Assembly Standing Committee on Petroleum and Gasoline Supply

[Background]

Good morning. Good morning and welcome. I'd like to convene the Assembly Committee on Petroleum and Gasoline supply for today's hearing. Before we move to our agenda, I have a couple of housekeeping announcements to make. First, as is customary, I will maintain decorum throughout today's hearing in order to hear as much from the public.

Within the limits of our time, we will not permit conduct that disrupts or otherwise impedes the orderly conduct of legislative proceedings. Any individual who is disruptive may be removed from the room. For each Bill, testimony will be limited to eight minutes total. That will be four minutes of support testimony and four minutes of opposition testimony.

For any additional witnesses on a measure, please only state your name, position and affiliation. If any, and I will, as is customary, invite everyone to come to the microphone at the appropriate time to share that additional testimony. Today we have three measures on our agenda. To begin. Let's go ahead and establish quorum. Madam Secretary, please call the roll.

[Roll Call]

All right. Wonderful. Great. So we do have a quorum, and we are ready to jump in to the business of today's hearing. Item number one on our agenda is ABx2 1. Assembly Member Hart, the floor is yours.

It.

Thank you, Madam Chair and Members. To begin, I accept the Committee's carefully crafted amendments. I deeply appreciate the very hard work from the Committee's dedicated and talented staff. Governor Newsom called this extraordinary session to address one goal, to reduce gasoline prices in California.

ABX 2 1 grants the California Energy Commission the authority to engage in a public rulemaking process to address this critical issue. The CEC will determine, through a transparent and public process whether requiring minimum inventories of refined transportation fuels benefits consumers.

The goal of this measure is to guarantee that fuel is readily available during times of supply shortages and reduce prices for consumers. Since the passage of last year's special session legislation, the California Energy Commission and the Division of Petroleum Market Oversight have gained critical insights into refinery operations and gas price trends in California.

The proposed CEC regulations will only be adopted if they're proven to reduce overall gasoline prices, increase fuel supply, and reduce market volatility. Last week's informational hearings demonstrated how complex and sensitive the fuel market in California is.

I listened carefully to each of your questions and concerns and the stakeholders' valuable input last week during our two-day, 10-hour-long hearings on this issue. In fact, I took 10 pages of handwritten notes on your comments.

Since then, I've been working hard with the Governor's office, our chair and her staff, our leadership and stakeholders to address the concerns raised last week. The Bill that's before you today attempts to directly address those concerns through a series of amendments.

The amendments protect frontline communities, ensure workforce safety, refine the Advisory Committee structure, and create additional legislative oversight. The specific foreign amendments are as follows. Number one, the Bill instructs the California Energy Commission to maximize the use of existing storage infrastructure rather than building new storage.

Number two, language to ensure that protecting refinery worker safety is the highest priority when the CEC is evaluating the timing of refinery maintenance work. Number three, the Independent Consumer Fuels Advisory Committee is retained so that Labor, Environmental Justice, Consumers, and Industry all have a seat at the table to advise on minimum inventory requirements.

Number four, additional legislative oversight is added by including a December 31, 2032 sunset date where the Legislature will reassess whether a minimum inventory requirement accomplished its intended goal. A number of additional considerations are added to the Bill that ensures a deliberative rulemaking process.

This Bill will hold oil companies accountable for resupply plans when refinery shutdowns and supply chain disruptions occurr, ultimately saving Californians billions at the pump. I'm pleased to author this Bill, sponsored by Governor Newsom and Attorney General Rob Bonta, alongside my colleague, Majority Leader Aguiar-Curry, who would like to share a few words.

Thank you, Assemblymember Hart. Madam Chair, and to our Committee consultant who has been nothing short of amazing during her special session fall break. Colleagues, I will keep this very short. My colleague and joint author has covered the main points very well. I want to take a minute to highlight a thorough public process that got us here.

The Assembly could have acted quickly at the end of session on a proposal, but many of us felt that we did not have the appropriate amount of time to consider this Bill in the last day of session. This was especially true because this issue is important and it impacts virtually every Californian.

In order for us to engage in this kind of thoughtful process Madam Chair and this Committee have undertaken, we worked with the Governor for him to call this second extraordinary session so we could take the time the public deserves.

I know my staff, leadership staff, the Committee and all of you have spent many hours learning about the critical issue of gasoline supply and pricing over the past few weeks. We rarely get this time to put this much attention into one Bill.

I watched the historic amount of testimony from stakeholders and participation by the Members of this Committee during the two days of extensive hearings this week.

Excuse me, last week. And I will say today that we are not done should this Bill pass through the Legislature and be signed by Governor Newsom. We are giving an enormous amount of responsibility to the California Energy Commission and the Department of Petroleum Market Oversight, and it is my hope that this body is very much involved in the development of regulations that will follow this Bill becoming law.

We can rarely make everyone happy with the work we do in this body, but I do feel very proud that the Governor's proposal, embodied in AB 2X1, received the attention and scrutiny it deserves, and I think the thoughtful amendments we accept today resulted from the process we've undertaken in an extraordinary session make this a significantly better product.

For that reason, colleagues, I ask for your aye vote.

I'm also pleased to introduce Vice Chair Siva Gunda of the CEC and Director Tai Milder of the Division of Petroleum Market Oversight, who've been engaging and working on this issue over the past year.

Good morning chair, authors, and Members of the Committee. Thank you for the opportunity to join you today in support of your important work. Through the passage of SPX 1 2 last year, the California Energy Commission was tasked with important responsibilities to shed light on the causes behind gasoline price spikes and to develop options to protect California consumers against them.

Over the past year, we have gained invaluable insights into California's petroleum industry. We can now clearly establish that at the heart of price spikes is a lack of healthy levels of liquidity in the market, especially during late summer months when demand for gasoline is at the highest.

This situation is further exasperated when confronted by lost production due to planned and unplanned refinery outages that are common during this period. The resulting supply tightness in the market leads to industry scrambling to secure supply that drives up prices in spot market and ultimately at the pump.

Like any for-profit company, refiners seek to maximize their profits within the market and regulatory structures they operate under, and the current structures do not incentivize them to ensure maintaining necessary market liquidity that protects consumers from price spikes.

At the heart of ABX 2 1 is maximizing proactive planning, using existing infrastructure to enhance resiliency in the system and reduce reactive behavior by industry during supply tightness that ultimately hurts consumers. The proposal does not alter other important priorities such as safety of refinery operations or protecting frontline communities.

The proposal will provide the CAC with authority to open a rulemaking process that deepens our understanding into two concepts that allow stock minimums for refineries and resupply obligations. And the CEC would only go forward with a rule, with establishing rules only if benefits outweigh significantly any risks. Thank you.

Thank you to the Chair, to the authors, to this Committee, and to the Vice Chair. As a result of the first special session, we know why price spikes happen. The data is crystal clear.

When we see low inventories and refinery maintenance, that is when prices can spike at the spot market, and that means higher prices at the pump for California consumers. This pattern keeps repeating itself. We've now seen price spikes in the late summer in each of the last three years.

California's consumers are rightly sick and tired of paying inflated prices during price spikes. As you saw last week, these price spikes are not normal. They don't happen in other parts of the country. In order to break this cycle, we need to have extra supply on hand to inject liquidity on the spot market during critical, busy, driving months.

It's basic supply and demand. But we also know that our highly concentrated refining sector doesn't have the incentive to keep enough supplies and inventory. That's because price spikes are profit spikes. This is a common-sense solution that has been adopted by developed countries around the world.

This Bill will increase supply at critical times and create a buffer to protect consumers from price spikes. It will also provide predictability and stability for our economy and improve resiliency if there's a natural disaster. With this legislation, you can continue the critical progress that was started in the first special session. Thank you.

Thank you. We'll go ahead and now open it up for additional testimony and support. If you would like to provide testimony in support of ABX 21. Please approach the microphone. As a reminder, please just provide your name, position, and affiliation, if any.

Well, let's go ahead and turn that on. All right.

Okay. Daniel Barad, on behalf of Union of Concerned Scientists in support, thank you.

Mariko Yoshihara, on behalf of UFCW, Western States Council, in support.

Michael Swords, Vice President of Government Relations at LACI, in support.

Raquel Mason with the California Environmental Justice Alliance, very grateful for the Committee amendments. Now moving to support. Thank you.

Connie Cho, Senior Policy Advisor for the Asian Pacific Environmental Network with grassroots refineries communities. And strong support, thank you so much for the incredibly powerful amendments.

Thank you.

Good morning. Janet Staniford, on behalf of Attorney General Rob Bonta, proud co-sponsor. Thank you.

Good morning. Christina Scaringe with the Center for Biological Diversity in strong support. Thank you very much for the amends.

Thank you.

Good morning. Malik Bynum with United Domestic Workers, AFSCME Local 3930, representing over 180,000 home care and child care workers and across the state in proud support of ABX2-1.

Thank you.

Jamie Court with Consumer Watchdog in very strong support.

Bill Magavern with the Coalition for Clean Air. Thank you for the amendments, with those we are in support.

Thank you.

Erin Niemala, on behalf of Campaign for a Safe and Healthy California, also in support. Thank you.

Thank you. Okay, we'll now move to opposition if our witnesses can approach the dais. Thank you.

Good morning. Robert Sausedo, President, CEO of Community Build. Opposed.

Oh, sorry. We're going to first hear from our primary witnesses in opposition. And then I'll.

I stand corrected.

And then I'll open it up for testimony in the room. Thank you. All right, go ahead and turn it over, Mr. Leary, to you.

All right. Good morning, Madam Chair and Members. Thank you. Zach Leary, Chief Lobbyist, the Western States Petroleum Association. Here in respectful opposition to ABX2-1.

In the last special session, you as the Legislature, wisely rejected the Governor's initial proposal in SBX1-2, and instead you required a multi-year process to collect the data from industry, craft multiple studies for legislative review. You also had the wisdom to give the CEC a consumer Fuels Advisory Committee.

Unfortunately, the Members of that Committee were never appointed by the Administration and therefore the CEC never received the advice that you wanted them to in the legislation. Last year, the focus was on price gouging, and the data that is being publicly reported on the CEC's own website is not supporting that fact.

So now, in the middle of this multi-year process, you're being presented with an idea that was similar to an idea that was contemplated 20 years ago and determined by the CEC that it was a bad idea then, and we think that's still the case today.

We align ourselves with the CEC's conclusion that this proposal would create artificial shortages and cause everyday prices of gasoline to rise. That's Economics 101. When presented with this idea, it sounds good. Store more. But your diligent work in the informational hearings revealed this simple idea is much more difficult and complex than originally thought.

The hearings illustrated not all tanks are the same. They are consistently in motion, blending multiple components to make gasoline. Vice Chair Gunda even acknowledged not every refinery might have capacity, which Professor Bornstein opined, well, we can create a trading mechanism. Vice Chair also brought up the concept of central planning.

So begs the question, are they trying to become the Cal ISO for fuel delivery? This simple idea got really complex really quick in just two days of digging. We remain fundamentally opposed to the proposal. We believe the Legislature giving its authority to yet another state agency to raise everyday gas prices on consumers is not a good idea.

You already have one agency that's doing that, the California Air Resources Board. They have not shown you the math for this economic theory. And that's all this is, is an economic theory. They again have not shown the math. So is this proposal going to cost 10 cents a gallon? 20 cents a gallon? 30 cents a gallon?

We don't know because we haven't seen the math. The Bill proposes a long-term cost increase to a short-term price spike. Are consumers just then paying more to pay more? The reality of the decades of policy that have gotten us to this point are daunting.

You are likely going to face a Diablo Canyon moment with a refinery. Fortunately, with Diablo Canyon, you were able to keep the lights on. But if another refinery decides to leave the state, at that point, it will probably be too late. For these reasons, we must respectfully oppose this proposal that will likely increase costs on your constituents.

Thank you.

Thank you, Madam Chair, Members of the Committee. Jeremy Smith here on behalf of the State Building and Construction Trades Council of California, we are opposed to ABX2-1. President Chris Hannon was planning to be here today, but is stuck, I think on the same late-arriving flight that Mr. Murtsuchi is on.

But to be clear, I am here, we are here today on behalf of our Members who you will hear from later today, their families, and their communities.

ABX 21 authorizes the CEC to require refineries to provide a resupply plan that will avoid price increases to the California transportation fuels market before getting approval to perform a turnaround or maintenance event. For the safety and health of our members, many of whom you will hear from today, this is a nonstarter.

Our members are inside California's refineries and have worked over 33 million hour over the last five years safely while providing for their families, which offers them a unique perspective on how gasoline is produced and how this maintenance affects California refineries.

Maintenance must be done on a schedule based on the condition of metals and infrastructure and the lifecycle of equipment such as vessels, pipes, and valves. The safety of our Members working in refineries, the safety of other workers in the refineries, and the surrounding communities must not be jeopardized on market and pricing considerations.

It would be impossible to store fuel to mitigate a 30-day maintenance or turnaround event which under the bill may lead to the inability to do maintenance leading to shutdowns, closures, catastrophic failures, injuries or death, and massive job losses. During a turnaround, there is a rush mentality by our Members.

Refineries lose money for every minute the refinery is down for maintenance. However, delayed maintenance or maintenance turnarounds schedule for anything other than safety and health and allowing politicians or a panel of academics to make decisions about how and when turnarounds can happen is a safety risk and will put workers and their communities at risk.

The bill also authorizes the CEC to develop minimum inventory levels that likely cannot be complied with with an existing refiner infrastructure, requiring additional tank farms to be constructed without consideration for space and the reality that they could never be permitted.

Communities like Torrance and Richmond and others would not be accepting of additional tanks for gasoline and other refined fuels in their communities. Finally, the elimination of labor and other stakeholders, replaced by academics and economists on the Expert Advisory Committee, removes years of experience, insight, and expertise.

Our Members and affiliates have extremely valuable knowledge that is critical for the safe operation of refineries, and they should be included in any new Committee created under ABX 2-1, this bill does not demonstrate an ability to lower prices while maintaining safety and reliability.

While we understand that there are Committee amendments we look forward to seeing, we remain opposed to ABX2-1.

Thank you. We'll go ahead and open it up for additional testimony in opposition. If you'd like to provide testimony in opposition to ABX 2-1, please approach the microphone.

I apologize, I am going out of order. I wasn't here in time, but this is Kimberly Rosenberger with SCIU. We want to emphasize our strong support for this and putting California families over profits. Thank you.

Thank you.

Hello again. Robert Sausedo, President and CEO of Community Build, opposed the long-term effect. It will be deleterious to consumers. Thank you.

Good morning. Faye Guyen from Cure LA. We oppose as well. Thank you.

Hello. My name is Cedric Farmer, and I am the Executive Director at Urban Recovery Los Angeles, and we stand in opposition.

Aloha. Mitchell Bechtel, on behalf of the District Council of Ironworkers, in opposition. This Bill is going to raise prices and our members are going to lose jobs. Thank you.

Good morning, Madam Chair and Committee Members. Matt Cremens here. We are in respectful opposition with the Operating Engineers. Thank you.

Madam Chair and Members. Oracio Gonzalez, on behalf of California's Business Roundtable and the California Business Property Association, opposed. Thank you.

Brandon Knapp, representing Bay Area Council, in respectful opposition. Thank you.

Dan Chia with Omni Government Relations, on behalf of the California Chamber of Commerce and respectful opposition. Thank you.

Hello. Tom Hanson, IBEW Local 302, Contra Costa County Local 302 is in opposition.

Good morning. JJ Sevilla, IBEW 302. Concord resident, opposed.

Anthony Butler-Torrez with the California Hispanic Chambers of Commerce, in opposition. Thank you.

Chair Members. Dean Talley with the California Manufacturers and Technology Association, respectfully opposed.

Dr. Ruben Guerra with the Latin Business Association, and we strongly oppose.

Good morning. Michael Ceragosa, councilmember, City of Placerville and on behalf of the Central Valley Latino elected officials coalition, in opposition.

Good morning. Ken Miller, Ironworkers Local 378. On behalf of our 2,100 Members, we oppose.

Good morning. Elias Martinez, Local 378. Before I became an iron worker, I was in the refineries for 27 years. And if you take away from maintenance, I've seen it firsthand what it could do to people. So I oppose.

Thank you. And just as a reminder: name, position and affiliation.

Elias Martinez, yes. Local 378, iron worker. Thank you.

Hello. How you guys doing? My name is Francisco Yanez and I'm an organizer for 378 and I oppose.

Good morning. David Meyer, local ironworker, 378, Vice President, opposed.

Charles McElroy, local 377, iron worker. I oppose.

William McElroy, local 377, iron worker, opposed.

Miguel Garcia, local 377. I oppose.

William Perez, iron worker, 377. I oppose.

Good morning and thank you. My name is Justin Alterman, just a humble 377 apprentice iron worker, and respectfully oppose. Thank you.

Good morning. Jeremy Clark, Labor Relations Manager for TIMEC Refinery Services Company. I oppose.

Good morning. Eddie Reyes, Ironworkers Local 377, President, San Francisco San Francisco resident, strongly opposed.

Madam Chair Members. Andrew Antwih, with Shaw Yoder Antwih Schmelzer & Lange here in opposition on behalf of Fresno County, Kern County and the Western Propane Gas Association.

Thank you, Madam Chair. Jack Yanos on behalf of the California Trucking Association, respectively opposed.

Good morning. Alessandra Magnasco. On behalf of the California Fuels and Convenience Alliance, the Arizona Petroleum Marketers Association, the Nevada Petroleum Marketers and Convenience Store Association, and the following small businesses. JB Dewar, Seiberts Oil Fuel Delivery Services, South Bay Enterprises, Ed Staub and Sons, Lakeview Petroleum, Valley Pacific Petroleum Services, River City Petroleum, National Petroleum, and Rebel Oil.

All opposed.

Good morning. Alex Chavez, third generation oil field worker, and I oppose.

Tyler Bird, President of Ironworkers 416, Los Angeles. And we strongly oppose this bill.

Good morning. Troy Arnson, business agent, Ironworkers Local 118. I stand with the state building trades with oppose.

Good morning. Mitch Ponce, business agent, Vice President, Ironworkers Local 433, and President of the LA Orange County Bill of Trades. On behalf of my Members, we strongly oppose this bill.

My name is Renee Palacios, business agent, Los Angeles Ironworkers Local 433, and we oppose.

Good morning. My name is Chris Graney. I'm the business manager of the Heat and Frost Insulators and Allied workers, Northern California. I've worked in every single refinery in Northern California. On behalf of my Members, I strongly oppose.

Good morning. My name is Anthony Vescuso, and I'm a business agent for Local 16, Heat and Frost Insulators. I'm also a resident of Contra Costa County, and I strongly oppose anything that would take away 30% of the revenue from my county and lower the services. Thank you.

Good morning. My name is Pablo Villagrana. I'm President of Ironworkers Local 155, Fresno, California. And we oppose.

Good morning. My name is Luis Navarro. I'm out of Local 155 and I oppose.

Good morning. Jesse Solis. Local 155, Fresno, California. I oppose.

Hi, my name is Alexander Kim. I'm representing the Asian Food Trade Association, representing several hundred grocery store owners and also grocery stores that provide down the supply chain. We respectfully oppose.

Good morning. My name is Jerry Palan. I'm the President and CEO of the Coalition of Filipino American Chambers of Commerce. It's 10,000 strong Members, and we are based in Cerritos, California. We strongly oppose the bill.

Good morning. My name is Suliman Basir, and I am the CEO of the Afghan American Business Alliance. I respectfully oppose.

Good morning. Mario Monzo, out of Local 92. Strongly opposed.

I'm a proud bolomaker. My name is Hugo Castaneda out of Local 92 in Southern California. If you guys pass this bill, how are you guys going to guarantee for my Members and for our families, our future?

Sir, we can only at this point do.

I strongly oppose this bill.

Name and affiliation. Thank you.

Good morning. My name is Dominic Fernandez, and I strongly oppose. I'm from Local 92.

Good morning. My name is Guillermo Zugera II. And we do the maintenance on these refineries. And I oppose.

How you doing? Good morning. Alfredo Leyva with Boilermakers Local 92. Strongly and firmly opposed.

Hello. Good morning. My name is Rudy Partillo, Boilermakers Local 92, strongly opposed.

Morning. My name is Jesus Rosado. I oppose.

Good morning. Luke Pimentel. I strongly oppose.

Good morning. Melanie Lee from Local 92, Los Angeles, California. I strongly oppose.

Good morning. Mike Miller, Local 378 ,Ironworkers. Disabled veteran. Currently work in Chevron as a rigger 40 hours a week. Strongly oppose your potentially taking food off my table and endangering the.

Thank you, sir.

Employment of all our Members.

Hi. Good morning. My name is Jerome Ramirez, Member of the 378, Ironworkers local. And we are strongly opposed.

Good morning, Chairman. Timothy Jeffries, international representative for the border of Megan, State of California, representing locals in 549, Northern California, Pittsburgh and Southern California. We strongly oppose this bill from international Vice President Tom Baca. Thank you.

James Bradshaw, Boilermaker Local 549, and I oppose this bill.

Michael Jolly, Boilermakers Local 549. Represent Northern California and Nevada, who strongly oppose. Do you want bombs in our backyard?

Hi. Felicia Templeton with Local 549, Contra Costa County. And I strongly oppose.

Carl Keith from Long Beach, California. I'm representing Local 92 Boilermakers, and I strongly oppose.

Good morning. My name is Gabriel Lopez. I have six kids. You guys are making it hard for me to support them. I've been with the refinery for 25 years and I hope I could be able to retire. I oppose highly. Thank you.

Al Bohler Junior, Local 92s, opposed.

Good morning. My name is Juan Romero, Local 92, Los Angeles, and I strongly oppose.

My name is Jesus Perez, Local 549, Boilermakers. I live here in Rancho Cordova. I'm a husband and father of three. I work regular shutdowns and refineries. I have worked at refinery's regular maintenance crew for over five years, and I see the importance.

Sir, at this point, we can only take name, position and affiliation.

Let's keep our coworkers safe, community safe. I oppose. Thank you.

Robert Lopez from Long Beach. Boilermakers, Local 92. I oppose.

Cal Saylee, Local 378, Iron worker. And I humbly oppose that bill.

Hi. Good morning. Fedencio Vasquez. I'm 378. I don't work. I'm opposed.

Good morning. My name is Hector Cortese. I got it working in 378 am oppose.

Good morning, my name is Gerard Ambrins, I'm at work 378 and I'm opposed.

Good morning, my name is Eric Larson, I live in San Jose and I'm an apprentice to an iron worker and I'm opposed to this legislation.

Hector Juarez, Local 92 opposed.

Dozing with boilermaker union oppose

Hello. Raymond Oliva, Local 92 I oppose.

Hi, good morning, my name is Isabel Machine and I'm opposed.

Archie Aguirre, proud Member of Local 378, Ironworkers strongly oppose.

Daniel Santoyo, 378 I oppose.

Thank you. All right, we'll go ahead and bring it back to Committee Members for questions or comments. Assembly Member Garcia?

Thank you, Madam Chair, and thank you to the authors. Thank you to both the witnesses in support and opposition. My question, and it's to both the opposition and the proponents, we're hearing from the workforce that the proposal has the risk of sacrificing jobs. I'd like for the proponents and the opponents to address the issue.

How is it the jobs are going to be put at risk here, and if you can share that with us, it's been said that contrary is going to happen. Gas prices will go up.

I'd like to hear how, from those who are opposing the bill and those who are proponents of the bill, how are we going to be saving gas? And then, of course, on the price of gas. And the last question here is the issue of safety for a workforce. We're hearing that we're putting at risk workers.

I'd like to hear how we're not. And if we are, I'd love to hear more details about that.

I really want to hear some responses to those three questions to really kind of shed light on the pros and cons that have been pointed out by both the witnesses and those who have testified in favor and support and against.

Thank you, Assembly Member. I'll take your last question first because I think that was the primary concern of Mister Smith and also all the boilermakers and iron makers that were just speaking to us. That is worker safety. And there are amendments in the bill.

The very first amendment to the bill is in Section one, and it states that any such regulation must include, but not be limited to, all of the following provision. A.

Establishing that the health and safety of employees and the public must always be the primary consideration, and that any harm to employees in local communities, from changes to the timing of turnaround or maintenance, should be minimized. That is an explicit statement that the highest priority in this legislation is protecting workers and the communities that live near refineries.

In addition to that, we have retained the original proposal for the independent consumer Fuels Advisory Committee, which includes representation from labor and from environmental justice communities on that Advisory Committee. So we will have those folks at the table working directly with the CEC on making these decisions.

And I'll leave the other questions that you asked for Mister Gunda.

Thank you. Thank you Assembly member for the question. I think it's important to just take a step back and think about the fundamental argument around what could potentially create job losses or refinery shutdown. And the underlying assumption there would be that the businesses would not stay profitable anymore.

And the important work if this authority is given to the CEC. The CEC would have to go through a rulemaking process to study the impact of any legislation and what that would do to the revenue of the industry players, including the refineries. So it's an important element of what we are going to do.

And based on those considerations and the stakeholder feedback through the rulemaking process, if such risks are significant and cannot be mitigated, the CEC would not act on such a rule.

If I'm. Yeah, I think.

Well, so sorry, if I may continue on that and then.

Through the Chair, Yes.

So as a starting point, I think it's really important to understand all of these refiners report their profits for the western region and for other regions. California is part of the most profitable area in the country. And we saw record profits during these price spikes.

And so I think being able to disentangle these outrageous price spikes from normal, routine, fair profits is important. There's no reason that these companies cannot operate fairly with a bit more inventory and still make profit and stay in business.

And in fact, as the Vice Chair indicated, the CEC has to do a cost benefit analysis before moving forward with any regulation. In terms of showing the math. DPMO gave a public presentation showing that avoiding the one price spike in 2023 would have saved over $2 billion.

Consumers have been paying these exorbitant prices for gasoline in California that are not tracking the rest of the country, not tracking crude oil in the rest of the country. And so the economic case for this is unassailable.

And you heard from independent economists from UC Berkeley and from Stanford talking about how a Reserve requirement is used other places and can provide supply and liquidity when needed.

And then on the labor point, the bill, as the Assembly Member said, explicitly recognizes that worker safety comes first and there's no need to trade off consumers protection and worker protection. We can do both. And this bill does both?

Assembly Member, I think, on the authority piece, this, I think, is setting a really dangerous and bad precedent of putting the CEC between the decision of a refinery to do maintenance and whether they can do it or not. So the authorities granted in the bill, do they have the permission to say no?

And I think that's a fundamental question you need to ask, is, what if they say no? What if something goes wrong after they say no? Who is liable? The state said no. Something went wrong. Who's carrying the bag after that?

Thank you for the question. Assembly Member Jeremy Smith, again, on behalf of the state Building and Construction Trades Council. Well, we look forward to seeing the amendments. We haven't seen them yet. The description of them is one that we appreciate the work that the Committee has done to think about our Members health and safety.

But the spirit of the bill is to stop the price spikes and the profit motive here. And the spirit of the bill is to ensure that, or to require the refiners to do something they may not be able to do, either because they don't have the land or they can't get the permitting.

And so taking the decision out of the hands of workers and the folks who employ them at the refineries to determine when a shutdown should occur or turnaround or a maintenance event should occur to, that's in the spirit of the bill.

And we think that's just a fundamental safety issue, not only for the communities around the refineries, but for our Members and for the Members of the United Steel workers who work inside the refineries as well.

Follow up question, Madam Chair, but this is all being done on the premise of the information that's being provided by the refineries. Two years ago, we, this body, this Legislature approved SBX 12 that is giving us all of this information that we're now taking action on.

And so much of what's being raised as concerns could happen, should happen, is really being outlined on how it will happen by and through the CC with the information that is being now provided by the industry, if I'm not mistaken.

So can you confirm or deny that that is the information that's being utilized to make some of these precise decisions on the part of CC, if this policy was to move forward?

And that's a question to the industry representatives and labor, which information are you on, the refinery maintenance or on the.

All right, we're talking about the maintenance schedules, right? We're talking about storage capacity. We're talking about all of the kind of details that are being included in what would be the enforcement of this policy is information that's being provided by industry. Would that be correct?

Yes. Okay. And I think, assemblymember, I think two distinct differences. We do provide our maintenance schedule, or our Member companies provide our maintenance schedules, not only the CEC, but the dirty. Obviously, there are strict rules put in place for doing maintenance on the infrastructure.

On the capacity issue, we heard last week at the informational hearings, there's 14 days of supply in the system. That's the system at large. Beyond the refinery gates. That's the data that's being used. We then heard of, well, then some refineries actually don't have capacity to do that type of inventory.

And so then we get to the point of a trading mechanism, and a trading mechanism means somebody has and somebody does not have. So you need. Then the capacity doesn't exist. So you need to actually trade between companies, which in our position, brings up serious concerns about creating competitive advantages and disadvantages based on refinery size.

It also raises the question, you are now having fierce competitors trading data on storage capacity. I mean, that is a huge antitrust concern from my perspective. And I think something this Committee should consider granting that type of authority for.

Through the Chair, if I may. I would just add that inside the bill in print, they're taking our voice off of the expert Advisory Committee and replacing it with academics. And nobody even talked to us about this bill and how it affect the workers in the refineries before it was introduced. I wanted to add that as well.

And finally, you know, in consultation with labor and Workforce Development Agency. Those words are in section one. I don't have to remind this Committee that Cal OSHA, for example, is chronically understaffed, underfunded. They work really hard there to do the good work that they are needed to do.

But we are relying on academics to determine in the bill in print when these maintenance events can occur. And if the refinery industry can't comply, they may make a decision to leave the state, putting, as you just saw, and thousands more Members out of work.

Just one last comment. I do see in the amendments here that a Member representing labor will be part of the division here, this independent consumer fuels Advisory Committee. And so there will be a seat at the table that will be critical.

And it sounds to me that in order for this to work, it's going to require greater collaboration without any need to disclose any secret sauce trade elements to specific businesses.

And so I'm hopeful that that is what we're able to achieve in order to hit what is the primary concern and conversation that has been triggered here at gas prices for Californians.

I represent a region state that is a very Low income community that is also contributing to the transition efforts, as you all know, the Lithium Valley efforts that are underway. But that's not very near right in terms of helping us fulfill these goals and objectives. And so the issue of gas prices is of major concern.

One thing that, you know, I think is missing from this conversation, and perhaps it's a separate discussion, but for me, equally important is the kind of public health, air quality elements of this entire discussion that, again, is not part of this legislation, but perhaps needs to be thought of as we're making these decisions moving forward.

I don't have any other questions. I just want to thank both the proponents and opponents for answering my questions. Thank you.

Thank you, Assembly Member, Assembly Member Jackson.

Thank you very much, Madam Chair, and thank you for all the work that you've done to help facilitate many of our concerns. I just want to start off with, I believe our language is really headed in the right direction in terms of my primary concerns of impacted communities and ensuring that we have a priority in terms of making sure that all of this is well and good, but the overarching goal should be to lower gas prices, keep gas prices Low.

And so I really have some technical stuff because I just got this this morning. So now you guys have to deal with it in front of everyone. In section 1 A, it does have the provision to ensuring that health and safety of employees and the public is the primary consideration.

But then in the last part, it says that, and that any harm to employees and local communities, from changes to the timing of turnaround or maintenance, should be minimized. Why are we using the word should instead of shall?

Does anyone have a answer to why we're not using the most definitive word as opposed to a little bit more subjective?

I think it's a good point and we'll look at that and have my commitment to we have time between now and the floor vote so we could tweak things.

I would definitely like to see that word change, please. And then secondly, on Section two. B. Three, it has a recognition that the health and safety of employees and local communities are always primary considerations. It seems to me that B is adopting shall provide the following. So this is action. These are action.

But the only one that is not action is three, which is a recognition. I don't like that word recognition. We got to get stronger than a recognition because a lot of people recognize all kinds of stuff and don't do anything. And so I would like to see that specifically.

Again, I would have provided all this yesterday if I would have seen it. But here we are also in 5 C. It says, notwithstanding subdivision a, the Commission shall not adopt a regulation pursuant to this section unless it finds that the likely benefits to consumers avoiding price volatility outweigh the potential cost to consumers.

Can you tell me what, what greater benefit exists higher than lowering gas prices?

That would be the primary focus.

I mean, that's not what this says though, right? I mean, am I reading this wrong? Go ahead.

And I think the theory we're basing this off of is you're going to create an artificial shortage in the market by withholding supply to build an inventory.

What I think the CEC is saying is overall we may raise gas prices day to day to smooth out a price spike, but in the year they're going to see a savings. Well, what is that savings? I think that's where I think you're getting to the point.

You haven't seen the math on how the savings is going to account. Is it a daily savings or is it a yearly savings? And I think it is the latter. It is the yearly savings that they're trying to go for. But that means the math has to work out.

And I think your response, yes, I want to let Assemblymember Jackson finish his line of questioning. I know that, I know that CEC and DPM are eager to remind everyone of that math that they shared with us last week, but we'll go ahead and let Mister Jackson finished his questioning before that.

You know, to answer your question, your first question, the structure of that section of the Bill is introducing the guardrails that are there to protect consumers.

And so that phrase is highlighting the trigger point, saying that the CEC will not be able to go forward with the rulemaking unless it meets these threshold criteria, that it reduces prices for consumers and the benefits outweigh the price volatility, that there are minimum levels of inventory or refined transportation fuels lead to greater supply, that the minimal levels of transportation refined fuels will lead to a lower average retail price on an annual basis, and whether the easing of supply chain inefficiencies constraints would lead to greater supply in the California transportation fuel.

Oh, no. Yeah, definitely. I really appreciate. I appreciate you're working with me on this. I guess my question to Administration really is, do you foresee any rulemaking that would knowingly raise gas prices even though there's things that we could be doing to keep them Low?

No. No. I think the answer is no. And I want to just also respectfully offer to the Committee and to my colleague from WSPA. I think oftentimes the information that we put out is quoted selectively, and it's problematic when a Committee is trying to hear in its totality what we're trying to do here.

So I just want to respectfully offer to my colleague from WSPA that CEC has made certain assertions about the negativity of these potential solutions. And as we noted last week, the fuels assessment was an open, robust, public process where we did a whiteboarding exercise, including with the industry.

And some of the cons we noted in the fuels assessment directly came from the industry. And so we faithfully represented them and said we need to study further.

And as we noted last week, after we published the fuels assessment in its draft form earlier this year, we continued work on two or three options that felt that we could do immediately.

And for that, I also want to quote WSPA's written comment into our docket, which said, here are these opportunities are interesting to further study, again noting caveats of the problems. So we continued to study that. And as we went through that study, we looked at the minimum inventory levels and really started analyzing the potential benefits here.

So I just want to provide the numbers we provided last week between DPMO and CEC. And this is where I want to draw the role and remind DPMO is an independent agency within CEC, so we take information from them as a part of our total work. So I'm going to represent just the CEC's work.

CEC established that the preliminary number of what the savings could be by eliminating the price spike could be about $1.0 billion. That's what we look at. And then we looked at a number of different ways you could increase the liquidity in the market to reduce that price spike.

And when we look at that, and I want to just absolutely clarify this, we have not decided on needing 15 days worth of supply to be carried by industry. All we are talking about is what is the incremental ability to make the market a little bit more liquid.

So under that presumption, if we maintained about two days worth of liquidity, and the reason why the two days comes in is because when we look at the last two years, when the price spikes happened, we dipped all the way to 12 and a half or 13 days of supply. So we're talking about those two days.

So when we talk about those 2 -2.5 days worth of supply, and we did the math, preliminary math, what we're talking about is industry holding those gallons and selling them.

Right. I mean, I understand you're responding to them, but I'm trying to get back to my language.

That's what I'm getting to, which is.

So when I'm saying is, when I read this, it seems as though is that we're creating an opportunity to adopt regulations that may not lead to lowering prices.

Like we're basically saying, we want to make sure that prices are consumer friendly, but there may be some things that may offset that. Unless I'm reading this wrong. I mean, am I reading this wrong?

I just want to clarify at least the thinking here. So I just want to make sure, and we can go through the text if it's kind of miscommunicating. We are talking about eliminating $1.0 billion worth of payments at the pump.

And when you remove them, the average price, average price across the whole year drops by 7 to 10 cents across the year. And the cost of dealing with that additional buffer would be in the vicinity of tens of millions.

So if you spread that again over the year or during the price spike, you're talking about overall on the net tenths of cents of benefit. I just want to make it very clear.

So your overall goal is not just about the spike, it's about lowering prices.

Alright. Lastly, I'm sorry, I know, don't whip me, Madam Chair. You scared us last time.

Yes. Absolutely. Absolutely.

My last question, Madam Chair, is all of this is obviously, we got to make sure this is not just in a vacuum because also CARB is coming out with regulations, right? How is this being thoughtful with understanding that CARB may come out with regulations that may actually incur or create greater cost pressures?

I mean, how can you talk to us about, is this being done in a vacuum, or is all this done understanding the regulatory landscape that is coming forth in the future?

It would be done holistically, I think, whatever. So I want to just also bring back one of the questions you raised earlier. The DIR has safety rules, Cal OSHA has safety rules, CARB has emission rules, and industry participants.

We have to take all of that into account in any rulemaking we do, and any constraints that exist within those specific lines of work will be taken into account. And after we take into account all those, if the opportunity does not exist or the benefits do not outweigh the costs, the Commission will not adopt such rules. Okay.

Thank you very much. And again, I really appreciate the back and forth from the authors, from everyone else, and certainly Madam Chair. Thank you all so very much for making sure the considerations of the Inland Empire are being addressed. I think, I'm not sure it's up to you.

Thank you, Assemblyman, if I may, madam.

Is it responsive to a question of Doctor Jackson.

To a couple of your points? Doctor Jackson, I think first, on the transportation fuel assessment, I do want to commend the CEC on their work. Very straightforward, factual, about supply demand, the reality of our fuel infrastructure that we're in right now.

I think, Doctor Jackson, I think you're getting at the .1 of the things they contemplated in the report is, do we want Low gas prices or high gas prices? In the report itself, it says, well, lower gas prices would result in more driving. And I think, you know, to meet the state's goals, it's transitioning.

It's going to, you know, zero emission vehicles. There is not a desire for lower gas prices from the state policy and so on. The point of the CARB regulations, those are happening independent. Those are happening right now. In November, the Air Resources Board is going to adopt an update to the Low carbon fuel standard program.

Then there's going to be a cap and trade regulation afterwards.

Those programs are set to become more stringent to meet the climate goals, and they're the tools to get to the goals, but they are going to become more stringent, and there is a direct correlation between those programs and costs that your consumers see independent of what the work the CEC is doing, what the work the Legislature is doing.

Those programs are on autopilot, so there are going to be impacts.

Thank you, Assemblymember Zbur.

So thank you very much. I was very pleased to see some of the changes that were in the, in the Bill.

I thought they were responsive to some of the issues that I raised in the first hearing, including things like making sure that health impacts and impacts defense line communities are reflected in the Bill, changes made to the fuel advisory council to make sure that the unions and fence line communities and the industry itself is represented, issues related to the use of existing capacity, storage capacity reflected in the Bill.

So I want to thank you. I think those are all moving in the right direction. I do want to say that one of the things that was convincing for me in the informational hearings was the data that actually showed that California is unique in having price spikes during times in the year.

And I know that this is really the goal of this legislation. I do have a couple of issues that I think are remaining that I'd actually like to ask you to consider before it comes back to the floor.

And so when you look at Section 25 354.2, I think you did add language related to addressing the health and safety of employees during these maintenance situations and the fence line communities. One of the things that was not included there is the underlying job impacts.

We just had a whole line of folks that are working in the refineries or near the refineries that are very worried about job impacts as well. And I think that's a different thing than health and safety of the community and even health and safety of the workers.

It's really, are you going to actually, is what we're doing going to result in job losses and job impacts? And I think that should be part of that, that section. I concur with my colleague from Riverside County in the sections of the Bill related to the, what the regulations will provide.

I do think that the section related to the health and safety of employees sort of being the primary consideration. I concur with those comments. In addition to that, I also think that job impacts should be also included. I think it's different than health and safety of workers, but job impact should be one of the criteria in there.

Then going down to section C, and this is something I raised before, and there weren't really any changes made here. The Vice Chair, I think, articulated, I think, what the goal of this Bill is, and I concur with it, but this doesn't really quite say that yet.

So when you look at sort of the criterion that's going to guide and is going to really, you know, we're giving significant regulatory authority to the CEC under this Bill. And so I think it's important that the regulatory authority have really clear guardrails that are not, that are a bit stronger than what we have here.

So, for example, it says that will not adopt a regulation unless it finds the likely benefit to consumers avoiding price volatility outweigh the potential cost of consumers. That is sort of like a 51% standard. If it's sort of like 51% more likely that you're going to not harm people, you can actually adopt the Bill.

This should be much stronger. It should be, I think, something similar to what you stated, which is that it significantly outweighs it. And frankly, that overall it's going to result in price reductions.

And I think just having that in the Bill is going to be important to explain to the public that the goal of this is to reduce prices overall. And this is sort of, it's sort of agency regulatory language that I think says that.

But I think it should be explicit in the Bill so that the public knows that the goal of this is to reduce gas prices overall. When we're taking into account both the average prices plus the peak, the peaks in Section C.

So one thing I did want to point out just in response to, I think, some of the comments that were made by the industry, this Bill doesn't allow a regulation to be adopted unless it meets sections one, c 1 and 2. That gives me a fair amount of comfort in terms of the price issues.

I mean, literally, you can't do it unless you consider whether it's likely that the minimum levels of inventories, refined transportation fuels will lead to greater supply in the California transportation fuels market than would exist without the minimum levels. And then the second one below that is something similar.

So the CEC has to actually, as I mentioned before, I'm not convinced necessarily that some of the arguments that the industry is making are not true in terms of tank capacity.

But I think what we all need to recognize is that this is the beginning of a process where we're delegating to the CEC the authority to answer that question, whether or not, I think some of the issues that you're raising are actually accurate.

And frankly, the CEC, I think, is not going to have the authority to adopt this if basically what you're doing is taking fuel off the market and resulting in a price increase. So I think that part is, I just want to point out that is already built into this Bill.

My other issue relates to sort of what I've been saying before, and that is on the things that shouldn't be in the Bill.

I think I would be more comfortable if you added in provisions related to no loss of job impacts, issues related to protection of fence line communities, and even issues related to the not providing not requiring new tankage that has impacts on fence line communities.

I think the stuff you have later in the Bill about averaging, I think addresses a lot of sort of the competitive dynamics and making sure there's equity among refiners. But still, those are really important criteria.

And I think we've got a whole host of folks that just testified today really worried about whether or not this is going to result in their jobs going away and whether or not this is going to result in refinery shutting down. And I think that needs to be part of what you think about when you're doing that.

And so I'd like those concepts incorporated into section C, if you can do it with that. I, the last question that I have for the Bill, author and Brock Schiefer is one of the things that everyone is afraid of change. That's just something that is a common thing in the world we all live in.

The question I have, I understand why you wouldn't want to bring it back to the Legislature for sort of adoption approval of what you're doing.

I actually have a lot of faith in, in regulatory processes where you actually have to, in addition to the things that are here in the Bill, I mean, you are subject to, I understand, a lot of other criterion as part of the administrative process in terms of cost efficiency.

I assume there's other things that you're normally subject to when you're adopting a regulation. And so I have a lot of confidence in the regulatory process, but I think there's a lot of fear about what this Bill could do.

And I'm just wondering whether or not it would be possible to include at least an informational hearing before the Legislature before the adoption, not a yes or no, but an informational hearing so that actually we could understand sort of how you've weighed some of these factors and could actually give you input during the public comment period.

And I think that would give a lot of people, and myself included, a lot of, and I think what we're going to find is you're going to be paying a lot of attention to all these things that we're hearing.

But I think having that additional step would at least give, I think a lot of folks that have concerns about just the fact that this is new, some amount of confidence. I was wondering if you might be able to respond to that. And that's my last question.

There is an annual report requirement in the Bill, and I think that's an opportunity for informational hearings.

If I understood your question correctly, not to speak for you Assembly Members of our I believe the question was in advance of the adoption of the regulation.

Yes. So, like during the. I assume that there's a public. There will be a public comment period when the regulation is issued. Would it, would.

Could we include in the Bill a requirement that there be an informational here, not a vote yes or no on the Bill, but a vote, but something where it's brought back, where there would be a hearing that's run by either this Committee or the UNE Committee or somebody here in the Legislature where the Bill could be presented and you could at least get input from the Legislature and public comment on that, which you would take into account before the final adoption of the Bill.

Yeah, I think that's. We're going to hear a lot of different input from different Members today, and we're going to take all of that back and have conversations with all the different stakeholders and have an answer for that, but I can't commit to that today.

Thank you. It would make me feel a lot more comfortable voting on this, given I think we've got a lot of fear about this Bill, and I think that would actually assuage a lot of that. So thank you very much.

Thank you for the comment.

Thank you. Assemblymember. Assemblymember Papan.

So, first of all, I want to say I, too, am very grateful to have this special session and the ability to vet legislation like this, which affects a very important commodity, which is also subject to a lot of fluidity, if you will.

So with that, I do have some intricate questions, because we did just get this language, and I haven't had a chance to really take it all in. So one of the things that I see in, I'm going to get down to the nitty gritty here, which is section 4B.

And in subpart four, you say, a process for adjusting or waiving, if appropriate, minimum inventory requirements for one or more refiners based on region, season, refinery size and storage capacity. I would like to see in their lack of refinery size or storage capacity because.

Put me exactly where you are?.

Sure, sure. Sorry. Sorry.

Went too fast. Section two.

Section two. Okay.

25 section. Hold on. 25 354.4. Got it. I'm not. I don't have the second page. We have different copies in front of us. So are you with me now?

Yes.

Okay, great. All right. So you say, if appropriate. So what you're saying. Let's define the section. Regulations adopted under this section shall provide for the following.

And under subpart four, it says, a process for adjusting or waiving, if appropriate, minimum inventory requirements for one or more refineries based on region, season. And it says refinery size and storage capacity. I would just like to see lack of refinery size and storage capacity.

At least then we have put some criteria around what is appropriate and what is not appropriate. Does that make sense?

Yes, I understand exactly. And I think that's.

I know it's very peculiar, but sometimes it's important to do that in a statute. When we get. I'm continuing on down now with section c, sub part two, which we've talked about, is you would do this if you felt that the annual average of gas prices is lower.

And I guess my question is, is that compared to what, and we may not have the what, or are you going to use those three years that where we had gas spikes, and that will show you billions compared to overall not a lot in that year? What is the answer to that?

Thank you, Assembly Member. I think it's a really good question. So we have a few different metrics to compare, and I think a part of the public process will also hone into that. There's a couple of fundamental pieces we need to publicly adopt. One is what constitutes a price spike?

So we have economic theory on what constitutes a price spike currently. Similarly, we get a lot of questions on other terms that we use. So as a part of this process, one of the core things we need to do is to say what constitutes a price bike and adopt that definition.

And once we adopt the definition, that provides us a counterfactual, and the counterfactual will be used. Some of the counterfactuals we have today are the price forecast we already have based on economic variables, but that will be readjusted based on this Bill.

I see. Okay, so that'll be your metric, as it were.

Okay, so we've talked about, I think Professor Borstein was mentioning about this idea of perhaps credits, and I know that gives the industry a lot of heartburn and exchanging credits. Is that somewhere in this Bill?

My guess is it is in the section that I've been in, excuse me, part D, but I'm not seeing anything that says, hey, there might be some credits because one refinery may not have capacity to have some additional levels of inventory, so you might be using it somewhere else. So are you with me on subpart d?

I can give you the. It's 235.., 25354.4 subpart D. I'll wait until you're there. Is that where we're talking about, there might be credits?

I can jump in. Yes.

Yes. Okay. That's my initial question. Thank you, Madam Chair, for facilitating the hearing, as you are so capable of doing. All right, simple answer to a tough question. Yeah, sorry. So, it says market based compliance mechanism, and I'm assuming that might be this credit that we've been talking about. So I guess my question is, what are you.

Who would oversee such a credit? I don't want to call it scheme mechanism, if you will. And do you anticipate that the industry would trade amongst itself? Would there be trades among northern and Southern California? This may not all be appropriate for a statute, but I kind of want to know what we're dealing with.

I'll address that at the outset. My background is an antitrust enforcer with the United States Department of Justice, also the California Attorney General's Office. There are already areas of our economy where this happens in the energy sector, and I know that the Vice Chair has some expertise there.

We can look to those other areas where competitors can trade a certain type of credit, but they can't collude on prices. They can't agree to shut down their refineries at the same time, things like that. So there are precedents for this type of trading mechanism. They don't have to run afoul of the antitrust laws.

Appreciate that WISPA agrees on that point, that there shouldn't be. This should not be used as a vehicle for collusion. And so, obviously, in developing the rules, DPMO will be encouraging, following best practices that exist in other industries.

Okay. And I'm gonna let you answer in a second, because one of the things I think we. I hope, established the other day was that while we don't know, you certainly all know how you could get to 15 days based upon who has the entire industry having capacity.

Can you answer my question about Northern and Southern California, by the way? Will there be credits among those two or separately?

So, going to defer again to the CEC on regulations that haven't been passed yet, and also to the authors. And I see in the Bill there's language now about different regions. And so, you know, again, without prejudging the process, I think the amended language allows for treating on a regional basis.

Okay, so you're anticipating that it would not be because the two aren't connected. So I was.

Go ahead. Just gonna add one thing, and I'm sure colleague from VIspa would agree. As we look at the inventory levels today, CEC has visibility. Refinery by refinery today. I would imagine even as an industry kind of group Vispa would not be having that kind of information, so they would not have visibility of that.

So the ability to understand what capacity currently is available and how you can use that, I just would respectfully offer that the visibility that CEC has because of SPX 1.2 does not reside with either WISPA or any single refiner.

And we need to use that in a way that we could construct a mechanism that allows, allows for more liquidity.

And again, I want to reemphasize, while 15 days seems to have a good that hockey stick happens, we might end up finding that 15 days is not achievable during the process based on where we are and the specific constraints, refinery by refinery.

And once we take into account the workforce constraints, the revenue constraints, we might end up deciding maybe 14.5 is enough or 13.5 is enough. So it's important to think about maximizing the opportunity to mitigate the price spikes and reducing them as much as we can through a thoughtful process.

I would just add too, that more. Inventory is better than less. And that's the point, is that if. We don't have some objective goal that. Has a precise number of days of inventory, if we're able to work refinery. By refinery to increase inventory in the. Whole system, that's a benefit to consumers.

And just on your point, assemblymember, I think this language mirrors one of the most controversial issues that you all tackle in the Legislature, which is the cap and trade program. It's called the market based mechanism, and that is kind of the mirrored language in this provision. And market based mechanisms come with a cost.

So on the balancing all of this out math question, was this factored into the analysis of having a market mechanism that costs something for the space that's being traded for the trade off of giving this authority to the CEC?

Because the first time we really heard of this concept was at the informational hearing of, you know, Severin Bornstein saying this could be a potential mechanism, but it does come with costs.

Okay. It just wasn't expressly in there. So I had to make sure I kind of understood. So I have one more item. So I was very pleased since we met last week to see a sunset provision. I want to express for the record my reservations about seating legislative authority. And I would welcome even five years.

You know, when we got CARB standing up and saying, it's taken them five years to look at e 15, that causes me a lot of heartburn. And I think the public, you know, we have representative government and we answer to the public in elections, these agencies do not. So I just want to say I welcomed the sunset.

I'd welcome even a Shorter one. I think my colleague from Los Angeles suggestion of perhaps taking a look see before the regs are adopted would be wonderful. I think maybe something I know I've spoken with my colleague, who is the co author here, about perhaps something even more than an annual review.

Some more oversight would be welcomed because this is such an important commodity that affects every single californian, and it is a very, all joking aside, these situations are very fluid, as I'm sure our Vice Chair can understand. So because we answer to the public by way of elections, I would really welcome as much.

You know, I bantered about a lot. I was really relieved to see a sunset. And the more interplay that comes from electeds, I would welcome. So whether that's a Shorter sunset or more frequently coming to see us, as I know Miss Edgar Curry is entertaining, would be very welcome. That's not really a question, but thank you.

Thank you, Assembly Member, Assemblymember Wood.

Thank you. Thank you, Madam Chair. And I want to say I very much appreciate the amendments that have been made. I think they're responsive to a lot of the concerns that we heard last week.

I recognize, and I think it's important for the workers who came here to understand that we do not want anything to do, we don't want to do anything here that would potentially put you at risk for your health and your safety.

And I hope that once the building trades have an opportunity to review this, that they will agree that these amendments actually hopefully satisfy some of their concerns. Maybe not all, but that's the iterative process that we're working through here.

I guess, you know, I think about some of this from a different perspective, and I'm going to go back to our representative from DPMO. Have there been years you followed market prices and oversight here for a long, long time? Have there been years when the oil industry hasn't been profitable?

Perhaps during the pandemic? And I was thinking about assemblymember Papen's question about, well, what year are we going to use to measure average prices? And unfortunately, every year since before the pandemic, through the pandemic, we've had price spikes, except for two years during the pandemic when demand was so Low.

And so this industry in California is extraordinarily profitable. And I think the high profile nature of their profitability came to the fore during the last special session.

Well, I think it is very profitable. I mean, just look at the stock prices, look at the dividend yield from owning stock. It is profitable. And so I guess some questions for the opposition, mostly for WISPA here.

And as I said, I hope that the building trades will, when they look at these amendments, will hopefully soften their opposition. Have to recognize too, that we are heading to a day when we don't use fossil fuels. And so there will be a transition of workers from this industry to something else.

And it's incumbent upon us, I believe, to make that trans, you know, prepare people for that transition, give opportunities for these highly skilled workers to still be able to provide for their families in a new environment that promotes green energy and not without the reliance so heavily on fossil fuels.

But one of the things I was sitting here thinking is like asking the recent price spikes in the last couple of years, we're past Covid now, which is an important benchmark. I asked Wispa, can you explain those price spikes? Why did that happen?

Not during the pandemic last year, last.

Year, for example, and the year before. Why did those price spikes happen?

There can be a number of factors, as noted in not only the transportation fuel assessment, global factors can come into play. Global conflict.

Did they, did global factors come into last year's price spike? You should know. You guys are the ones who represent industry here. What led to last year's price spike?

I'm not sure which spike you're talking about. I think there was September, September. I think there was a couple of unplanned outages, from my understanding.

And so with, I want to ask our DP, is that, do you see, what did you see from that perspective?

Both significant planned maintenance, so refinery decisions to intentionally take their major processing units offline during demand, also while inventories came down, and then unplanned maintenance on top of that.

So it was a combination again.

But the driving factor was maintenance. Lack of resupply during maintenance and letting the inventories come down, but not crude oil prices. No invasion to use as a pretext for raising prices. Crude oil stable. That's right.

Okay. Okay. Thank you. And I guess I look to our building trades here. It's like, don't your employees get affected by high prices too? I mean, everybody gets affected by high. Are you not concerned about the high price of fuel?

Yeah, we're absolutely concerned about the cost of fuel. We're concerned about the cost of groceries, the cost of everything that, you know, living expenses in the State of California are expensive and we're concerned about it.

Our Members, although they do get an opportunity to work within their communities, to be able to have a career in this industry, you need to travel, and you need to travel across communities and across our state. And our Members, you know, probably utilize the gas pump more than just about any other workforce. This Bill doesn't address that.

It doesn't give a clear pathway. It sets up parameters that we don't really know what they are yet, and it gives the authority to implement them. And it puts price ahead of our Member safety and the other workers in the refinery safety and the surrounding communities.

So this Bill doesn't clearly address the pricing and even for the Members that work in and out of refineries on a regular basis, over the last five years, we've worked over 33 million hour in refineries throughout the State of California.

You think of the biggest project that we've had in the state anywhere and that multiplies it times two. It's important that we're able to produce products locally and we're able to have good jobs. The most concerning part about this Bill is it puts our Members safety secondary, puts them as a consideration.

It puts other workers as a consideration, their safety. We need to do maintenance. We need to do turnarounds based on metallurgy around the condition of the vessels, around the condition of the pipes, the condition of the valves.

We need to make sure that when we go in there to do the maintenance, we're doing it ahead of time before we have catastrophic events. And that our Member safety is not a consideration. But it's everybody's safety is the number one factor. So the Bill doesn't clearly demonstrate to the building trades that it addresses pricing.

And while it doesn't clearly do that, it clearly puts our Members' jobs in jeopardy. You know, if there's a path to no compliance because you can't provide a resupply plan for 30 days of maintenance, it's impossible. Does that mean that you can't do maintenance? Does that mean that you can't be compliant? Does that mean you can't operate?

Our Members' jobs go away. That's what we're concerned about.

Well, I hope that when you get a chance to look at the amendments that, and there's some feedback on that, I hope that we're closer to where you believe we need to be. I guess I go back to, and I appreciate the changes in the composition of the Advisory Committee. I think that's an important step forward.

But I look in the analysis and I'll just read what our analysis says.

And it says item number 16 authorizes the CEC to regulate, in consultation with the labor and Workforce Development Agency, labor and industry stakeholders, the timing of turnaround and maintenance, if such a regulation can protect worker and public health and safety while also minimizing the risk of maintenance driven supply shortages.

The key piece of that is worker safety is up for front. It's not at the lat, it's not at the end of the sentence. It's at the beginning. It's the beginning of the sentence. And I think that's significant. I think we recognize that and we want to protect workers here.

And I don't think anybody wants to take a vote on something that's going to in any way endanger workers.

Does it also delete the section where the resupply plan has to satisfactory demonstrate that it doesn't negatively affect the transportation fuels market? Is that also a consideration or is our Member safety the consideration because it's a pull between affecting pricing and having our Member safety be a consideration? We're not accepting of our Member safety being a consideration.

Safety is, is number one to us.

I appreciate that. So, you know, I look back to in my, like my district, when, when we have these fuel price spikes, we pay a lot more. In my district, you know, you get, maybe you get $6 a gallon in the Bay Area, we get seven and higher.

And a lot of workers in my communities travel long distances and those price spikes are really, really significant. It just fundamentally seems really, really, really unfair that when there is planned maintenance that goes down and supply goes down, that prices across the board go up for everybody.

Tell me, a representative from Wispa, how is that fair to consumers? We know what happens. We know what happens in the spot market. We heard a lot about that last week. We know it instantly that the rack increases prices across the board. So if you don't like this solution, what is your solution?

Because I haven't heard anything except, no, we don't like that. And maybe that's not an unfair que, that's not a fair question because I understand you're in, the companies are in for a profit, and I get it. But what's happening now, the profiteering, taking advantage of a change in supply hurts all consumers.

And I just don't understand how in good conscience that we can continue to let that happen. So what if you don't like this? Do you have a solution? Do you have any solution?

Because it is a profitable industry and these spikes really just increase profitability for everybody in the market, in all the refiners and everywhere down the supply chain, everybody profits. When these spikes happen, except the consumer gets hurt. So recognizing that where you guys are in, you guys are on the hot seat here, what is the potential solution?

Do you think it's fair that when there is a little blip in the supply, that every refiner, everybody gets a pump and makes more money? Do you think that's fair?

That's to you for Wispa.

Do you think that's fair?

Doctor Wood, thanks for the question, really, and appreciate the time we were able to spend together and talking about this issue. I think a couple things just to unpack in the conversation here. One is on the spot market, which you brought up.

So when I look at the spot market, and obviously as a trade Association, we don't have access to opus or other services that show pricing. So that's part of our kind of fundamental is we don't have that type of access.

But when I hear the concept of the spot market, I think of it a lot like the housing market. And say your neighborhood, right? You bought your house for x amount of dollars. Your neighbor sells their house for higher than they bought it, well, your value just went up. And so that's the pricing of a commodity.

And Severn Bornstein will tell you this too. You'll see price spikes and valleys in any commodity market. And a lot of it's driven by supply and demand. And I think you're seeing that now in the housing market is housing prices are going up because the stock is Low and demand is high.

So very similar concept in the spot market. It's your neighbor's house, sets the price of your house, and then you sell your house. And now you've set the price for your other neighbor. And so that's essentially how the spot market works, is setting up.

I would disagree. I think that's a very, very different dynamic. I would disagree with that. Let's ask our front petroleum expert here.

Yeah, so, gosh, that is not the right analogy. So what Professor Bornstein was talking about is a competitive market here. Four companies control 90% of refining capacity. So when they talk about, gosh, supply is Low, prices are going up for everyone. That is not fair, because they're the ones who have the incentive to maintain lower inventories.

They're the ones who have the incentive to schedule maintenance either at opportune or inopportune times. And they're the ones who decide whether they resupply bye having replacement sources of fuel. So for them to say that's just supply and demand in the market, when they're the ones pulling the levers that is not fair.

DPMO Wispa has said, please show the math. Wispa was present at public workshops in June and August when we did just that, analyzed the cost of the price spikes. One price spike, 2023, over $2 billion. Appreciate that CEC's modeling and they have their own statistical analysis, maybe more conservative.

I'm going to say $2 billion is very conservative for this very simple reason. Gasoline prices don't just hurt drivers. It's our whole economy. When you think about inflation, energy costs are a big component of inflation. So you're talking about the delivery costs for goods, transportation, you name it.

So I would say our, you know, the impact we're talking about here is probably conservative. It's likely a lot more when you think about the whole supply chain.

Thank you. And that is the point. When our representative from the trades spoke, you talked about price of groceries and things going up. Yeah, all those things. Price of gasoline contributes to all of those things going up. Everything, everything goes up when the price of fuel goes up.

Now, there are other factors, obviously, but price of fuel has a direct influence on the price of goods across the board.

And so I apologize for a bit on a little bit of a rant here, but it's like, look, I just don't see how it's fundamentally fair when you have one tiny piece of the market or one supplier goes down, that suddenly it's free rein for everybody to raise prices all across the board and affect all consumers because one.

But somebody goes down for an expected or an unexpected maintenance there. And so the ability to find a way to smooth these spikes out is really, really important to everybody. And so if you have another way of smoothing these spikes out, Zach, then we're open to it. But so far that's not been offered an Assembly Member.

I think a lot of that work is going to take place.

The fuels transition plan, which was part of SPX 12, as that multi year process of look at the industry, get the data, understand it, work with industry so that we can have the fuels transition assessment, which was the foundational document that you guys got earlier in August to set the stage for the transition plan.

And that's where I think a lot of this work is going to take place, is during that transition plan discussion, we're actively participating in those panels. And so we intend to come to the table, be part.

But I think this rushed proposal, in our view, appreciate the thoughtful process and informational hearings, but we just don't see this as the right solution.

My final point is that I don't think that transitions plan anticipated the ongoing spikes that we're seeing, and that's what we're trying to address here. That's the purpose of this. And quite frankly, if you all didn't allow these spikes to happen, which you could do, we probably wouldn't be having this conversation now.

Thank you, Assembly Member. Assembly Member Joe Patterson.

Great. Thank you, Madam Chair, and thank you, Assembly Members, for presenting this Bill. I've said this last during one of the informational hearings, and I apologize. I missed the second one because I was sick. But I'm personally not here to protect the profit margins for anyone.

My number one concern is how much my constituents are paying for gasoline, and hopefully everybody agrees with that. It is kind of ironic to me to hear things like how four refiners control 90% of the market.

I mean, there was a time when we had more competition in this state, and things that maybe the State of California inflicted on itself is why we have less competition. So let's be clear about how I know that for sure.

The Governor himself, as we move to swiftly decarbonize our transportation sector and create a healthier future for our children, I've made it clear I don't see a role for fracking in that future and similarly believe that California needs to move beyond oil.

And that's exactly what's been happening under this Governor as well as previous administrations, which is why we've gone from a lot more refiners to what we have now.

And just generally, I have some concerns, too, because California hasn't exactly done a stupendous job at regulating other things that my constituents depend on, that all of us depend on electricity. We have by far the most expensive electricity in the nation. Insurance.

If anybody in my district can get insurance, then they have an advantage over a lot of other people, because it's just very hard to find insurance. But getting to part of the Bill, assemblymember, I know that Assemblymember Jackson had talked about this section as well, and there's been some focus about it.

But the very first proposed amendment on the provision establishing that the health and safety of employees and the public must always be the primary consideration.

I kind of understand what we're getting at, and I appreciate the trade sayings, hey, look, safety needs to be number one priority, but it is kind of weird to put into law that it should be minimized. Like, is there an acceptable level?

Is there a minimal level of risk or a minimal level of harm that should be done? So I think it either needs to be rephrased substantially, because I think that we would probably agree that there's not a minimal level of harm.

I also in that think that it needs to be really, in terms of the harm to employees and local communities. I think local communities is too broad. I think I understand the intent. But we, I mean, that opens up really the Pandora's box of what a local community is and what harm to them is.

I mean, you ask probably anybody within the local community about how something's causing them harm, you're gonna get a different answer. And then, so how does whatever they're saying influence the regulatory process? So I think that needs to be dialed in a little bit more.

So I know the Governor is trying to prevent price spikes, but what is there, we talked about this a little bit, and I think somebody was asking these questions. And again, I'm sorry if this was said during the second informational hearing, but what exactly does this measure do to prices of gasoline?

I'll take the first step there. So what we presented in the informational hearing, assemblymember, is that the way a price spike happens is that there's a shortage of inventory in either planned or unplanned refinery maintenance.

And then the spot market, even if it's only one or two contracts on the spot market, those prices go up because there's a lack of liquidity, and that pattern is crystal clear in the data. Then what happens is those prices get passed along to wholesale and retail.

I think, as assemblymember Wood noted, there's a sense of, is that fair? Because the refiners costs are not going up. That's the thing that's kind of staggering. And I think one of the reasons intuitively people say, well, gosh, those are real profit spikes.

If the cost of these refiners aren't going up, why are they charging such high prices? And so the way to get at the root cause of price spikes is have liquidity at the spot market.

There should be a fairly stable relationship between California prices and say, the New York Mercantile Exchange prices, the Nimax, there's over time, a pretty consistent range that's in, and then these price spikes take them out of the range.

So getting rid of the price spikes on the spot market is how you reduce prices annually for drivers in California.

Yeah, I don't have much to add, but as I remember, I think that both the testimonies, the second day from DPMO and CEC really focused on what we understand today. The root causes it really. When, for example, last year, you have a couple of outages. And what the industry then does is really has to scramble.

They have to scramble to really meet their contracts. And I want to just make sure I address a point that was raised prior to some refiners today have a pretty solid resupply plans because they have their particular market structure, and financial structure requires them to honor contracts.

So because they have those honoring contracts, they do some resupply because they have to make sure they meet their obligations, but industry as a whole doesn't. So what happens is some of them do plan somewhat of, some of them don't. And then if they don't, they go to the spot market and really scramble to buy.

And when the spot market is not liquid, nobody has ability to sell, the prices spike. And if they spike and spike and we just have this enormous hockey stick happen that get passed right to the pump. And we're trying to figure out how do you improve liquidity.

So during those tightness, you don't have to scramble in a way that the spot market prices just go through the roof.

So you believe that this measure will reduce prices? Yes. And then, so in the. I wish I didn't bring it. I brought every document but that. But the report that the Energy Commission put out or was talking sort of about, you know, that it could potentially reduce the spike, but increase the average cost.

How is that assessment different than.

And I kind of, like, wanted to reiterate today on that one. So we discussed that on the second day. I just want to provide context of that report. It was a whiteboarding exercise, and we heard from the industry, and we respectfully carried those into the, into the report.

And we said this is all we heard, and we need to further this analysis. So since we've finished the report, you know, early this year, we've continued to do workshops on those particular ideas.

And as we continue to dig into the different analysis, for example, the days of supply metric that we showed you, we didn't have that when we put the assessment out. That was developed afterwards. And we continued to look at the refinery levels.

And based on today's analysis, we really think there is a threshold level of understanding that there's a huge opportunity here.

Okay, thank you. How many, I don't know if one of you know, but how many gallons of gasoline do we use a day? Do Californians use a day?

It's about 800,000 barrels of gasoline is used in California. If you average that, that's about 0.95 gallons per person in California a day.

So 800,000 barrels. Right.

Sorry, times 42. 350 million.

Okay, 50 million gallons. 350 million. 350 million gallons. Okay, so that's for.

Sorry, sorry, sorry. Hold me, hold me. I'm back.

35 million. I was a math major, and I wasn't very good at it, so I switched my major swiftly. But we're. It's a pro. It's approximately 350 million gallons. No, no, no. Just. Just let me give.

Make sure that I don't make that mistake for you.

I actually like when mistakes are making, because then I try to capitalize off. It's three.

It's 3.0. No, no. Million. Okay, 35 million. I actually did pretty well on my gres, but I'm struggling. Well, you're definitely smarter than me, but I'm putting you on the spot.

All right, so, okay. Is it 100 million? I mean, I'm just curious.

Like, 35 million.

35 million. All right, 35 million. All right. So I guess the thing, you know, that. So we're talking about, let's say we want, you know, enough, and it could go up and down based on whatever is discussed with the industry. But let's say it's 10 days, 15 days or something.

Let's just say it's 10 days, because that's very easy math. So now we're talking about taking 350 million gallons of fuel off the market in perpetuity. And if that's. I see you're shaking your head. How would that be untrue?

I'm kind of just going to make sure we walk this through. So, over the last couple of years, when you look at the spikes happen, right. First of all, the reason why the price spikes happen is kind of the perception of scarcity, right? It's not really scarcity.

Nobody's lining up at the gas stations not being able to fill. So the lowest that we've observed is about 12 and a half days of supply. So it kind of like you're talking then about two and a half days worth of supply. Could you create a minimum?

So on the first day they discussed, you have the shell capacity and you have the working capacity. Right? So if you look at just the working capacity of all existing California refineries, it's roughly 23 days of supply storage. Right. And that drops all the way.

I mean, this is kind of the data that we have based on the law that you passed last year, and it drops significantly Low. So what we're talking about is, okay, you have an operating minimum that you currently do. Is there a cushion that you could carry?

A very, very tiny cushion, which you have a lot of space for, that adds up to that, because all the work that we, I mean, the reason why the numbers sometimes are confusing are because they're so big and the amount of storage that we have is not minute in California.

Having said that, if a particular refiner, because of the business model, is working on their resupply plans already, they would not have much storage. Right. So that's something that we need to consider.

So I understand what you're saying, but there are times where supply is much lower for whatever reason it is.

And so I can see just a scenario in which the refiners are, because I would understand they don't want consequences that are laid out in this Bill that they're maintaining more than that storage, because they don't, if they drop below 15 or 13 and a half or whatever you say it's going to be, they have to make sure that they have that even more cushion than what you're putting out there.

So, I mean, but we're, we are talking about whether, we are talking about some level of millions of gallons of gasoline that will be taken off the market to pad this. If, if we have to maintain the 15 days, if the average is 12 and a half, then maybe it's 70 some odd million.

Right. So I think I'm absolutely clear on where you're getting at. Right. So here's kind of another way to think about this. At the beginning of summer, right. They maximize their storage tanks.

They maximize their storage tanks very specifically because they know that in the middle of the summer you have these potential outages, some of them, but mostly because the demand spikes. Right. And then you have that inventory keeps going down. For now, let's say a simple case, I have a refinery outage.

And to the labor, I would point that it is done because we need to protect and maintain. Just completely honor that. So at that point, I have a refinery that I'm going to go out. I know that. And we know that 120 days before they tell us that.

Now you can decide as you're burning through your tankage to order a ship to refill during the middle of summer, which they do. Sometimes they do because it fits what they have to do to kind of meet their contractual obligations.

What we're trying to do here is can you refill, can you make sure that you are maintaining a certain level so if an unexpected outage happens, the industry as a whole has liquidity so that those extraordinary price spikes in the spot market doesn't happen.

And if I may and apologies, I come from an expressive family. If I was shaking my head as somebody remember, I apologize. I wanted to explain the idea, and the economist spoke to this about this buffer is that this is a buffer that's accessible. It's not being held off of the market.

This is additional supply that through operational decisions, refiners are currently nothing. Taking that high summer, early summer threshold that the Vice Chair was speaking of, they're choosing to not maintain that for a variety of reasons, but it leads to price spikes.

So if we say you need to hold more in the tank, they're going to make operational decisions to do that. And that can include producing more, using more intermediate feedstocks to boost production. And it can include cargoes, which they also order regularly, but often after price spikes instead of before price spikes.

So, as I understand, the amendment to b five sort of addresses that there would be a metric or threshold based on market conditions that would require making that fuel available to the market. So the whole idea here is to increase supply and to make that supply available under conditions.

For example, a refinery operations problem, prices are going up. Make that liquidity available to the spot market. So as the Vice Chair explained, there's not a situation where there's one buyer and no sellers, and prices go crazy. But every refinery has this obligation of an inventory. Conditions get met.

Now there's a bunch of sellers who could sell at a profit, but just not at a sky high price.

Okay, great. I mean, whether it's producing more fuel or, I mean, this seems to be just centered around the skepticism whether the industry could or couldn't do that in the first place, produce that product.

And I think that's where maybe the rub is, is that perhaps I will, by public statements from the Administration, assumptions that they're not doing that intentionally to pad their profits.

But, you know, one more thing I wanted to say on the Bill, actual language of the Bill, is, in terms of the report that needs to be filed annually, I think that was in prior legislation, but from, I think that there should, ought not be any further regulations if that report isn't submitted.

Because I recently read an article that something like less than half of the required reports from the Administration, not just this one, but priors as well, even make it to the Legislature.

And I think that you can't really move forward with regulations without really knowing, you know, without us seeing the report, just a couple more sort of like philosophical questions. So I can understand what, what is mentioned, fair profit, like a, what is fair profit in this context?

And is anything that maybe your office is going to do in particular, but both offices is what you're going to do to implement this Bill, sort of take into account fair profit.

Yes. So I think there's a couple of ways to measure that. I think, again, kind of going back to the point of how do we metricize some kind of counterfactuals?

DPMO has presented in a number of workshops at the CEC what the profit margins were prior, like, what the per gallon profits in 2015, all the way to now, adjusting for inflation.

So you could have a benchmark looking backwards when businesses were still operating in California with healthy profits and say, is that the benchmark that we want to judge against? So there's a couple of recommendations both from DPMO and economists who provide it into our record to think about that.

So as a part of this particular process, we need to kind of adopt those baseline metrics. What constitutes a price spike? What constitutes kind of a fair and healthy profits? And I think that's something we are going to do as a part of this.

Did you have anything to add to that?

Yeah, I would just add philosophically, we exist as a market oriented solution. So it would be what a competitive market would produce.

And so once we identify market flaws and sort of address the competition issues, what a competitive market price would be, and we can look to other markets around the country to see that and also look outside of the price spike periods to see that.

Two more questions. I think one of them are brief, but you said these proposed requirements exist elsewhere.

But I mean, I think we can agree that California is very unique in not only the type of refined gasoline we use here, but is there something that, I guess it's not really a question, it's more just a statement that I think that they may exist elsewhere, but the market conditions are much different.

And so whatever happens in California, it's hard for me to look at what's happening in any other state or nation because it's very unique here in how oil is produced and refined into gasoline for the authors of the Bill and one of the main proponents isn't from this group.

So you might have some conjecture, but at the end of the day, we're talking about maintaining what more than might exist right now, oil in this state. And I'm just curious why environmental groups are supporting this. Do you have any context into that?

I think the people that are supporting the legislation are concerned about the impact on consumer prices.

I hope we all are. But at the informational hearing I was fortunate enough to attend is there was a lot of testimony from one of the environmental justice groups about how dangerous refineries are. And so it was just very, I wish I had the opportunity to really ask that.

It was towards the end of the hearing, but how, you know, storing more oil in California meets their objective, you know? So I don't expect you to answer that because you're not in their heads, obviously. But just something I was curious about. So hopefully I'll be able to ask them before it gets to the floor. Anyways.

Well, I really appreciate all your time, and, you know, I obviously got significant concerns, but I appreciate you hearing me out on some of the actual technical changes in the Bill. So thanks for your time.

Thank you. Assemblymember. Assemblymember Bennett.

Thank you very much, Chuck. You know, this is a complicated issue, and complicated issues are really easy to confuse people about. So just because it's a complicated issue doesn't mean what CEC is trying to accomplish isn't fairly straightforward. Right.

And I would hope that we'd spend a few minutes trying to reduce this down to the straightforward issues that the CEC is trying to do.

So my first question for our representatives there, and that is that we talked about what the spirit of the Bill is, is the spirit of this Bill to try to stop all price spikes, or is it to try to focus specifically on price spikes that are unique to California separate from international crisis price spikes, etcetera?

The latter unique to California. Unique to California. Thank you very much. Now, just because I'm saying, hey, this is pretty straightforward, doesn't mean it's going to be easy and there aren't some technical things you have to work at. But we can make this look like this is the, you know, the whole transition plan.

This isn't the whole transition plan. This isn't about what are we going to do with refinery. That's, we have a transition plan. And going, this is very narrowly focused on just that issue, which is the price spikes that are unique to California.

The second thing is, do you genuinely believe that the residents of California will be better off if we are able, after you do the regulations, come up with some kind of minimum inventory standards that more stabilize the inventory that we have out there and decrease the likelihood of California unique price spikes?

Yes, that would be. Yep. Great. Keep my answer short because I remember because I wasn't.

Thank you. And the third question is, you know, we keep hearing this, are you going to lower prices? Right. I think the more accurate way to say this is if we do this, you believe prices will be lower than if we don't do this.

It doesn't mean that if there's a blowup in the Middle East and everything goes sky high this isn't going to stop that. This is simply going to say relative to not doing this, consumers are going to be better off, significantly better off.

Thank you. All right, so to get, for the CEC and DPMO to do what it is that they're asking to do, they will do it better. They'll do it well regardless, but they'll do it better if they have the best information and the best analysis of the options.

Yes.

And for that to happen, they really need the collaboration of the stakeholders that are out there, the stakeholders that have that information. So if there's a concern and very legitimately expressed by the representative from the building trade share today about safety, we need that expressed clearly so that there's no question.

And my question for you, will you adopt a program, any program that jeopardizes safety simply to bring down prices?

No.

But how do we assure that's going to happen? By being there collaboratively saying, look, this is what's going to happen? How do we work around that rather than what some people want us to do is say, don't do this at all. What we should do is those things that are concerns.

How can we still avoid California unique price spikes and deal with the concerns? And I wish that that's what we had spent the last four weeks on because we would then be having, I think, a far more healthy conversation right now.

But instead, unfortunately, while there are some people in the industry that have indicated they want to collaborate, they want this to happen. Right.

Unfortunately, the industry came out with an all out opposition based on the, I think, inaccurate piece of information that the storage capacity is not there and we're going to have to build a whole lot more storage.

And they even put out the price of what it costs to build a storage tank and how long it takes and all of that, and that opposition. And they said it's just going to be enormously costly.

And sure, if you're an Assembly Member and somebody says we're going to have to spend a tremendous amount of money to build new storage and all of that, you're going to have concerns about that. But we didn't just waste four weeks. What I'm concerned with is I think we've tarnished our ability to work together to do this.

I think that for me, it was particularly disconcerting at how many people kept repeating the industry line that the storage capacity is just not there.

And I think that it's, for some of those people, it's now embarrassing when we have the data that you put up last week the data that you sent me in an email here, the data that you just cited, an answer to the question over here with Mister Patterson, that we have roughly net usable capacity, that's getting rid of the heel and all of that stuff of 21 days, and that all you're asking for is some ability to kind of coordinate with the industry on how to keep that on the higher end rather than the lower end.

So my next few quick questions for you, and I'm trying to go as fast as I can. I think I'm way ahead of other people's schedule so far, so. And that is that when inventories are Low, is that when it's most likely that spot prices are going to peak up?

Yes.

If I may, I'm sorry. As to that last point, Assembly Member, the Vice Chair is much, has much too much humility about the point of working with industry to get to solutions.

And I want to say in this oversight role, I've observed the Vice Chair in his office and the chair's office going individually to every refinery in person, having very constructive conversations. And those conversations are very different than what you hear from Wispa.

And so these kind of loudest voice in the room type issues, I think do not predominate. And the Vice Chair is not here to make big promises. But the work, the constructive engagement, the hours and hours that he and his staff have put in, really do validate that point that you were making a moment ago.

It's valuable to have your independent voice here, I want to point out, and it was very valuable for you to just make that point, because I know that Mister Gunda would never have emphasized that himself. But I think that's one of the things that's a question for us. Do we trust the CEC?

The CEC has done some remarkable things here, like go and visit every refinery, try to work collaboratively also, and it still keeps getting used against them. In these debates, they've identified what the potential problems are with each solution, as well as the potential advantages with each solution. So spot prices do go up, are associated with Low inventories.

And one thing that I want to talk to the author about is there isn't anything in here about the spot market. And I'm not asking for it to be in here because I think it complicates things too much.

But I do hope that we can at least unofficially ask CEC when they do all of this and when they come back for the kind of thing that my colleague asked for, that information that we get, we learn more about how the spot market, how much liquidity is there?

I've had some information that says one time the spot market set the price up high and there wasn't another spot trade for four days. Four days in a spot market, that's not a very liquid spot market, and yet every contract was tied to those spot market prices. Right.

So last week, I think towards the end, after you had presented all of your slides about storage capacity, etcetera, and the relationship between spot prices, I think that we, we didn't have a healthy representation to help us have better collaboration coming from not this person, but somebody else representing the industry Association.

But we need to say today we want to stop and reinforce collaboration. Just like my colleague from Coachella said, we need more collaboration. We can. This, this is not as hard as the next thing that we have to do. Right?

And labor, I believe if we went to all of the workers and we said, if we can give you the same safety you have, if not better and lower prices, would you like to have that? I think there's no question they would. But what's been portrayed here is this is an all or nothing one or the other.

You're either going to get Low prices at the expense of safety, or you're going to get safety and have to have high prices. But if we have good information and good analysis of the options and that good collaboration with somebody as responsible as our CEC representative, you can have both.

And I would just hope that people would sit back if this passes and see how responsible CEC is going to be when they come back. And I want to end with this.

If we can't do this fairly narrow thing, just deal with California unique spikes, how are we going to have the collaboration to deal with the big gorilla in the room, which is we are at great risk. We have declining competition, and that's a function of the fact that we have a declining demand for gasoline.

And so you can't have increasing competition with a declining demand for gasoline. The margin for air is very small at this point in time. We really all have to roll our sleeves up. And so to solve this problem, we have declining competition and stair step supply downs.

If a refinery stops, you're going to have a stair step drop. That's huge. We need great collaboration between labor, industry, other stakeholders, environmental groups, good government groups, the consumer advocates, to try to say, what's the plan for doing that?

But we ought to start with this one because this is a smaller bite of the apple and could get us to do that. So I implore all the people of goodwill to roll up their sleeves and let's get this one right and then let's get the big enchilada right that is out there also. Thank you very much.

Thank you, Assembly Member Alvarez.

Thank you, Madam Chair. I want to start by thanking the workers. You know, some of us don't have the luxury of living in a suburban community where you have a garage and you can plug in an electric vehicle. We live in urban communities where we still rely on gas to power our vehicles.

And I want to thank all of you who do the work to be able to allow us to still engage in transporting and obviously in getting to and from work. And I just want to thank you for the work that you do, and thank you to your Members as well.

I think today you've raised some very legitimate issues that I have some comments around. I don't have any questions per se.

What I wanted to call attention to is stuff that has already been raised by some of our colleagues here today that I think must be further refined before this goes forward on the issue specifically, starting with the workers, and on the issue of the harm being minimized. I do think it's not acceptable, certainly to me.

I don't think to anybody that some level of harm is okay. And so defining what that is, I don't even think we can define it. I think the wording here should be eliminated. All harm should be eliminated, certainly to the workers who are working within the refineries and in the chain.

But also, I'm not really entirely sure what you mean by local communities and what harm to them. And if we are going to keep the language as is and just say minimize, I think there's a good point being raised about who's going to be liable for that.

So if something does happen to a worker or to a community, the way this is written today as a result of CEC having now the authority, because that's what this is, it's not entirely coordination. It's really, they have the authority to determine, they would have the authority to determine when a closure for maintenance were to happen.

If there's a discrepancy in what perhaps the workforce or the specific site thinks needs to happen in terms of maintenance, I'm concerned about that. And I think that has to be made of perfectly clear in this. And I do also have concerns. Our colleague, Mister Jackson, raised them at the very beginning of this.

There are some phrases in here that don't really define what we're hoping to accomplish. He referenced a section about the recognition for health and safety recognition. He focused on that component of this section, which I agree with him. What does that mean? And is recognition really enough?

I agree with him that it's not, but the end of that sentence is just as important. Local communities are always the primary consideration. So is it the workers that are the primary consideration, or is it the local communities?

What is the order of what consideration is given as to who would be more important in a decision that the CEC made? That is not clear at all in what we're voting on today. Further, also raised by a colleague, was on section C. And by the way, just for public to know, we had not seen these amendments.

At least I had not until this morning. So I apologize that some questions were not submitted ahead of time to our colleagues, who I respect and try to do that, but I had not seen this, and so I could not get this to you sooner.

Section C, where it talks about the likely benefits to consumers avoiding price, should outweigh potential costs. This cost benefit analysis, I think there was some exchange already. I think that needs to be defined. What is likely, what percentage of likeliness is enough, or what percentage of costs decreasing is enough.

Then c one and c two continue to use this. I'll use my colleagues vague phrasing of whether it's likely that minimum levels of inventories in Section one, whether it's likely in Section two there, c two, what does that mean? Whether it's likely that is not also defined.

Then you go to what is on page three of what we have in front of us today with the amendments. Again, letter E. And this reads, the Commission shall not apply a minimum inventory requirement under the section two refiner in a manner that would be met only by the construction of additional storage.

That to me, says that perhaps construction of additional storage might be required. And we know that construction of any infrastructure project means more cost. And so I'd like to understand if that is the intent or not, and if we perhaps would be requiring additional storage infrastructure to be built. That's very, very important.

I would probably end with this. I do appreciate, and I've said it before to the Commission, I think the work that has gone into this is commendable. I think it has been appropriate. And I really appreciate you walking us through that.

I think there's questions that are legitimate here that need to be addressed, but I think I need to have, with the same confidence that you've presented to us, that the spice spikes in price that those are. You've been very confident about that. Hearing, after hearing, after hearing you've said this is the reason why.

This is the reason why, with that same confidence, I think you need to come before us with the same confidence that whatever action you propose and that you're going to take is going to actually help the cost of gasoline. Otherwise, it is an unacceptable option.

And I think the only way to do that is to do what our colleague, Mister Zuber said, which is to come to the Legislature with enough time through an informational hearing is fine. I'm okay with that.

If we, that's, if there's none, not the willingness to bring this back for us to say yes, but give us enough time so that as you make those determinations, you present us with real evidence and data that we are going to actually help reduce the cost of gasoline.

So that if for some reason with a six month lead time or something like that, we don't see that in your data, we at least have the opportunity to then act as that Legislature.

I think that is, I would ask the authors to please consider that in addition to Miss Pappen's, which I support her request that the section shall be repealed within a Shorter timeframe. She mentioned five years. I'd be supportive of that.

I think those things have to be part of this for this to be a true approach that is taking into account all the considerations which I would like to recognize. I don't think the last four weeks were in vain. I want to thank the chair. Informational hearings were really helpful and important.

I am not going to engage in trying to pinpoint or make either side feel like they're more wrong or they're more right. I think there's a pathway here and I think there's legitimate questions that get raised by the opposition. But I also think they can be addressed, and I expect that before we vote on this Bill.

Thank you.

Thank you, Assembly Member, Assemblymember Rubio.

Thank you, Madam Chair. And thank you to the Committee and Commissioner Gupta. I have not received the answers to the questions that I asked for on the 17 September. They have not been provided as of this morning. I checked. Just wanted to point that out. But I'll start with the workers.

We keep using the words planned and unplanned maintenance. Planned, obviously for regular maintenance. But I spoke to some of the workers last week about the unplanned maintenance, or it's unplanned because they can't predict what's happening. I was told that something breaks, they have to fix it.

But you're using the word planned and unplanned as unplanned being a nefarious act. Unplanned, obviously they can't plan for it. But again, goes back to the issue of worker safety. How can we guarantee or are we going to guarantee that the workers are protected, number one. But also I don't think the question was answered earlier.

What if something does happen during, if a refinery asks for planned maintenance and it's rejected and something happens to that refinery, who's liable? Well, first of all, who's liable? But are we willing to put our workers at risk by rejecting planned or requested maintenance? So that's the first question. If you can answer that, I'd appreciate that.

Yeah, sure. But also Assembly Member Rubio, I think we sent the answers. I'm pretty sure, but we'll check. Sorry if it didn't come to you already. So specifically to the industry operations, just want to absolutely confirm that we don't have oversight over the industry directly. We work with Dir.

Dir has ultimately the authority and that's who we will work with. And if, you know, in consultation with them, if they deem a particular thing to be unacceptable, we would honor them first because they have precedence over us in the ability to have industry operations that are safe.

Thank you. But again, to the point that I was also making is when we're using planned and unplanned, you're using the word unplanned as if it's, they're doing it on purpose to somehow game the system. And I think what I heard from the workers that the unplanned is obviously because they weren't planning on anything. They're doing maintenance.

Something happens, something breaks, something catches on fire, whatever the issue might be. So if we can identify the appropriate word, like planned, you have control over obviously unplanned. They don't have control over that.

I think we need to separate that because we all came into this and I think we're already going against each other because somebody wants to be right. This is not about being right. This is about getting it right primarily for the workers, secondarily or I guess interchangeably for the community Members.

Then you mentioned that if this is done, it will lower the cost of gas by seven to gallon. However, under our Low carbon fuel standards and cap and trade program, they're undergoing review. And I understand that automatically at some point in January or sometime next year, there's going to be an additional 45 cents of increase.

So how do we explain to our community that there's a reduction of seven and $0.10? However, we're adding $0.45 because of our Low fuel standards and the cap and trade program. Is that correct or is there a different number?

Do you foresee an additional increase in January or sometime next year that is out of your control and based on Low fuel standards?

Remember, I would respectfully can't answer that question. Not because I don't want to. It's under the Aid Resources Board and I would defer to them on that particular regulation. So something, as I mentioned before when we, in the testimony that we've provided the last week, we talked about price spikes specifically as they constitute to things that change.

So that's what we will be looking at.

Thank you. And I thank you. Raise your hand.

Yeah. I would just like to respond to the CEC regulating maintenance events and in consultation with the dirty. The DIR is significantly underfunded. It has 30% to 40% vacancies. They don't have the support and staffing they need to enforce the labor standards that they have now. They are not engineers. They're not experts in metallurgy.

They're not experts in operation. They don't have boots on the ground in the refineries. They don't have the boots on the ground to enforce the labor laws throughout the State of California already. The CEC, whether in consultation with the DIR or not, shouldn't be regulating maintenance events in refineries.

There's extreme temperatures, there are extreme pressures and there's a lot that goes into it. And the CEC should not be regulating them. And the DIR is not equipped and staffed to be able to take on additional things. And this is outside of their expertise as well.

Thank you. Well, and to that point though, what I'm hearing is that our workers are at risk now because we don't have the DIR to be able to regulate any of these issues. And so if our workers are at risk now, what happens? If now the CEC, how are we going to assure that the workers are protected?

Because they're not. Now again, what I'm hearing from Mister Hanna is that they are not protected right now because of the lack of oversight by the Dir. How are we going to ensure that our workers are protected then?

If I could speak to that and the unplanned maintenance assemblywoman first on unplanned maintenance just really wanted to engage on the interplay of an inventory and why that's important for unplanned maintenance. Completely understand.

There shouldn't be a tension between a refinery's profit motive and let's say there's a piece of machinery that looks like the vibrations are getting too high or there's an issue that poses a risk. If they don't have inventories, they might be incentivized to push through versus if they already have a required inventory. It makes unplanned maintenance.

You can anticipate, obviously, things unexpected will come up. And the idea is to have a buffer to deal with these unplanned events and not have those hurt consumers and not have worker complaints be ignored. And so I just wanted to really validate, first of all, the professionalism and the dedication of Dir and Cal OSHA.

We have been working closely with their staff and between the informational hearing and today, engaged with them further, and just really wanted to sort of reassure that if there's a violation, Dir continues to have all the powers that they currently have, including any complaint that gets filed by a worker, a local government, an air quality district, that has to be acted on every complaint.

And if it's a serious complaint, it has to be acted on within 24 hours. And nothing about this legislation changes the paramount nature of safety. And I think hopefully with a buffer, it actually encourages, hey, if something's going wrong with the machine, we have the supplies already here.

We have contingency plans in place, and so that's not a disincentive to move forward with needed repairs. Thank you.

And just. Sorry, just want to close on this one. I'm really happy. And I think based on what's in the language, it's just not about the stage agencies. It also asks us to consult with labor.

And I think I want to make sure that we very clearly articulate it's important for CEC to set a table for the rulemaking process that absolutely has the voice of the labor at the table and make sure whatever regulations we develop, we develop in consultation with them, so that all standards both around planned maintenance and those that you talked about, which are unplanned but happen, how do we ensure this liquidity interacts with those circumstances?

Thank you. And when you refer to labor, are we specifically talking about the building trades, or is that who you're referring to? Because we say labor should come to the table. Well, who specifically in labor? Because that could mean very many different things.

I think we'll have many opportunities, again, if we do this right, as we always try to at the Energy Commission and all state agencies. One, we'll have an advisory board Member by statute, based on the amendments today.

But also we have the ability to put together working groups, including as expansive and broadly as we wanna do it and we will commit to doing that.

Thank you. And I'll let you respond in a second. But that brings me to another question. According to SBX 12, that we passed, or that was passed in January of 20231 of the requirements was that a Committee was to be formed. To my knowledge, that hasn't happened.

So obviously, if it hasn't been formed, then they haven't had any meetings. So how do you plan on making sure that in this case, it is? I have a question as why it hasn't been formed, but that's not for you to answer. But that Committee hasn't been formed on SBX 12. So are we passing this?

And then you're gonna. You know, I'm not suggesting that you would, but again, the SBX 12 was passed under that premise that there would be a Commission Committee convened. What, do you have a timeframe as to when that's going to be formed?