I hate to pick on Chevron, but the quarterly stock report for Chevron's overall gross margin was 38%. That's based, again, on data on the internet that's available for tracking large companies on stock markets. So, I mean, the stock market could be wrong, but just like the CEC could be wrong on their website, but just for the data that's available to us.

In comparison, Apple, for example, had a 43% gross profit margin and people are paying $1200 for Iphones. Do you anticipate that the Governor or the Administration will come after other companies? I know utilities. The price is set and they can't charge more than a certain percentage above the cost of utility production. But do you anticipate that this will, and Senator Dalhe or the Vice Chair mentioned the food industry issue that happened.

So my question is, do you anticipate that this type of policy will follow other industries or companies?

You will notice that during the pandemic, we did set some limits on prices in order to avoid price gouging because we saw runs on certain products. So the State of California did that on a short term basis.

So while I can't speak for the administration, I think I can speak for that if the legislature finds a circumstance where there is egregious activity that is putting our consumers in a very difficult financial situation for which there's no solid supply or other thing driving it, that we would be smart to act in a way to protect our consumers as we did during the pandemic.

Thank you. Going back to the CEC expert again, presented by the Administration of the California Energy Commission on the November 29, 2022 hearing, he presented a slide program, and on slides number 32 through 35, approximately at, if you're going to go back and look at the tape, it was like at 50/20 to 50/50. So on slides 32 and 35, he presented data that shows that gasoline inventories were down from either loss of production or loss of imports.

And I noticed in the bill, and the legislation in the bill before us is that there is. Let me find it again, I apologize. There is language in here that says on page 12 at the top you can start on page 11 at the bottom.

But it just basically requires all importers of refined products and renewable fruits via marine vessel shall report to the Commission at least 96 hours before the arrival of the marine vessel and the name of the tanker, the product, the barge, the whole bit. It gives you a list of everything that has to do there. So I noticed that you don't have raw material like raw oil, like crude oil from other countries. And Mr. Garcia, maybe you can answer this question.

How much actually refined product do we import to the State of California?

Refined product is depending on. I don't think it's a constant, but it's becoming and growing more. So it used to be with historically we were self sustainable in terms of refined product. But I don't have those, as Ms. Sanchez said, I don't have those numbers in front of me, but I will happy to reply, follow up with you and your staff. But I think it could be growing.

And that is an issue where again, part of what we're asking to consider is our supply and demand imbalance because we actually might be importing more. And our understanding, and we would certainly encourage other experts Energy Commission to opine on this, but our understanding is the more we become dependent on imports, that is what's going to set our street prices. That's what's going to set retail prices is ships coming in from South Korea, from Singapore.

So I don't know exact numbers, but I can certainly follow up with you, Senator.

So I do know that we get refined products, meaning gas that's already on the tanker. So gas that's already on. It's not oil.

Just responding, fom Wispin Oil Company's own data provided when I met with them. It showed that we California refiners export some level of refined product. So while there may be times where we are receiving some, we are also exporting some.

Happy to clarifying that.

I'll let you answer in just a second. I apologize. My understanding, and I could be wrong, and you can correct me if I am, is that we use everything that we refine here in California.

We use everything that is California spec. Yes, that's carbon. Absolutely correct. What we export is non-carbon, but.

It is still refined gasoline.

It is gasoline that it does not meet California specifications and cannot be sold or used in California.

So it's a byproduct of the California refined fuel and you can't sell it here, so you export it.

That's right. And it is a byproduct of every refined barrel of oil.

But you could refine it further and sell it to the California market.

I don't know if we could do it under the same barrel without additional intermediaries.

We're not reliant on imports. We meet the demands of the California market and export additional product. I'm glad the Senator has raised the issue.

I'm glad, too, and I'm excited about this discussion because we used to produce roughly, I don't know, so many hundreds, thousands of barrels. Now we're down about 400,000 barrels in state production, and we're bringing oil in from foreign countries. So to refine.

Crude oil. I'm talking about refined products.

Crude oil. Yes. So refined products. So let's say a refinery, and correct me if I'm wrong, let's say a refinery finds this crude and they've got additional fuel that's there, and then we have a summer blend that's implemented. Can that be refined further for a summer blend, or is that product just have to be exported out? And if you did refine it to a summer blend, is there an additional cost of running it through the system twice?

I mean, summer blend requires additional processing, requires additional inputs. That is why when Governor Newsom directed the airport in September to go quicker to a winter blend, we saw more fuel supply. Governor sent a press release that we have more supply, we're impacting the market, but it was supply because we moved away from a California-specific policy. I will note, though, that the bill does require a lot more information from importers of refined products.

So either we are going to see refined products imported or we're not, but we expect that that's going to be something that we see a lot more, again, especially if we're going to comply with California's Scoping plan and reduce our own domestic refining capacity by 94% while our demand continues.

I just want to clarify that scoping plan is a 94% reduction in petroleum use, not refining capacity.

Okay, I have questions. I guess if the AG could come to the microphone of the representative for the Attorney General, it could be a technical question. I'm just asking. On page 13, it's asking for all of these entities. Again, lines two through 40. And then continuing on the next page, it says, like, the date of the transaction, the time of the transaction, the contract identification, the contract position, all of these issues regarding the transaction. Did you participate or did the AG's office participate in this language?

I'm just curious.

Yes, we engaged in conversations.

So you're currently in a lawsuit against two traders, right? A couple of traders.

We have ongoing litigation against SK and VTOL.

Yes.

Okay. And they're not oil producers.

The two entities that we have our ongoing litigation against were traders in the gas trades marketing.

So a third party person, that has nothing to do with producing oil. Like, I'm talking about our oil producers in my district, in Kern County or anywhere else in the states, people that extract oil out of the ground, this has nothing to do with them.

The particular lawsuit that we have ongoing right now in San Francisco's Superior Court is about gas trading firms SK and VTOL.

Which is a third-party trader. I don't know. Just. It's a third-party trading organization. It's not WISPA. It's not SIPA. It's not the oil companies. It's a trader that escalated or manipulated the price. It's a paper transaction that manipulated price. Correct.

In this particular lawsuit that I think we're discussing here. Right. Our ongoing litigation against trading firms SK and VTOL. The targets of that case, that investigation, are gas trading firms. That's correct.

Okay. Thank you. Thank you for that. You guys did participate in this language, correct? Participating in the language.

Yes, we engaged in conversations with the Governor's office, with the legislature, throughout the development of this Bill.

All the information that is, I would think, and I'm not an attorney, but all the information that's requested in this language looks like if it starts being provided to you immediately, it will significantly help you collect data for your lawsuit if these organizations participate in that. Was that the intent?

So our ongoing litigation is well underway and is about behavior dating back to 2015, 2016. This bill has no particular bearing on our current litigation. I will say that the Attorney General's Office has been looking at the gas markets for decades. Right.

And I think that will come as no surprise to anybody here who, we all in California State government, have been looking at and concerned about the behavior in the gas markets for decades.

I just. I thought it was really interesting that all of this information that you guys would have to pay attorneys to go gather and find out, like, find when a particular stock was traded. Now a company has to provide that information to you. I just kind of wanted to set the record straight, and I appreciate you guys helping me do that. Is that the producer that produces oil out of the ground does not. I'm sorry. I apologize. You can sit down. I apologize.

The producer that takes oil out of the ground is not somebody who sets a price. Like, they just don't set the price. And they have a contract. Oh, I didn't go over contract language. So there's a contract in here about contracts. There's language about contracts that's required to be provided. I wanted to ask about. You want copies of all contracts, agreements entered to and amendments and contracts or arrangements with any refiners, oil producers. Again, a producer is someone that extracts oil, petroleum product transporters, petroleum product marketers.

I mean, the list just goes on and on. Mr. Garcia, is there something in there? I don't know. Do you guys have a standard price that is from Producer A, B, or C? So let's just say Hathaway Oil or Chevron. Is it based on volume of fuel, that crude that comes through the refining facilities, or is it an independent contract? And is there any confidentiality issues with these contracts?

And is there any way to undermine, if the information becomes public, is there any way to undermine, like, I'll just use my colleague sitting next to me from Buena Park. If I submit a thing saying that I'm going to send you 50,000 barrels a day or 20,000 barrels a day, is there a cost difference in the contract that the refiners would charge, say my colleague, who will send you 80,000 barrels a day?

Senator, I appreciate the question. I don't have individual, specific information about contracts, although I would imagine that they are unique, they are different. Some may be short-term, long-term, they may get a better deal if it's a long-term. There is a pegging, even California prices to a standard which is either in Texas or a global standard. But I'm not sure about the specifics. But I do have concerns about sharing those contracts.

Just to FYI. And again, I'm done, Mr. Chair. But I'm going to make one comment. I'm very disappointed in both sides. Both sides. And the reason why I say that, you come up here, you say, this is a landmark legislation. It's got to be done. This is something first done ever in the history of any type of. You made this big deal about all of that.

And neither side can answer in questions that are very important to make sure that what's going on here is actually going to produce a lower gas price for our constituents. And this is all about supply and demand. It really is. It's very simple. You learn that in grade school and for both sides not to be, both sides in support and in opposition, not to be able to answer these questions that are very simple, like the definition of a producer, it's just frustrating.

And so that's my frustration. So thank you very much, ma'am. You are going to give me this information regarding what the definition of a large major producer. I'm sorry. Versus a non-major producer. Right. Okay. I'll give you this. Or do you have it? Do you have my comment or my question? You're awesome. Thank you very much.

Thank you, Senator Mcguire.

Thank you so much, Mr. Chair. Very grateful. First and foremost, I just want to say thank you, Mr. Chair, for your incredible due diligence on this issue in, for holding all sides accountable and for your leadership from where this was to where it is now, we've seen some massive change. I also want to say thank you to the Governor's office for their sincere engagement to Ms. Sanchez, Mr. Goldman, thank you so much to Ms. Bauma, Ms. Williamson. Very grateful.

And in, I want to say thank you to Senator Skinner and to Protimacins for their common sense and collaborative style and willingness to be able to meet with all sides. And I think that is absolutely critical and why we have seen those changes today. And to Ms. Skinner and to Ms. Atkins, thank you for your incredible work over these past many months. Just going to have some comments, Mr. Chair, and I'm going to tick through these quickly.

I think my frustration coming in today is that no matter if you live in LA or up in Crescent City, last fall we saw massive price spikes at the pump. And as we heard from representatives from WSPA today, energy policy has consequences. But what also has consequences is greed and taking advantage of consumers. So if we're being honest, California consumers have been fleeced. They've been fleeced, and those who have padded their pockets have been some of the biggest corporations in the world.

And those, as Senator Durazo eloquently stated, those who are the most vulnerable in our communities have paid the price. So last fall, millions of commuters in this state and across America were trying to figure out how to be able to pay their gas bill, with their food bill, with their rent, and paying for medicine. In Humboldt County last fall, gas was hovering between eight and $9 per gallon. If you are a minimum wage earner in this state, that's about 15% of your annual minimum wage.

That's going towards the price of gas. An Arcada today, it's $5.39. Still today, the Shell station in downtown Arcada, California consumers, as we've heard, were paying $2.60 more than the average consumer across America. And this is despite the fact that gas tax in this state is 54 cents.

Would like to be able to clarify some items that have been advanced here today and just quickly go through some items that I'm grateful to Senator Skinner for. First and foremost, I think we need to be clear and we can't leave this hearing without clearing this up. This isn't a tax. I've heard that today. Anyone that says that this is a tax is not being truthful or as some would say, it's fake news. The Governor's office.

We heard today that the Governor's office did not meet with oil industry representatives. That's not true. Governor's office met with WSPA. Governor's office met with independent refiners. We also know, thanks to the leadership of Chair Bradford and Ms. Skinner, the Senate officially met with WSPA and gas retailers along with other sides of this discussion, consumer advocates, environmental groups and local government leaders. We've heard today that this may give an agency unbridled authority and power. That couldn't be further from the truth.

There's a sunset on this bill if the auditor comes back. The State Auditor comes back and says that this has not stabilized the California fuels market or hasn't reduced gas spikes in this state, then the program goes away. When's the last time that happened? Reason why that's in there is because both the Senate and Assembly wanted to be able to see that check and balance.

And by the way, in that time, if the Auditor's office says that it is not reducing gas spikes and smoothing out the fuels market, the legislature has 180 days to act. Just like our job should be is being a coequal branch of government. On the Advisory Committee, you have 12 12-month cooling off period for the gubernatorial and the legislative seats. And oil and labor also have a seat along with a community organization on the Advisory Committee. Three.

So many times we hear that the Executive branch, and I'm not speaking for this Governor here, but legislature can't get access to information from various agencies. In this revised bill today, aggregated data can be provided to the Pro Tempore's office and the Speaker's office. They have to sign legally binding nondisclosure agreements on the aggregated data, by the way, the same data that would be available to oil, labor, gubernatorial, as well as legislative seats.

In addition, on the issue of reserves, we all want to see enhanced reserves in this state. The CEC has to develop a reserve study game plan by the end of 2024. How refiners will be able to get additional reserves so that when we see spikes that we can utilize those reserves. There is enhanced language under the Department of Justice of holding refiners responsible. By the way, we would want that to be able to bring ease to this fuels market on the penalty.

How many times have we heard concern about an automatic penalty being implemented? This new plan that is in front of us today, this new bill says that there has to be a rulemaking process based off of some very clear points that the penalty will not lead to higher average prices at the pump, it will not lead to a greater imbalance between supply and demand and that exemptions from the penalty are sufficient to allow greater margin before making production decisions.

The reason why I bring that up, why is there such a fight about data? And this is a data-informed decision at the California Energy Commission before a penalty can even be enacted they have to prove that that's going to smooth out prices. And by the way the rulemaking it is subject to legislative and judicial review. I'm going to end it right here and say this. And again just want to say thank you to Chair Bradford and in particular to Senator Skinner.

If we are serious about protecting vulnerable residents in this state, we have to focus on the cost of fuels, the cost of food, rent and access to health care, full stop. And this will be a massive benefit for those consumers. And if anything goes awry, as it should be, we will have an audit report coming back to us that has the full authority to sunset the program by 2033. Thank you so much, Mr. Chair, and grateful for all the work that went into today.

Thank you, Senator Dodd.

Thank you, Mr. Chairman. When this first notice of the special session came out, I was frankly pretty annoyed about the approach. Wondering what was really unclear to me was even as we got down to the nitty gritty on the bill, when it came out, how does this really impact. I listened to academics, I went on the CFE trips and listened to professors from Cal at Stanford, USC, and they had some real concern. And I had the concern about a ready fire aim approach that I felt was going on with this bill. But what was not unclear to me, and I talked to the oil companies at another event that we were at in November with them, and they had their panels, was, you didn't do a very good job of explaining what the gap really was. Not even close to a good job. And so it leaves us as legislators at a point where we're wondering, what do we do to protect our customers? So we're at the hearing, I think it was a couple of weeks ago now. Seems like forever ago, but I think it was only a couple of weeks ago. And I asked the question, what in the hell are the unintended consequences of this legislation? That was first and foremost in my mind. And now, I guess I gotta say, I'm happy to say that Governor Newsom and the Legislature work like hell to address many of the unintended consequences. We've heard from my colleagues, this is not a perfect bill. Very few bills that come through the Legislature qualify as perfect bills, I can tell you that. But this bill now mandates a deliberative procedure driven by facts and experts with built in safeguards and the off ramps that my colleague Senator McGuire just spoke to to ensure California consumers are protected. And independent experts concur that these measures address the issues that were previously raised. This is exactly, in my view, what's supposed to happen through the legislative process anyway. And people keep talking about the legislative process. I'd rather have a group of experts on a panel, and I'm not talking about interest groups. I'm talking about experts. We found out yesterday that it will be a group of experts that will be making these decisions. To me, that's way better than legislative oversight. I've been here for eight years. I don't think we've done a lot of legislative oversight. So I think we do have the provisions there that can protect this body with the auditor coming in to be able to make those changes and disband the program if it's not doing what it's supposed to do. So I am going to support this bill today. I do represent oil companies in my district. I'm an unabashed for you, Senator Seyarto, I'm an unabashed supporter of capitalism. And at the end of the day, we're asked to decide on many issues. I don't think what we're doing here today brings us to a socialistic state or anything close to that. I think what we've got right now is an opportunity to protect consumers that we didn't have before. So I'd like to thank the author and the governor's office and the legislative teams in the Senate and the Assembly for getting and rolling up their sleeves and coming up with another solution that we have before us today. Thank you.

Thank you, Senator. Next up is Senator Ashby.

Thank you, Chairman Bradford. I'd like to really thank Majority Leader McGuire for his comments because it was such a good summary of the issues from where we started to where we are right now and thought you really laid it out well. So for people who've been paying attention, following, really listening to what the questions and concerns were from the beginning and wanting to understand where have we arrived in this moment, I would recommend rewind the tape and listen to what he said, because he laid it out as clear as it can be laid out. This conversation started by the Governor, started before I entered this building. And I can tell you at the time, though, I was having plenty of interactions with voters, and they were certainly struggling around the cost of gas. Every door that I knocked on talked to me about gas and whether or not they could get their kids to school, whether they could get to work, if they could get to doctors appointments, and really trying to plan their weeks around it. Like, what are we going to not do this week so that we can preserve gas in our cars so that we can get the kids to school or get to childcare. That's scary and has to be addressed. I was immediately impressed by the California State Legislature. This was the first topic when I walked in that was taken up by the Senate, and the Senate asked such incredible questions of the governor's team, and they pushed and they pushed hard. And there's a leadership team inside of the Senate that really moved this from where it was to where it is now. This committee, Senator Bradford, Chairman Bradford, he held oversight hearings. And so people here who said they weren't heard, I saw those same groups in those hearings publicly where he allowed plenty of time, hours. This folks sat and listened to all the concerns and weighed that in and then reacted to it. And then changes and modifications by the author, Senator Skinner, were thoughtfully made in collaboration with the Assembly, the Senate and the governor's office. The Administration has engaged deeply and meaningfully, which I think is important to note. This wasn't siloed. People were really trying to work together and trying to hear from stakeholders. And what I appreciate most about this process is that it put the most important stakeholder at the center of the dialogue, which is the people of California. And I think what we're doing here today and where I see this having moved from where it was to where it is now, is that we're establishing an information collection program where there hasn't been one before or where it's been inadequate before. There are even Senate bills, Senator Allen's bill from last year that is reiterated in this legislation so that it can be implemented to its fullest capacity. We're leaning into transparency, taken transparency and moved it to the top of this dialogue. If there was a marquee for this show, it would say transparency on it. And that's what everyone is singularly focused on. It's a data driven approach which couldn't be wiser because we're not going to have fines and fees and penalties that are arbitrary or based on nothing. They have to be based on data. You have to provide the data. And folks have an opportunity in that process, as Senator McGuire explained, to talk about what's happening in the market. And if the market is experiencing some flux, it will be taken into consideration. It's mandated, it's written into the legislation. I read every word of the new bill. It's clear. It's clear that no decision would be made without thorough data input and revision from lots of experts, including industry experts. I think that's as good as it gets. We do need to make sure that small businesses have the resources they need to be responsive to this. I did hear that today and I think that's really important, to the extent that some of this legislation calls on small businesses to provide some of this same data. We need to make sure they're well resourced to do that, that it doesn't become the mechanism by which they have to stop doing business. We wouldn't want that. That's not the goal. The bill's vastly improved. It certainly could be better, of course, and there may be a time in the future where the Legislature needs to reengage. But that's also stated clearly in the bill. It's called out by the fact that there will be regular audits and that it sits with a sunset provision on it right now. So automatically, in 10 years, there's a discussion about whether or not it's worked, whether or not it needs to change, whether or not the Legislature needs to take it up wholly again. That opportunity is written in the Legislature will automatically have to discuss this again at some point. Things like that sunset provision, things like the audit, things like the level of experts engaged in this give me a tremendous amount of respect and regard for the author and the leadership and everyone who pushed it to this point. Senator Bradford deserves a ton of credit for taking on all of these oversight hearings and being a leader in the discussions. So for me, my comments are in closing, are that as a new member, both the only new member on this committee and a new member in the Senate, I'm really proud to be a part of the Senate. I'm proud of the work I've seen my colleagues do to move us from where we were to where we are now. And so special thank you to the pro tem, her team, Senator McGuire, Senator Limon, Senator Bradford, and of course you, Senator Skinner.

Thank you, Senator Newman.

Thank you, Mr. Chair. I'll put my end minutes to the side. So actually, at this point, I think the policy has pretty well been litigated here, and I appreciate all the members, but especially the witnesses for your thorough and detailed participation today. So I do want to talk a little bit about process, right. First, I share some of my colleagues concern about the delegation legislative authority. Again, you've touched on that, but as a broader matter, I think that's something that we as a body should be concerned about. But to process. This is obviously an important issue, and it has been very thorough. But as we moved it through here, it seems a little rushed. And I actually want to touch on, as an example, Senator Grove had a series of definitional questions. After a while, it starts to feel like semantics, but the implications are actually real. That question about what's the delta or the distinction between a major oil producer and a small producer will have major downstream impacts on some of California's smaller producers. And I think that's important. And so if there's one law that I believe in in California, it's the law of unintended consequences, and we should be wary of that. And we should allow, wherever possible, sufficient time to explore these issues. I think there's some concern that we're not doing that in this case, moving from a hearing today to the floor tomorrow, and I've made my views clear on that. But again, this is going to affect a very complex energy production ecosystem. And irrespective of your position on this issue, the larger imperative remains that we need to align California's energy production resources with our transition plans. And in order to do that well, we need to give as much input and the best basis for participation for all of the participants. And so I think, again, Senator Grove has called out a particularly good example. So smaller producers, the Members of SIPA, to her point, they don't set the price, but they will be affected by this legislation. We should keep that in mind. And as we do, we should keep more broadly in mind. These are big issues. They intersect with lots of other very complicated and long lead time plans. I certainly respect the administration's desire to do this now, but I think we as a body should remember that and work deliberately toward that alignment and forcing that as a co equal branch of government. So thank you. That's all I have.

Thank you, Senator Caballero.

Thank you, Mr. Chair. By the time it gets down to kind of the last person, I just want to say ditto to a lot that's been said. I want to thank the author of the bill for listening carefully and for working really hard to take into consideration the concerns that were raised initially by the bill. Want to thank the Governor and his staff for their diligence in listening as well. I think there were many of us, myself included, that had some concerns about what we were going to achieve, the direction we were going, without having information, without having good data. And although I agree with my good friend from Orange County that more time would be appropriate, I'm prepared to support this today because I think you've done exactly for exactly the reasons that my good friend from Northern California stated. There are some real protections, there's some real guardrails, and the data is going to be really critically important, and the ability to craft any solution, assuming that there will be one, will be based on data. And that really was my biggest concern. The biggest issue last year was the price of gasoline. And I can't overemphasize the challenges that people were making to determine whether they actually could get to work or not. And when you're faced with having to commute a long distance, and I have a significant population that are commuters, that are super commuters, even the high cost of gasoline was debilitating. And they expect some kind of action on our part. So I really appreciate the work that you've done. And thank you, Mr. Chair, for all of your hard work as well. It was a team effort, and it's much appreciated.

Thank you, Senator Wilk.

Thank you, Mr. Chair. Like everybody else at this dais very concerned about high gas prices. I represent 1,060,000 constituents. I have, over half of those constituents are in MediCal, so I have a working class district. Two out of my seven cities are considered supercommuter cities, they're in the top 10 in the nation. And this has been a struggle for my middle class residents as well as my working class residents who want to enter the middle class. So gas prices, energy prices in general has been a problem. You mentioned the spike last year. Yes, there was a spike last year, but honestly, we've had problems with our market since the refinery fire in Torrance back in 2015. And as mentioned, yeah, we're about a dollar higher because of all the things we do here in California. But there's still another hidden 40 cents a gallon. I've been to the same briefings with Senator Dodd, and we have economists that I respect that can speculate, but they don't have access to the data, so we don't know. The one thing that I'm frustrated with is the oil industry says, well, it's not me. Well, if it's not you, who is it? So I think it's incumbent upon us to find out what's going on. Fact of the matter is, from the economists I've met with since June of 2015, California consumers spending 3 to 5 billion more a year for gasoline than the rest of the country. So shame on the oil industry for not working more with us to find out really what's going on. So they've had a lack of transparency. I think we've had a lack of transparency, too. Case example, this particular proposal, I like and respect the author, and one of the things I like about her, she's always straightforward into the truth. She said there was bicameral discussions on this issue, and I'm sure that there was, but there was definitely not bipartisan. And so I do have an issue with that. I also have an issue that currently, if we take a vote this afternoon, we're violating Proposition 54. This has not been in print for 72 hours. To be honest with you, I've had 75 constituents in town the last day and a half, and I have not read as thoroughly through this as I need to. I will take care of that tonight. Having said all that, I am, like a lot of people, concerned about the legislature again, giving up more power and more authority. We're now going to set up this new institution that may or may not be able to do what we want done. To be honest with you, I think there's an entity out there who could do it, which is a Federal Trade Commission that's well equipped for this and could actually dig in, do the information, and then bring it back to the legislature for us to decide what to do next. Now, I don't think most of us will be here when that happens, but I think that's a much better way to go than the way that we're currently doing it, by just fast tracking it. I really appreciate Senator Grove going through and noting those drafting errors. I'm normally not concerned about drafting errors this early because of the fact it happens all the time when we clean it up. But this seems like this train is pulling out of the station and it's going to be done before we know it. So I've got a real concern about that. And we've done this a lot, particularly in green energy. Last night, a session last year, we had to bail out the administration and vote to reopen Diablo Canyon. I had hundreds and hundreds of letters from constituents ask me to vote no on that, but I can't. The Administration made mistakes. So what? I'm going to penalize Californians by denying them access to energy. So I voted for it. I didn't want to vote for it, and then I had to go back and explain to hundreds of constituents my vote. So I'm actually going to lay off this today. The reason why I'm going to lay off it today because I don't like this process. And the bill has come a long way. I think it could go further, and I think the oil industry has known what's going on, and I don't know what they expect if they don't arm us with the information we need to make the decisions that are best for my constituents. So I'm like, playing on both of your houses. I'm as frustrated as Senator Mcguire, and so I'm going to lay off today, and I really hope you guys don't fast track this, because I think we've come a long way, but I don't think it's done. Thank you.

Great I think I've heard from.

I'm sorry. It's a very brief.

All right. Very brief.

Thank you, Mr. Chair. Thank you. And I really do appreciate the author in the governor's office being able to clarify some of these things. There's a lot of people watching the hearing again, because I give out my cell phone number to everybody, and a lot of people in my district are affected. But I'm getting several texts from across the state, really, that the definition of marketer, some of the small gas stations are considered marketers in some definitions of the code section, and they are concerned about, we're talking about the retail, the person, you go to the gas station, you fill up your car. They're concerned about having to be subject to the reporting requirements as well. So if you guys could identify marketer, I told them I'd answer 14 of them. I told them I'd ask that question. So thank you very much.

Thank you. And I want to thank everybody for their participation in this hearing today. Most importantly, our author, Senator Skinner, for all of her work, the working group, and we all have, I think, have agreed this is light years better than what it was a week ago, let alone three months ago. And it was a lot of time put into this. And I, too, have concerns as how quickly this process is moving. But I want to assure everyone that it's been a lot of hours dedicated to trying to get this right. But I also want to strictly state that we're all concerned with consumers and what they pay, and we should as legislators, regardless of what party. We made that clear. That's at the forefront of everything that we're trying to do here. But some of what we face today has been because of legislation as been stated. And I want to make sure that we do not conflate market manipulation with profits. And if we find that there's no market manipulation, I hope this industry is not demonized simply because they made a profit. That's what we live in, a capitalistic society. We're not demonizing technology for making profits. I just want to make sure that if it is determined that there hasn't been any market manipulation, that we shouldn't go after their profits no more than we're going after anyone else's profits. It's also mentioned about enhanced reserves, and that's a real challenge for me, because with everything we're doing as a legislature, we're making it almost impossible to have enhanced reserves. We're asking for oil to be left in the ground. We're asking for refineries to shutter, and we're making a move to get off of gas burning cars. So if we're moving in that direction, moving toward EVs, why should a refinery have reserves and why should they plan for reserves? So I just think we need to be cautious as we move forward. But I have two sections I want to mention, and it was mentioned by the AG and it's section three as it relates to refinery maintenance. And I think outside of cost, the number one issue should be worker safety other than after cost. And I'm just concerned with the language which states the CEC may by regulation impose requirements governing the timing of a turnaround and the maintenance developed through consultation under this section. And my question would be, why should the CEC develop a regulation that determines the maintenance and the turnaround schedule for refineries? And what does their expertise, be it the CEC, have in regards to safety of operations? As they mentioned, a refinery explosion that was in my district, less than 3 miles from where I live, the Torrance refinery exploded. So would this create a liability for the state? Should the refinery have to postpone maintenance and an incident occurs during that time? That's one question I have, and alas, is Section 10 as it relates to the standing up of this division. This division would include staff and expertise in the transportation fuels and economists. This seems a very useful division. I support this. But I'm just worried about how quick we can do this, how quickly we can do this. Can this new division be put in place and hire staff in a timely manner which allows us to get the information that we need going forward? So how quickly do you see this happening? And I will end with those two questions.

Chair, in response. You're absolutely right. Our existing rigs around the turnaround time and the maintenance which the legislature has enhanced. In fact, I was the author of a bill along with Senator Hancock back when I was in the assembly, and I believe it was 13 or 14 after a Chevron explosion in Richmond, not the one in Torrance. And language like this, as we know, anytime we establish additional authorities, the additional authorities cannot, they do not supersede existing language around safety and such. And of course, while many hands were in the drafting, we do rely on Ledge Council to help ensure that any drafting is not in conflict with existing statute. But of course, that is always something that can be re-asked. But I think our existing statutes around that safety and labor, but worker safety and all of our safety will not be superseded by this. So there was a second question I believe you had.

As for the timing of standing up the division in Section 10, Article three.

I will turn to the governor's office.

How quickly do you see this happening?

Thank you, Senator, for the question. If this Bill moves forward and makes it to the governor's desk, it will be in effect in 90 days. The additional appropriations for such a division will be part of the budget discussions with this Legislature. We would hope that it would be up and running later this fall so that we can again do the day to day monitoring of this market that is so desperately needed.

That's very ambitious. Ok, I'll leave it at that. Senator Skinner, would you like to close?

Thank you very much, chair. Thank you, Members. I really appreciate the conversation and the questions. And, of course, as we committed to, we will get answers to any questions that we were not able to answer just on sitting here on the dais. But I feel the input from all of you and the different comments you made on the evolution of this from the point that it was initially, introduced, the first language that we all saw to the language that we have today addresses the concerns. While you can never predict what every unintended consequence may be, certainly those that were possibly highlighted as being a potential in the last draft were addressed in this bill. And if we go back to what was the objective from day one, which is to protect our consumers, as you all have said, this is a much better construction to help protect our consumers. We do not have to have an automatic penalty to do so, and this does not automatically levy a penalty. What it does is allow us to get the information to analyze it to determine if there were unfair or improper, what we would consider harmful to our consumers manipulations of prices, and then they can be acted on. And if not, then there would not be such action. And, of course, the legislature gets annual reports as well as the sunset that was described. So I think in terms of, when I think about the role of government and our role to do our best to protect our residents, our consumers from harm, from either a business practice or climate change, for example, or others, that our purpose in developing regulations and certain statutes is to do that. And I think this one hits the right note. And clearly, as it is implemented beyond just the 10 years, if we see that there are flaws, in other words, if we have not excluded, say, smaller market participants who really should not be, I think that the tricky thing about any bills like this is that there's so many different code definitions, and obviously we're going to look back at those. But if we find, for example, that there are certain market participants that we never had intention to cover, we can correct those things, as we do with most legislation. So I think that it hits the right note. I very much value all of the input and the meetings that occurred to construct this and everyone who participated in that. And with that, I ask for your aye vote.

Thank you. We have a do pass to appropriations. We have a motion by Senator Min. Consultant. Please call the roll on SBX 12.

[roll call] 12 to two.

We have 12 ayes, two no's. The measure passes. And we'll leave the roll open for another few minutes to allow those absent members to come and add on. Members and audience, that concludes our hearing for the day. I appreciate all everyone's participation. And again, we'll leave the roll open for absent members to add on.

All right. Can we open the roll for our absent member? The current vote is 12-2 on SBX1-2. Please call the absent members.

[roll call]

It's 13-2, that measures out, and I want to thank everyone for participating in today's hearing. If you weren't able via the teleconference to get your questions or concerns in, please submit those to the Senate Energy and Utility Committee and would be more happy to welcome those comments. The Senate Committee on Energy, Utilities and Energy for the first extraordinary session is now adjourned.