Senate Standing Committee on Fuel Supply and Price Spikes

The Senate Committee on fuel supply and price spikes will come to order. Good afternoon. We're holding this Committee today in the O Street building. I'm asking all Members of the Committee who are not here right now to report to room 2100 so we can establish we have one Bill on today's agenda and that Bill is ABX2 1 by Assemblymember Hart. Before we hear the Bill, secretary, let's call roll establish.

[Roll Call]

A quorum is present and I'm gonna ask our author to come forward to the table. But before we hear from the author, I just wanted to make some brief comments. This is the second time in its many years that the Governor has called a special session to address gasoline price spikes.

Last year we passed SBX 12, which afforded the Administration, specifically the Energy Commission and new Division of Petroleum Market oversight with many new powers to address gasoline price spikes. My Standing Committee held an oversight hearing on this topic earlier this year to continue to monitor the developments by the Administration.

On this front, the General view is there is still much work to be implemented as it relates to many of these pieces of legislation, though I know the CEC has been working diligently and hard to address them.

However, I am very disappointed the Administration has not established an Advisory Committee to inform the development of these policies, particularly as the Advisory Committee is intended to have a representative from the workforce. I think it's important to say that all Members here on this dias and in both houses share our concerns about price of gasoline and impacts it has on all of our constituents.

We all understand that household budget can be highly impacted by the cost of fueling up at the pump and the ripple effects gasoline prices have on prices of produce and other goods.

Even as the state is attempting to transition to zero emission vehicles, including electric vehicles, many of our residents rely and will continue to rely on gasoline fuel for many decades to come. I being one of them, it's important that that we have access to affordable and reliable gasoline.

That said, price spikes are only one aspect of the gasoline fuel story. We must also be mindful of all the policies that affect the price of gasoline and ensure that they do not have unintended consequences, not just on the price of gasoline, but also on the safety of the workforce operating these refineries of the local communities that live adjacent to these refineries.

As well, these are the lenses that I'm using when I review these transportation fuel policy proposals, particularly given the fact that there are four refineries in my district.

These refineries provide middle class jobs to many of my constituents and are important drivers of the economy, economic development, and really, since the founding of many of our cities, Los Angeles County, including Carson, El Segondo, and others, again, these cities would not have been founded if it wasn't for these refineries.

I look forward to the presentation today and hope that we get some assurances from the Administration about addressing my concerns, as well as my Committee Members concerns as it relates to safety for workers and local communities. On that note, Senator Hart, the floor is yours. Sorry, Assemblyman, I might have demoted him.

Thank you, Mister chair. Everybody knew what you meant there, for sure. Thank you, chair and Members. To begin, I accept the Committee's amendments. The Governor called this second extraordinary session to address one goal, reduce gasoline prices for Californians.

Since the passage of last year's SBX1 2 by Senator Skinner, the California Energy Commission and the Division of Petroleum Market Oversight have gained critical insights into refiner operations and gas price trends. In California, gas prices surpassed $6 per gallon last September, costing consumers an extra $2.2 billion at the pump for the past two years.

In the early fall, gas prices have surged at the same time refineries went down for maintenance. ABX2 1 clarifies and builds on law from last year requiring refineries to submit resupply plans to the CEC in advance of maintenance or turnaround events.

The Bill grants the CEC the authority to open a formal rulemaking process to determine whether requiring minimum inventory levels of fuels would benefit California consumers. The proposed CEC regulations will only be adopted if they are proven to reduce overall gasoline prices, increase fuel supply, and curb market volatility.

Let me be clear, ABX2 1 does not prohibit a refinery from conducting important maintenance. Refiners can and should perform the maintenance they need to to keep their workers and facilities safe. Amendments taken in this Committee make skilled and trained workers safety and existing law abundantly clear. Moreover, legislative oversight is imperative.

The CEC is required to submit an annual report to the Legislature reevaluating the need for regulations. The minimum inventory regulations sunset on January 1, 2033 where it will come back to the Legislature. The goal is guarantee that fuel reserves are readily available for consumers during maintenance events and supply constraints.

This Bill incentivizes fuel refiners to plan proactively saving California gasoline consumers billions at the pump while keeping profits for oil companies. I am pleased to author this Bill, sponsored by Governor Newsom and Attorney General Rob Bonta, alongside Assemblymember, Assembly Majority Leader Aguiar Curry and Senator Skinner.

Good afternoon Senators. I will keep this very short. My colleague and joint author from Santa Barbara has covered the main points very well. This Bill sets up a regulatory process to avoid refinery gas supply imbalances that causes price spikes in our state.

It does this while assuring the process places a first tier priority on maintaining important protections for the health and safety of refinery workers and surrounding communities. I want to take a moment to highlight the thorough public process that got us here.

The Assembly conducted an historic amount of testimony from stakeholders and participation by the Members of the special Committee on petroleum and gasoline supply during the three days of extensive hearings. In total, the Committee spent over 14 hours on this Bill, hearing from experts in the industry, labor, economics, academia, and our own state energy personnel.

We can rarely make everyone happy with the work we do in this Legislature, but I do feel proud that the governor's proposal, embodied in abx two, receive the attention and scrutiny it deserves. The many amendments we've taken during the second extraordinary session make this significantly better product and are a testament to the process that brought us before you here today.

The Committee amendments negotiated by the Governor, the Speaker, the President Pro Tem that we all will be accepting here today make it even more protective of our refinery workers, neighboring communities and gas consumers. For that reason, Senators, I ask for your aye vote.

Thank you. Now we'll move to lead witnesses and support. I see we have the Vice Chair. Please, you have three minutes for your testimony.

Good afternoon, chair, Vice Chair, authors and Members of the Committee, thank you for the opportunity to join you today in support of this important work that's in front of you. Through the passage of SBX1 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 Californians against them.

Over the past year, we have gained invaluable insights into California's petroleum industry, and 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 its 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 the spot market and ultimately 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 maintain necessary market liquidity that protects consumers from price spikes.

At the heart of ABX 21 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. Any requirements on refiners would be developed through a thorough and a transparent public rulemaking process.

SBX1 2 already requires the CEC to consult with labor and Workforce Development Agency, as well as labor and industry stakeholders in considering ways to manage necessary refinery turnarounds and maintenance that would protect the health and safety of employees and the public.

ABX2 1 makes no changes to existing workplace health and safety regulations at refineries and requires any regulation adopted to protect the health and safety of employees, local communities, and the public. Any minimum inventory requirement will be developed based on existing storage infrastructure.

CEC data suggests that California refineries cumulatively have sufficient net usable gasoline storage capacity within the refinery gates to meet about 15.5 days of typical California demand. Adding new usable gasoline storage storage capacity outside of refinery gates, that number goes up to about 24 days.

It is important to note that CEC has been using 15 days of supply as a number where we begin to see the price spikes. Really important to know that when we talk about those 15 days, about one to two days of that is refinery production and imports coming into the state.

So we're talking about roughly 13 days of refinery storage, typically. So under this rulemaking process, we're really looking at how do we maximize existing inventory to improve liquidity. Our analysis shows that the potential cost savings to consumers in avoiding price spikes far outweigh the cost to refiners for increasing inventory to maintain liquidity in the market.

Taking the 2023 price spike as an example, CEC analysis estimates that about 100 million additional gallons of gasoline could have maintained market liquidity above 15 days of supply. In that scenario, if refiners buy low and sell high, they could make a profit on this extra inventory.

If gas prices were to drop about 25 cents per gallon, the additional inventory cost would be about $25 million. The 2023 price spike's estimated direct cost to consumers, meanwhile, was at least $1 billion. This does not include the indirect economy wide impacts as the cost of goods and services also increase when gas prices go up.

In closing, the Governor's proposal will provide the CEC with the authority to open a rulemaking to do a deeper analysis into two concepts that could ensure that California has a healthy fuel supply and stabilize prices for consumers, pay at the pump stock minimums for refiners and resupply planning for planned turnarounds and maintenance in accordance with the requirements of ABX 2.1.

Any requirements on refineries would only be established if benefits are found to significantly outweigh costs. This rulemaking would be a public process, and the CEC is committed to working in partnership with interested parties, including industry, labor and community representatives, to ensure California consumers, workers and residents are protected.

Thank you, Mister chair. Our other expert witness is Director Tai Milder of the Division of Petroleum Market Oversight, who has been working with Vice Chair Gunda for the past year on this issue.

Thank you. My name is Tai Milder, Director of the division of Petroleum market Oversight. Thank you to the chair. To the authors of the Bill. To the Vice Chair. Two years ago, the Senate passed SBX 12, which created the new division and gave the CEC critical new transparency tools to see information that before was opaque.

Thanks to these new tools, we know what causes these unique price spikes in California. The data is clear. low inventory levels combined with planned and unplanned maintenance leads to price spikes. We've seen that pattern now three years in a row. Very clearly. At the Assembly hearings, DPMO presented data showing that these price spikes aren't normal.

They don't happen in other parts of the country. We shared graphs showing that California prices can spike even as crude oil prices are going down and when prices are going down in other parts of the country. It's a basic story of supply and demand. When supplies are allowed to get Low, prices shoot up and so do profits.

We have a highly concentrated refining sector here in California, and that concentrated market doesn't have enough incentive to prevent price spikes. I think consumers are rightly sick and tired of paying inflated prices during price spikes and ABX21 is a targeted solution that's been endorsed by independent economists.

Three, quick preventing price spikes lowers prices at the pump. We presented data showing that if you avoid a price spike in one year could be as high as $2 billion in savings. That equates to about 15 cents per gallon for every consumer every time they go to gas station in a year.

Second, refiners have existing excess storage capacity. This is state and federal data showing that California refiners already have millions of barrels of unused storage capacity. Third, the Bill protects worker safety and strengthens existing law.

The amended Bill explicitly requires that any resupply and minimum inventory regulation must protect the health and safety of employees, local communities and the public. The requirements that are in this Bill buttress existing law. So any future CEC rulemaking would need to follow those legal directives.

There is no trade off here between worker safety, community safety and protecting consumers. This law will do both. We need to see more supply and market liquidity at critical times of years to protect consumers from price spikes, and that will help the economy overall with stability and predictability for planning.

And a Reserve also helps resiliency if there's a natural disaster or some other kind of international event. This is a common sense solution that's been developed by, that's been adopted by developed countries around the world. And with this legislation, you can continue the critical work of SPX1 2. Thank you.

Thank you. Additional witnesses in support of this measure, you can come to the podium and state your name in your organization.

Good afternoon. Daniel Broad, on behalf of Union of Concerned Scientists in support.

Alexa Chavez, on behalf of United Domestic Workers and our over 180,000 home care and child care providers in support.

Good afternoon. Christina Scaringe with the Center for Biological Diversity in Support.

Good afternoon. Rebecca Marcus on behalf of Consumer Watchdog and the Consumer Protection Policy center at the University of San Diego's School of Law in support. Thank you.

Good afternoon. Cassandra Mar with Niemela Pappas & Associates, on behalf of the Campaign for a Safe and Healthy California in support. Thank you.

Hello. Matt Lege with SEIU California and support.

Good afternoon. I'm Norman Rogers with USW Local 675. And actually I comments that are in neither support or it sit in the middle and we, I guess I am. Thank you. I am a tweener. Would I have an opportunity to speak further?

We've had our primary witnesses on this measure, so if you're in opposition, we'll have an opportunity for primary witnesses in opposition to speak. But.

Okay. We'll come back and give it another try. Thank you.

Any, I'm sorry, any additional witnesses in support of this measure? You can come to the microphone at this time hearing and seeing none. Now we'll move to opposition. Do we have primary witnesses in opposition? Yes, if we could. All right. I don't know if we have seats for everyone, but okay.

With our witness in support, I gave them three minutes, but according to our time, it was about eight minutes. So I will afford you both four minutes apiece.

Well, thank you, Senators and Members of the Committee. Zach Leary with the Western States Petroleum Association, in respectful opposition to ABX2 1. Last year, the focus of the special session was on price gouging, and the data that's coming into the CEC that's being publicly reported on their website is just not showing that fact.

In fact, the data is showing that refineries in California are losing money month to month. There are months where they make money, but there are a lot of months where they are losing money. In the last special session, you as the Legislature, I think, had the wisdom to reject the proposal from the inception and instead required that the Bill focus on collecting data from the industry, crafting multiple studies for legislative review, one that's in front of us today, the transportation fuels assessment.

You also had the wisdom to create the Independent Consumer Fuels Advisory Committee, but unfortunately, that was never filled and so never met, convened or advised the CEC. We thought that was an important part of the process. I just wanted to note that the implementation of SBX1 2 has been really difficult on collaboration.

We, as a trade Association, have tried to engage, we've requested rulemakings four times for clarity on the information that's being tried to, to be collected. Unfortunately, all four times those requests were denied. We have also written over 30 comment letters to the docket, very extensive questions on understanding the process. Unfortunately, those have not been responded to.

And we just want to express concern that if the implementation of ABX2 1 is anything like the implementation of SBX1 2, there should be definite concerns from the Legislature. So now, in the middle of that two year process, multi year collecting data, you're being presented with an idea that was actually presented 20 years ago by then Attorney General Bill Lockyer on a storage requirement for gasoline.

The CEC actually determined 20 years ago it was a bad idea and has said to reject it, and we believe it's even a worse idea now. We actually align ourselves with the comments in the transportation fuels assessment that state the proposal could create artificial shortages and result in everyday gas prices to raise. In the Assembly.

We talked a lot about the math and the math of this working out. I think there are a couple variables I just want to point out that I think are missing as it relates to the implementation of the Bill. Variable one, how many days of storage are we talking?

Are we talking one day of storage, which is about 35 million gallons of gasoline or are we talking 15 days of storage, which is half a billion gallons of gasoline? And what are the carrying costs associated with storing that kind of fuel? Variable two, how is this newly introduced trading mechanism going to work?

We think of it as like cap and trade or low carbon fuel standard. That's trading carbon credits. This would be trading actual physical and barrels. We think that could put folks at a competitive advantage or disadvantage in the market. And if this results in refiners having to be forced to lease private storage space, well, guess what?

Rent just went up for that storage because they know there's going to be a demand. And then variable 3 and 4, what is the market impact going to be to withholding fuel from, from consumers? We think there is going to be, that is supply and demand. And then our fourth variable that we see as a big concern on the operation side is now storage requirements will create a pinch point in the system and slow down production. We remain fundamentally opposed to the proposal.

We believe giving the legislative authority to yet another state agency to raise everyday gas prices is not a good idea for consumers. We already have one state agency doing that, the California Air Resources Board. For these reasons, we must respectfully oppose in the proposal. Thank you. Next witness.

Thank you Mister Chair, Members of the Committee, Jeremy Smith here on behalf of the State Building and Construction Trades Council of California. In opposition, respectful opposition to ABX2 1, we like to thank you, Mister chair, your Committee staff for the time you have given us and our Members and many other conversations on ABX 201 to hear their and our concerns about this proposal. Same goes to the majority leader and Mister Hart as well. Thank you.

We are here on behalf of our Members who you will hear from shortly, their families and their communities.

ABX 2.1 authorizes the CEC to require refineries to provide a resupply plan that will ostensibly 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, again 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 only 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 refineries and the surrounding communities must not be jeopardized on market and pricing considerations.

We agree with the industry that the requirements to store fuel to mitigate increased consumer costs that a maintenance or turnaround event may cause will 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 scheduled for anything other than infrastructure needs and the wear and tear of a refinery endanger our Members safety and health and could lead to catastrophic breakdowns that will put workers in their communities at risk.

This Bill could have looked to investigate solutions to gas pricing in California without seizing bureaucratic jurisdiction over the scheduling of refinery turnarounds. Instead, the Bill will impart unprecedented authority to the CEC, putting our Members health and safety in their hands.

Furthermore, it is yet another attempt to run refiners out of the state, taking thousands of careers for our Members with them. The minimum inventory levels the Bill authorizes the CEC to develop likely cannot be complied with without additional tanks being constructed, with no consideration for space or the reality that they can never be permitted.

Communities like Torrance, Richmond and others up and down the state would not be accepting of additional tank storage for gasoline and other refined fuels in their communities. Yet the Bill expects the industry to come up with a way to use existing storage that is already used for the process of refining.

This Hobsons choice for our employers only endangers our Members careers and their health and safety. This Bill unfortunately does not demonstrate an ability to lower prices while maintaining safety and reliability. While we have been informed while there are Committee amendments, and we again appreciate the time we were allowed with staff and Members in this house and in the Assembly to talk through those amendments, we must remain opposed to ABX2 1.

Thank you. Now we'll open up the mic for individuals in the room who are in opposition to the Bill. You can come up to the microphone and state your name and your organization.

Thank you Mister Chair Jack Yanos on behalf of Sloat Higgins Jensen, respectfully opposed. On behalf of the California Fuels and Convenience Alliance, the California Trucking Association, the Arizona Petroleum Marketers Association, the Nevada Petroleum Markets Association, as well as the following California small businesses, JB Dewar, Seiberts' Oil fuel delivery Services, Ed Staub and Sons, Lakeview Petroleum, Valley Pacific Petroleum Services, River City Petroleum, National Petroleum, Rebel Oil, as well as the following Arizona based companies, Miller Oil Company, Diamond Trucking to be fueled. Arizona fuel distributors, Valhalla Fuels, Bennett Oil Company, American Transport Freight Enterprises, Super Pumper stores, Calvert Oil, Jackson Energy, Senergy Petroleum, Circle K, Kenyan De Chile Fuels and JF Petro Group. Thank you.

Good afternoon, Chairman. I am Timothy Jeffries. I'm international representative for the International Brotherhood of Boilermakers on behalf of Tom Bachmain, national Vice President, Representative Boillermakers. In the State of California, we are opposed to this Bill.

Aloha. I'm Mitchell Bechtel on behalf of the District Council of Ironworkers. In opposition. Thanks.

Dan Chia, on behalf of the California Chamber of Commerce, in opposition.

Hi. Good afternoon. Paul Moreno, Iron Workers Local 433, in opposition.

Good afternoon. Tyler Byrd, Iron workers, 416, in opposition.

Good afternoon. Mitch Ponce, Vice President of Ironworkers Local 433 and President of LA Orange County Building Trades and were in opposition of this. Thank you.

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

Good afternoon. Members Oracio Gonzalez, on behalf of California's Business Roundtable, opposed.

Mister chair Members Andrew Antwih with Shaw Yoder Antwih Schmelzer & Lange here today on behalf of Kern County, Fresno county and the Western Propane Gas Association, all in opposition.

Hello, my name is Tom Hansen, Business Manager, IBEW Local 302, were opposed. Thank you.

How you doing? Rene Palacios, Business Agent, Ironworkers Local 433, opposed.

Randy Thomas, Business Manager, Boilermakers Local 549, Northern California and Nevada. We oppose this Bill.

Good afternoon. Anthony Vescuso, Local 16, Heat and Frost Insulators, business agent. And we are also in opposition. Thank you.

How you guys doing? Francisco Yanez, organizer for local 378. We oppose.

Good afternoon. Rachel Shoemake, IBEW Local 302, in opposition.

Good afternoon. Paul Fields, Vice President of Boilermakers Local 549. We repose.

Good afternoon. Osvaldo Troche, Boilermakers Local 549, opposed.

Dion Simone, local 549, boilermaker, opposed.

Martin Rodriguez, Tri County Building Trades President, Ironworks. Business agent, 433. We oppose.

Thank you. Any additional witnesses in opposition here in the room hearing scene? None. I want to thank all of our witnesses both in support and opposition. Now we're going to bring it back to the Committee. Do any of our Members have questions at this time? Senator Gonzalez? Yeah. Questions or comments? Anybody? Well, we're asking.

Two witnesses. This is, a lot of these are for you to answer the two witnesses in favor of the Bill. And then there's also some for the opposition witnesses because it has to do with some of the maintenance refinery issues that we have. I'm curious to the experts that have figured this out that this is the issue.

Number one, characterizing it as a simple thing. It's not simple. There is nothing simple about dealing with the oil industry and inputs, outputs and all the different parts of it. So it's pretty complex. And the goal of this program is simply what, to get rid of price spikes?

Yes. To address the price spikes, to reduce them, mitigate them as much as possible.

Okay. So occasionally we have these price spikes that go up to 650 a gallon. And I think the bigger problem for Californians is our gas normally cost $4.50 to $5 a gallon. Now. Those aren't price spikes. That's just the amount that we're paying now. So that's something I think we have to look at.

And I haven't heard anybody talking about. You know, we have nine refineries left, right? One of them is pretty small. So it's almost eight refineries left out of 32 that we started with. So when you're talking about a supply and demand, you know, talk about simplifying it. Supply and demand.

If we have cut off all this supply, if we've reduced the supply and we've reduced our usage, right, what, 30%. But we've taken 60 some odd percent of our refineries out of, out of Commission, they're gone. And so I think we're right at that level where, you know, how many gallons of fuel does California use per day or. Yeah, yeah. Per day I think it is.

We use about a dollar about, sorry, about a gallon per person in California, about 37 million a day.

Okay, so it's 37 million just for California. But we got letters from the Governors of Nevada and Arizona, both of them expressing grave concerns about this. How did you respond to them? What are their concerns? And how are you going to alleviate their concerns? Because they use some of our fuel also, correct?

Right. Absolutely. So I think. Thank you for those questions. Just kind of tackling. I mean, if you would like me to answer all of them in a sequence, firstly, in terms of our interconnectedness in the west, you're absolutely right. So Nevada and Arizona get fuel from California refineries and through a pipeline system.

And it is important to observe that every time there is a spike in California, there's also a spike in Nevada. And Arizona, those things move up together. So anything we do here to improve the liquidity and better operational efficiency of the refineries in California will also positively impact Arizona and Nevada.

That's our idea. They're like $1.50 a gallon less than we pay. Friends always show me pictures just to show off, and I'm like, okay, thanks.

Yeah. But during the spikes, they also kind of just track with us as closely as they are the rest of the year.

So they have similar spikes, but not. Did that alleviate their concerns. Did they think this is a great Bill now?

No, I think what they've been requesting for, and the CEC, myself, on behalf of CEC, sent a couple of letters, both to the governor's office in Nevada as well as the Senate in Arizona, based on conversations after that, after those letters were sent, they're asking for collaboration and partnership and ensuring that there is a table setting that we regularly talk and ensure that whatever we do takes into account their input and they fully understand what is trying to be done here.

So let's go back to profitability of our existing refineries, because if they're not profitable and we start losing more supply, it doesn't matter what we do in storage capacity, we're going to have high prices. Have we done anything in that arena to try to address how we're going to keep our refineries online? Because if we lose more, what happens to us?

Right. So thank you, Senator. I want to just kind of make sure there's a couple of factual information on specific, specifically the refineries, number of refineries going down in California. It's not just in California, it's been a national trend. So the consolidation.

So just to kind of share nationally, in 1980, we had about 200 refineries, and they're less than 15 in 2013. And this is not California trend, it's a national trend. And what we observe is over the years, the efficiency of the refineries have gone up, meaning in California, for example, in 1984, we had roughly 60% crude oil utilization.

Today it's at 85, 87 and sometimes during the summer it exceeds 90%. And what we're seeing is fewer number of refineries. They've consolidated. Sometimes in California, multiple refinery locations have consolidated into a single one.

So overall, when we talk about 40 in 1984, going down to nine, in terms of just carbon production, we're not talking about the capacity being reduced at the same level. So in 1980, we had the crude oil processing capacity about 2.7 and a million barrels a day. Today we have close to 1.7. So it hasn't reduced proportionally in the same way. It's just that they've consolidated and they run more effectively.

So, currently, we produce how much a day with our nine refineries, how much?

So we produce about 800,000 barrels a day.

What is that in Gallon?

About like 42, 43 million gallons.

Okay, so if we have. If we use 37, Arizona uses 3 more, that's 40, and then Nevada uses 42. So we're like, right there.

Right. So I think it's important to note, just with any market, if you look at June, July, the overall demand for the refined fuel, both in California plus what goes out, is lower than the overall peak capacity we have right now, refining capacity. So most of them in a store.

So in June, July, if you look at the last 34 years history, even looking at post Covid, the refinery inventories go to a maximum by the end of June, and they draw down, draw down during peak months.

So what we're talking about is, for example, just to kind of look at this year, in July, just within California refinery gates, we had about 12 million barrels. And they come down over the next couple of months by two, 3 million barrels within that.

What we're talking here is about, as you draw down, replenish them so that there is liquidity. And the replenishment could happen in multitude of ways. And that's something that the rule making process has to look into.

So you don't know what they need to replenish, where they need to replenish. It's all going to be up to them to figure out how they do it.

No. So I would just offer. I think part of it is, like today, for example, this year, and in the Assembly hearings, we got this question a lot, and we offered this. There are refiners that plan excellently well today. They plan really well. I mean, because of pirate confidentiality, I cannot say names.

But there are refineries who plan very carefully to resupply for both planned and unplanned outages. They do that. Not everybody does it because there is no incentive. So this law would allow the CEC to work with each one of them to figure out how can we maximize our pre planning to reduce reactive behavior at the pump, at and in spot market in real time.

If I could add on the question of visibility into refinery profitability in California, I think that the characterization from the industry couldn't be more wrong. I think looking at 2022 and 2023, we saw record profits for industry. And these companies are very large and and no, like, profit is good.

This is a market that we need to function, but it needs to be a competitive profit. So when you see what economists call excess profits, you know that there may not be competition. And one of the things we presented in the Assembly hearing is that four companies control 90% of the refining capacity in California.

That's a national trend. You know, consolidation happens. Other regions, too, but California is uniquely consolidated. And so these profits, they don't report, the refineries often don't report just for California. They report for the west versus the Gulf, versus the East. California and the western United States is the most profitable gasoline market in the United States and one of the most profitable in the world currently.

Well, you guys have the data for that, right? So what does the data indicate for this last year that you've been able to obtain the data? Have they been profitable every month?

So I'll let the Vice Chair speak to this as well. Division of Petroleum Market Oversight is an independent division of CEC. So we don't publish that data, but we've given input.

One of the things that we see, unfortunately, is that as much as we would like to have an open and transparent and Frank discussion between industry and the public, for some reason, the industry numbers that they're supplying to the CEC do not track what they report to the SEC in terms of their profitability. The numbers appear incredibly different and not consistent within the industry.

So the number that DPMO has been using publicly and what we're using to evaluate profitability is called a gross refining margin, where you look at the cost of crude and then what you sell these products for, and that type of gross refining margin, called a crack spread, is what's used in the industry.

So the crack spread, again here in California, higher than anywhere else in the country. Generally, there can be periods where lean periods where prices are low. And on one hand, that's a good measure of competition. That's good for consumers. But understand that industry needs to make a fair profit.

But these kind of excess profits, we're talking about the difference. Senator, you put it very well, $4.50 or $5 a gallon. California consumers are used to that. They can see where, even though if our taxes are higher, that's an investment in infrastructure, or our blend is cleaner, that's an investment in clean air.

When it goes between $4.50 and $6.50, I think people want to know, where does that money go? And before the Senate Oversight Hearing in April of this year, we showed that money goes to the industry. When those prices spike, the taxes and fees stay the same, and those are profit spikes for industry.

And I think people want to understand why that's happening and agree this is not a simple sort of approach overall, but the supply and demand fundamentals here are simple. We looked at the last few years. When the inventories get Low, that creates the stress on the spot. Market prices spike, profits spike, but industry costs don't go up.

All right, this question is for the industry experts here. The process of refining fuels, does it go through the refinery and they go directly into trucks that take them, or what happens with, are the storage tanks that are existing now? Don't they play a pretty large role in that?

Yeah. Thank you, Senator. Appreciate the question. In the Assembly, we had a lot of conversation about the supply chain getting crude oil from either the San Joaquin Valley or coming over via marine vessel. So when it gets to the refinery, obviously making multiple products, gasoline, diesel, jet fuel from a barrel of oil, you're not just producing all gasoline, you're producing diesel and jet along with it, along with other products.

And then we talked a lot about tankage in the Assembly informational hearings, and there's a difference between barn storing hay and the tankage we're talking about here. Our tanks are working tanks. You're constantly blending components that make gasoline. So your tanks, you're looking at a 40% to 60% capacity generally, and you can see that across the United States. So when it comes to just saying fill your tanks more, well, that's where it comes.

That pinch point I was talking about is if you're not able to take components into your tanks, we actually think you would potentially have to slow down the refining process to accommodate, for now having your tanks more full. And that could potentially affect the market and reliability issues. So we talked a lot about tankage. You may have a larger capacity, but your working capacity is pretty much at max right now.

I want to talk a little bit about maintenance. Who regulates when it gets maintained, when these plants have to go offline to get maintained? Who regulates that? Senator, the Department of Industrial Relations. Is that a flexible thing? Because I liken it to like, you have an airplane, right?

And every so many hours, you got to take your plane down and rebuild the engine, no matter what. Even if it's working right, we got to take it down. In the fire service helos, we have our helicopter. When they hit the hours, they're down, and they're down for months while we redo them.

If there's brush fires everywhere, that is not a consideration. We just can't use them. So that's one of my concerns here, is that if we're entering into an area where we have high demand and yet we have a supply issue, where we only have a few days of supply issue, and then we'll hit another pinch point.

In other words, we're just moving the pinch point around. Eventually, a supply issue is a supply issue, and the market will react to a supply issue. And when that market reacts, that's when we wind up having to pay more for our fuel. So who would make that decision? And how could they divorce their decision about when something comes down from safety to political convenience?

Right. Thank you, Senator Seyarto. I think I would just, first of all, just offer something for this conversation at this table. I do not want to push back on my industry colleague here from VIspA and note the differences between what they say to us privately and publicly, and I'm not going to comment on that because I want to have a good relationship, regardless of that has nothing to. Do with what I just asked.

I want to know that question, get. To that point of basically in terms of having specific requirements. So the question I would ask first is, do the existing system, the status quo of maintenance protocols, work or not? If they do work, if existing protocols currently work, we will not touch them.

So if the question is existing protocols and best practices do not work, that's a different question. So what I would want to offer to the Committee, regardless of the conversation, is whatever is in best practices, whether it's CalOSHA, DIR, labor standards, those will be inputs into the rulemaking process, and we will not touch them. That would be the constraints under which we will work. Those constraints will not be challenged as a part of the rule making process.

And for the industry, how long do these processes usually take to get in there and refurbish or reestablish a safe refinery? When you do maintenance, because there's the General maintenance and then there's the big overhaul.

Our Members go in on a contractual basis. They are hired by the refineries to come in at predetermined intervals to do the construction work.

But how long does that usually take? We're looking at one to 15 days of fuel supply.

I think it depends on the effort required to do the turnaround and the maintenance event. I knew that turnarounds take 4050 days. I've been told those are the big ones. Those are the ones where everything shut down and kind of, to your point about the airplane kind of redoing everything in a way, not redoing everything but looking it all over. But, you know, I've been told by folks who work in the industry, 45 to 50 days.

I know we have some folks here in the room that I represent from the boilermakers, from the ironworkers, if they wanted to come back to the mic and just give a more specific idea for you, but it's in that vicinity.

I think. One thing I wanted to add, Senator, about making the decision. So if there is a Reserve that's bigger than today, and the CEC has to go through a rulemaking and determine how much it is per refiner and for the system overall, but with more in the tanks, you have a lot more operational flexibility.

And so the pressure that I think some operators might feel to keep running if they're in sort of a busy time or for financial incentives, what we think is the optimal outcome here is there be a Reserve that allows for refiners and labor and other stakeholders, engineers, to decide what is in the best interest for public safety.

Period. Full stop. If you have more in Reserve, then you don't have to worry so much about those pinch points that you were talking about and put safety and engineering first and foremost, rather than market conditions. And from our position, having a buffer that allows each individual refiner to make those decisions, to optimize safety is the best outcome.

Okay. Now, in regards to the tank storage and the goal of having them very full in the refinery process, once they turn their refineries and their work in the demand side of this fluctuates with consumer demand. We either drive more, we don't, or whatever it is.

Well, there's got to be a fluctuation in the amount of storage they need in the tank to be able to continue to absorb what is coming through the refineries from the industry. What happens? Can you just shut down or refinery? Is there a switch? You just shut off the refinery, you don't work for a few days, or how does that work?

No. Very complex to shut down a refinery. Obviously, a lot of pressure buildup in the refinery as you shut down, I think. But that's what begs the question is, if your tanks are now fuller, can you run at that maximum capacity to meet demand? If your storage tanks can't take the product coming off of the refinery.

Right. So that becomes another issue, is if our tanks are so full that we can't absorb. So apparently you're an expert on that. Go ahead and give us the. You're shaking your head and rolling your eyes.

Sorry, Senator. Excuse. I come from an expressive family. And I apologize. I didn't mean to be. Certainly was not rolling my eyes. I think this idea that the tanks are full is, I think, the wrong starting point. The average in the industry is about 55% utilization.

And the difference between how full the tanks get in the winter or the early summer and how low they get in the fall is three to 4 million barrels. If you were at that early summer or winter level, the tanks still aren't full. And there are these.

There's a lot of, I think, to the credit of our colleagues from WSPA, there is some distinction between blending tanks and finished product tanks, where you hold it and then you load it into the. The system, but they're not close to full.

And even at a regulation that says you need to have a better Reserve, they wouldn't be close to full. There's a phrase called, I'm going to mispronounce it, ullage. No, ullage. U L L A G E, which is the amount of tank space that's not used. That currently is about half.

And so there just is more than enough operational capacity in this system. And I think it's using a few sort of technical pieces of Jargon to say there might be pinch points, I think, in the rulemaking process. I think confident that there's a lot of existing storage space that could be used.

And kind of, we've been noted, like during the Assembly hearing as well, we heard the shell capacity versus actual operational capacity. The numbers that we provided are actual operating capacity, taking into account the minimum they have to maintain and the maximum limits they have.

Even if you look at that, we have about 19.1 days worth of supply you could have in the state within the refineries and the storage tanks. Again, to the point that was made, I would imagine whisper would not have the independent refinery by refinery storage tankage capacity because it wouldn't be legal for an industry trade Association to have that. But thanks to the Legislature, we get to see that.

We get to see that regularly, and we get to see and what Director Milder mentioned, those operating limits. And again, kind of going back to the spirit of the law, we are not talking about 15 days worth of new supply. We're talking about a day or two of available capacity that could be used incrementally.

And again, taking into all the amendments that we see, taking into account all the constraints. The question we would ask each refinery, in collaborative spirit, is what more can be done to store that excess amount and whatever comes out of that as a part of the process, that's where the rulemaking will set those targets.

It seems our price spikes last longer than a day or two when we have them. Did you have a comment on what...

Yeah, just as we were talking about tankage capacity, I think what was revealed during the Assembly hearings, Washington, not every refinery is the same. Not everyone is the same size and not everyone has capacity to store.

And so I think that's why you now see this refining region, which brings up additional concerns for us along with the trading mechanism. But I think each refinery is different. And a mandate like this, we think, could put folks at competitive advantages or disadvantages.

All right, my last question before I let my colleagues jump in again, I. Hope. And I'll take a break from asking some, and then hopefully they'll cover some of the other ones that I have is on the tanks themselves. Now I forgot what I was going to ask about the Dowdon tanks anyway.

Well, I'll come back to it later if it comes back to me. But anyway, I do appreciate you're answering the questions to the best of what we can. I think what my, this initial line of questioning points out is that this is not a simple thing. And the repercussions if we're wrong to the public.

Yes, it says, zero, hey, we can, we can not do it if we're wrong. But it's even more billions of dollars than what we're talking about on a price spike. And so I kind of feel like I don't believe anything in October before an election.

And it's really hard for me to sit here and absorb this without actually what we really should have had is an extensive hearing, informational hearing on this. And we did have that. Well. Hmm. zero, okay. Well, anyway. Okay. Well, good, because apparently I missed that one.

And that's unfortunate because I think at the beginning, the initial part of this, it was, there were some questions about, gosh, I can't remember it. But anyway, thank you very much.

Thank you. Yes, my question is actually for the author and anyone you'd like to enlist. So the goal of this is to save consumers money. And so my question is, what is the criteria that will be used by the Energy Commission to ensure that whatever minimum inventory requirements are pursued, whether it's one day, 15 days, or, or longer or not at all, that they actually do save consumers money?

And I ask that also, recognizing that there are many different levels and players in this chain. So from the refiners all the way to the retail, there are many players in there. So just making sure that the ultimate goal is met. I'm wondering, what is the criteria that the CEC will use?

Well, this Bill does not contain the actual regulations we're going to. The Bill proposes to go through a public, transparent regulatory process to create those that rulemaking, working with industry and the regulations will only be implemented if it proves to benefit consumers by, number one, reducing the average retail cost of gasoline, number two, increasing the fuel supply, and three, minimizing the spot market volatility.

But do we have anything farther, more than that, or is there any other thoughts on that? Yes, go ahead, because I'd like to. I mean, I understand that we're not prescribing that, but what do we envision is possible, right?

Absolutely. We'll just add to that, Senator, I think just use this opportunity to just kind of clarify a few things. So what we have, you know, there has been a reference to the transportation fuels assessment that the Energy Commission has put out.

So the transportation fuels assessment was a whiteboarding exercise, a public whiteboarding exercise, collaboratively, and really put out all the options that the stakeholders have put in, including their pros and cons. And then what initial focus has been on was two or three ideas, what can we do to immediately address liquidity in the market?

So, over the last several months, and we did a Senate hearing in May timeframe, where we provided analysis, what we show today is when the market liquidity dips below 15 days, and when we say 15 days, roughly about 13 days of that is in storage tanks, and about two days is imports coming in and refineries running.

So when it dips below that, you begin to see this reactive behavior at the spot market. So the existing hypothesis, but also kind of based on the data we have, along with DPMO's insights, is that if you could maintain the liquidity to that 15 days, roughly, it would remove the reactive behavior at the spot market.

And again, this is refinery by refinery. And I want to just use this opportunity to expand on that, which is some refineries have end customer obligations. So a refinery might have all the way to the retail station. They have commitments that they have to honor, and some of them just produce oil to refine a product to sell.

So we will be looking at each one of them separately, looking at their tankage separately, and really looking at the spirit of how can you maximize within the existing tankage, more volume. So for context, the lowest we have seen, the days of supply dip two, was 12 and a half days in 2022.

So we're talking about 12 and a half days to 15 days, about two and a half days across all industry players. And that's something we'll be working one by one to figure out a, how much of the two and a half days could be brought in.

Okay, thank you.

Yeah, I just wanted to respond to the notion that this Bill applies to all of the industry. I think one of the things that SBX1 2 has revealed through the process is there are a lot of players in the transportation field market. There are wholesalers, distributors, marketers, energy traders, refiners.

But this Bill seems to be only subject to refiners. And I think it says refiner region, which I don't know is defined. And so to say that there's 13 days in the system, is that all the players or just refiners? And that's just a general question, because I don't think we've. I think that was with terminal operations in there.

Well, so could I just follow up on that? So with this whiteboarding exercise, it was, it was looking at up to 15 days and figuring out that this did seem to be the trigger, not these other players in the market. Is that what. So would your response be that these other players are not actually affecting overall cost?

Right. I mean, some of them, like the retail margin does increase, but retail margin increase is a reaction to the refinery margin increase. So it's important that we're looking at what's there at the top, and we can reduce the secondary effects by reducing the first one.

Okay. Thank you very much, chair.

Thank you, Senator Skinner.

Thank you, Mister Chair. A couple questions to our representatives from the CEC and the division. So I note, and the analysis does also, that the Bill gives the CEC and the division certain authorities, and it requires regulations. However, it also indicates that the regulations to be adopted.

Well, specifically it says it prohibits you from adopting the regulations unless you make certain findings. My question is, while so far your analysis shows that this is a. That requiring some level of inventory would help us with price spikes, the way the Bill is constructed, you could opt not to make that requirement. And I'd like you to see if I and the analysis have read that correctly and some thoughts on that. And then I have a couple other questions.

Thank you, Senator. Based on the amendments, the amendments are coming. We're going to be reviewing them as the Energy Commission and as kind of one of the Commissioner serving on that. This would be done through a Commission vote.

But the interpretation of the Bill today, if we cannot meet the different guardrails, quote unquote, put in the legislation, yes, we will not be making a determination to set minimum standards.

I ask that because some of the discussion seems to imply that this, that we are automatic, that this, by voting in this Bill, we are setting those minimum requirements and we're not.

And I just note that because it is one of the things that I like about the Bill because it gives the, if we were to set requirements and or set the regs, then some of the things that have been raised that could be real, potential unintended consequences could come true, and then it would be the Legislature that it would have to come back and act to fix.

Whereas this has a process built in, plus a stakeholder group, plus public input for you to make those determinations and set regs and then to analyze the regs, you know, reports to us and such, but additionally your own processes where if the regs are not meeting the intentions, then you can revise or reverse or eliminate.

So I just wanted to see if I understood that correct. Seems like your affirmation does. The other thing I wanted to, the other issue is on the, it prohibits the Energy Commission from applying a minimum inventory requirement if it can only be met by new construction of storage infrastructure.

So I think that that provision does help us in terms of some potential cost problems. And I wanted you to talk a little bit more about the storage capacity that you've analyzed so far. I mean, we have, the industry has indicated, you know, that they potentially don't have that capacity, or that capacity could be such that, since it's used for various things, could put this pinch problem.

And what I found kind of interesting about that was I listened to the Assembly's hearing, the informational hearing, and I was struck by the operator of Rotten Robbie talking about the fact that the way the refined product is pulled from the bottom of the tank, so the newly refined products put in the top, the refined products pulled up from the bottom.

And that fact that. So this is to the industry's point that, you know, this is a, you know, constantly in use. Well, that's part of what gives us the assurance that our concern of the product being, you know, the shelf life of a refined product that.

So I guess the point I'm trying to make, and I wish you would elaborate or affirm if I'm correct, is that we're not asking for a static refined product storage, because that could get into shelf life problems. We are asking to use, as the refinery does, the constancy of the way it moves and such. If you could speak to that first that, and then wants to, and if you want to respond?

Thank you, Senator. If I may. Just want to take this opportunity to share a little bit of a context based on what the information that was shared, we will acknowledge, and I would acknowledge as the CC representative, these are complex operations. These are very complex operations. We are not debating that.

But at the same time, what Director Milder mentioned, some of the options that needs to be implemented are straightforward, and our hope is we could work with the industry to figure out how best to operationalize them. So to your question, if I go back, when we talk about tankage, tankage are typically about blending components.

So there we alkylate, there'll be something else, there'll be something else, and then finally you'll have the production tankage, quote unquote, which, where you mix all these blending components together. One of the industry colleagues said this really well in one of our internal meetings, is it's like making cakes.

You know, I need eggs, I need milk, I need sugar, I need baking powder. I'm bringing all of them in tanks, and I'm kind of constantly mixing them to make cakes. On the other end, the problem is specific blending components could run low. So, for example, one of the critical components of a refinery is the FCC unit.

If the FCC unit goes out, you cannot produce alkaline. So if you have alkali stored ahead of time to levels that you could store, you would not have to stop production of refined fuel just because your FCC unit goes out. And that happens today? That happens today. So when we have maintenance events, the refineries don't shut down.

They take the existing blending components and keep mixing refined fuel. The problem of not being able to produce fuel comes when they don't have independent components. So what we see, based on the data that has been shared with us, opportunity to maximize those inventories. And so we'll be working with refinery by refinery to figure out what can be stored to kind of make that available during these extreme times.

The second point, in terms of storage, the total amount of storage, as I mentioned, if we count three separate components in California, one is just the refinery gate you have within the refinery, the different tanks, you have commercial operations.

And if you count all of that together, we have 24 days of net operating capacity in California, translating to 19.1 million barrels. All of that collectively. So we are talking about how do we use all that capacity not to maintain 24 days, not to maintain 15 days, to maintain incrementally a day or two, depending on what's visible.

Yeah. And just to your first point, Senator, and appreciate your time today on the minimum inventory. So working tanks going up and down, up and down for the components, I think also a complex market because those are all commodities which if you're now talking about minimum, which is in the Bill, potentially the authority for.

The authority for, but not an amount or a guarantee that it sets a minimum.

No, but I think our concern is with the minimum. What is that number? We've heard 14 days, 15 days, heard 12 days. It's unclear in the Bill. And that's part of our concern as an industry is we don't know the unknown. I think for the working tanks, which.

Is what the process, what the regs, that process

Would , which I think, yes, the process would develop what that day specifically is. And I think that would potentially differ refinery by refinery. I think for the working tank capacity and the components capacity is you are constantly bringing in batches of fuel, of components for the finished gasoline process.

You're actually certifying the tank to ensure it's a pure product. So once it gets to that finished tank, you have to certify that it is, you know, the gasoline you said it is, and then you're audited at the end of the year. You are then sending out batches of fuel.

So you're constantly dropping your fuel supply and putting into a pipeline system like Kinder Morgan gasoline, diesel jet is usually how it goes. And then you send along these batches of thousands, thousands of barrels of gasoline. And so it is a complex.

So if you're required to have that minimum inventory, I think part of our concern is you are potentially going in and out of compliance and then potentially subject to the $100,000 to $1.0 million a day penalty.

If I may, through the chair. We have the Boilermakers union here today. They're the ones who would actually build tanks if we were still requiring that in the bill. The bill now does not, to your point, require the building of tanks anymore, and so it's hard for us to reconcile...

There's not enough capacity. You can't build tanks, but you got to use the capacity you have on hand. But it differs about what is in those tanks now and the components and how this stuff is refined. So I know that there's a Boilermaker representative here who would be prepared to talk about tanks and how they're built if you have more questions about that.

Well, not actually. I think my real point was that it doesn't explicitly, what it prohibits is if there is existing storage, but it doesn't. I mean, I think obviously, it's constructed in a way, we're trying to avoid increasing cost. Right. And there obviously may be some, the analysis points that out, as does the CEC's figures.

But the amendments and with the work that the Assembly did is trying to minimize any of those costs. And so the building of tanks would obviously create a cost. However, it doesn't say absolutely cannot. So, in other words, the processes that the division and the CEC would have to undergo to make these determinations.

This is partly why I like the construct of the bill. Because rather than we, the Legislature, before we know all of this and before we are giving the authority to the CEC and the division to, through a stakeholder and a public process, make these determinations. And Boilermakers may get to build some tanks. We'll see. Anyway.

But finally, on the worker safety, you know, I appreciate that our Building Trades that work in refineries are concerned. I think that the amendments that the Senate has introduced that are reflected in this, I understand you still are not satisfied with them. I appreciate that, too.

But I think they've gone a long way to addressing some of those concerns by allowing for the emergency maintenance and actions so that we can absolutely put worker safety first. And I would just reference, it's not in the analysis because it's a little different. But the bill, I believe it was SB 54.

I can't remember the exact number. I always forget. The bill that Senator Hancock and I did with the Boilermakers and with Building Trades to really help ensure that worker safety was first and foremost in all of our turnovers and refinery maintenance. And nothing in the bill in any way rescinds or undermines any of that, which I'm also very pleased about.

So, Senator, if I can just add one kind of number or kind of context for you just to kind of keep the storage thing to bed. The last, I mean, if you look at 2022, when you had additional refineries operating in California, at this point of time, we had lower inventories causing the price spikes.

This year, we have the highest inventories compared to 22 and 23 with lower number of refineries and no price spikes or lower price spikes. So it doesn't attract that we don't have storage because we are running at a higher inventory level today compared to even 2023.

Real quick.

You've been talking about the gas spikes in 2022 and 2023. Four refineries went down. That's part of the gas spike. This has nothing to do with that. This would not alleviate that in the least. They had unscheduled refinery maintenance. I think one refinery caught on fire or something, and that takes a while.

They had lower than normal inventory due to higher than normal demand, and then they had lower than normal fuel imports because of the global disruption, because we were just starting a war over in the Middle East and also in Ukraine. We had global refinery shortfalls due to wars, labor and supply chain shortages.

If you remember, post Covid, we had boats floating off the thing with all of the things. So there were numerous things that had nothing to do with storage tanks that were causing these price spikes that we had, the extraordinary price spikes that we had in there.

And you've referred to it several times, but this, you know, it isn't just that. And so, you know, it's important when you do refer to those, that you label all of the issues that were going on, because that's why it's, that's what's different today than it was then.

Today, we've stabilized a little bit of the global thing, although that's going to become an issue pretty soon, I think, again. And this storage scheme is not going to offset what's happened globally. And so to just lay it all off on we didn't have enough storage inventory is not accurate. And I think it's misleading the people that don't know as much about this as you might. And we need accurate information. If we're going to do this to our constituents, we need accurate information. Thank you.

Would you like me to...

If you'd like to respond to that real quick.

Yeah, quickly. Senator, again, always appreciate your line of questioning. I've said that in the past. Having those questions help us be more accountable. And it is absolutely important, as a representative of CEC here, to maintain public trust and integrity to data with you. So with that, when we talk about the last few years, you are absolutely right.

There's a lot of factors playing in. But at the same time, the fact that around inventories was also playing in. So if you remove the global crude oil issues, if you remove those supply chain issues, you still see the spike. And that's what we've been presenting.

The spike is very particular to California. Because the rest of the country was also having crude oil prices spikes going up, and we're specifically looking at isolating the price spike to California and its relationship and correlation to the inventories in California.

Our regulatory climate in California is also very unique to the other places, and that's something that drives those price spikes.

Thank you. Senator Stern.

Thank you, Mr. Chair. And I want to thank you for maintaining this committee as a, at least the policy standing committee, as a watchdog here on these broader energy affordability issues. I think we all owe you a debt of gratitude for your vigilance on affordability and keeping things as simple as they can, but not simpler.

I wanted to follow up, I guess, on this same line of questioning that we've been pawing at, to the Vice Chair's point and somewhat from Senator Blakespear and Senator Skinner as well. I'm under no illusion that somehow ABX2 1, and no offense to the author, is going to solve all of our problems at the pump.

And I don't think it's going to be a sort of magic realignment of the leverage that the oil industry has over drivers in this state where drivers really are stuck and often held over a barrel about choices that they may have. I do think that addressing this storage piece, or at least giving authority to address this storage piece and get into the information gathering and the sort of regulatory process with an eye keenly on safety as sort of the compass here to get through it is going to be good for organized labor.

I think it's going to be good for the workers that we worried about with SB 54. I did want to get a little perspective. I know we didn't have time for a tweener testimony, but for the, if the Steelworkers are still here, if that's okay with you. You want to bring them up? Okay.

So I'd love to hear from them just sort of of the, not the turnaround job perspective, but sort of the everyday to see if some of the amendments that you've made since the Assembly sort of addressed some of those workplace safety issues. I do think you've made some meaningful improvements here.

I am concerned that we still haven't staffed up at Department of Industrial Relations and that there are ongoing budget pressures on both DPMO and on CEC on this front. So my first question is really somewhat of a fiscal one, but it's how are we going to find a way to make sure that we've got the personnel in government to be able to do this work?

I've heard from a lot of our friends in the trades that it would actually make a huge difference to be able to go hire a few more folks at DIR. The chair himself has made this point over the years, but the one position requested, I believe, in last year's budget, I think was like a $280,000 position, is still not filled. That's just DIR.

We know that DPMO and CEC are going to have real work to do here and that you actually haven't landed on an answer and you're sort of working backwards from there, but you're just trying to build up the capacity to digest very complex market information for the first time. This is groundbreaking stuff.

So do you anticipate that there's no direct pay for here? And we know that the operating account that funds CEC and DPMO is in a structural deficit here, and a lot of it's funded by utility ratepayers. ERPA is largely electric ratepayer funded. We're not really talking about electricity here.

So for the administration officials here, do you have a perspective on whether we should be expecting a sort of SBX1 2 and 2 1 sort of combo funding proposal, say, in the coming budget cycle? I really want to be sure that we're going to have that sort of independent agency judgment built up and that the capacity is going to be there. So just wanted to get perspective, and maybe too soon.

I was encouraged by the AB2 X 1 or X 29 reasonable cost recovery mechanism that was in the Petrie-Norris bill. I thought that actually was the groundwork for something solid and sounded like industry and labor were open to that, a $5 million cap cost recovery. Right now we know it's a $6 million request on the ERPA front still unfulfilled by the Legislature. So I'm worried we're adding a lot of important new authorities without the people to handle it. Care to comment on that?

Thank you, Senator Stern, on that question. I always want to just start by saying thank you for the resources we do have as of now. Thanks for the positions that were given to us within the SBX1 2 context. I think the kind of the top line, price, time, and quality. And I think you have to compromise on one or the other, depending on how much workload this will be. We are still kind of looking at what the final amendments will look like and that will set our work plan for the next couple of years.

I think we would likely have a little bit of support needed, but I think it also plays into, depending on what's going to happen with the broader budget and a consolidation we've done. Many of our agencies were requested to sweep that haven't been filled yet. And so I think we are kind of looking at the impact of that, what we are giving up. Based on what we give up and looking at how the amendments would come, there might be a minor request that might come up.

I would certainly welcome that request and, in fact, be open to working with you all on developing, and especially finding a cordoned way to deal with this sort of unique oil and gas market oversight that we're talking about here, versus the sort of electric oversight. And getting this off the rate base in sort of more squarely into a cost recovery framework that is not a new tax, but instead sort of an implementation fee, if you will.

So I want to sort of just plant that seed and hopefully that starts to bear some fruit in the coming year. The one other question I wanted to touch on is the ongoing work occurring at DPMO, not just on the storage and reserves question, but on some of the broader unaddressed volatilities we've seen.

We haven't been talking a lot about the mystery surcharge. And I'm really concerned that this is, to me, a necessary measure, but it's not sufficient. And I would like to see something back from the administration, at least rounding out or assessing some of those issues. Because the two things that, in my view, make us very unique in California as a market is, one, are the product we refine and the sort of nature of this nine refinery island and limited pipes in and out.

But two, the large role that branded gasoline plays and this unique dynamic of dealer tank wagons and where you have branded gas coming from refiners and playing a very dominant share in the market. Whereas you see on the East Coast a lot more retail competition, more folks are buying from the rack, less these sort of other contractual arrangements.

So is there a plan in the administration to address, if we give you this authority, is this all you're going to be focused on is storage and reserves and refineries, or is there going to be more effort made on this retail front? And can we expect something more to chew on there going forward?

Yeah. Well, I'll start here and then ask the vice chair to join in. This is urgent. So the idea that there are these price spikes, we did a calculation, 2023 price spike. There was one, over $2 billion that consumers were paying excess profits. And so I think it's really important.

A lot of DPMO and CEC colleagues are here working incredibly hard. We can prioritize different important things. And I think, so right now, being able to sort of stop these crazy price spikes is a great first step in protecting consumers. But, Senator, your comments are very well taken.

There are other structural things in this market, and DPMO has three PhD economists now that we've got on board, we're using the data transparency from SBX 2-1. And so I think that we are, we're going to be in a position to shed more light on that.

So I'm going to pledge to you that we will bring more visibility to why prices are higher in California. Looking at some of these issues between branded and unbranded and the sales mechanisms, the DTW that you mentioned. I also want to take one more opportunity. The Assembly hearings have been referenced here a couple of times.

There were hours and hours of pretty technical discussions, for example, of how much storage capacity do we have? And CEC and DPMO both made affirmative presentations of the data. I think industry addressed it more on this hypothetical level, was not presenting data. I would just point, for the Members of this committee's confidence.

I would reference June 2022, April 2023, and February 2024. And I'm picking those dates because they're different months throughout the year with seasonality. And those are dates where refiners in California had about 13 million barrels in storage. And then during the price spikes, we see more like 10 or 11 million barrels. So you don't have to take our word for it that there's excess capacity. Look at how they operate currently. You can already see that slack capacity in the system. That's not like a matter of debate, really.

And I think that data clearly came in with the Assembly hearings, as did this phenomenon of how price spikes happen during these low inventory periods and the sort of hockey stick effect of inventories. To your point, Senator, there are other really important steps ahead of us as well. But protecting consumers from price spikes is an urgent need.

If I may. If I may. Thank you, Mr. Chair, to the workforce questions you and Senator Skinner touched on. It occurs to me now that Senator, Assembly Member Skinner then, Senator Hancock, and I think, Senator Stern, you might have been staffing Senator Hancock on that bill. It's a sort of full circle moment for me here.

You know, we appreciate the requirement to use a skilled and trained workforce to do the work, and the refineries is included in the bill. B2 of the bill in Section 1 requires the executive director to be satisfied with resupply plans before the regulatory process is finished regarding the maintenance and turnarounds.

So if we can't even get a skilled and trained workforce in there to do the work, the work is not going to get done in a correct fashion. From the folks that I represent who are in the refineries, this work needs to be done on a schedule at times when it needs to happen.

And, you know, in situations where there's a concern about ongoing processes at the refineries, their voices need to be heard. But under B2 of the bill, as a criteria, the executive director has to be happy with the resupply plans. Essentially, I'm paraphrasing, happy with the resupply plans before the regulation go forward to do with maintenance turnaround.

For your members, if the sole focus wasn't so much just on refining storage margins, these issues, and we were looking more broadly at the gasoline marketplace, for instance, some of these retail issues we brought up, is there an openness, you think, from Building Trades members to looking downstream at some of the distribution issues and sort of maybe diversifying how we look at our gasoline market?

I think that our members, the members I represent, feel, maybe most acutely of all the workers in our economy, the high cost of gasoline. They have their tools. They have to drive oftentimes many miles back and forth to their job sites. They have to fill up their cars as often or more than anybody else in our economy.

So I think in this case, our members are feeling what you're getting at with this bill today as well. They just don't want to trade off their safety or their brothers and sisters safety who are working in refineries for saving a few pennies per gallon at the pump.

But an openness on looking closer at the retail side?

I think if it's going to help lower costs for our members, we're always, we're always looking for a place to do that.

Okay, thanks.

Thank you. Senator Gonzalez.

Through the chair, may I respond?

Would you like to respond?

Senator Stern, I think you hit the nail on the head. This market is complex. We are unique. You mentioned CARBOB. We have a unique feel that sets us apart from the rest of the nation. If you look at the Gulf Coast in the east, they are interconnected via pipeline, connected to a lot of different refineries that are very efficient at running crude. And so when operations go down, they are able to make up with the redundancy in the system. We just don't have that in California. We don't have that redundancy anymore.

On your conversation about the downstream from the refinery, I think we have been thinking about this mystery surcharge for a while. We have looked at the retail space. I think you're accurate. We have less gas stations per capita than the rest of the nation. We also have more branded stations than unbranded per capita.

And I think difficult to explain because there's a lot of land use policy that goes into the competition level at the street. But at the end of the day, the consumer still has choice to look at the 12 foot billboard and go to the lowest cost option that works for them. And you know, a lot of the times people choose to do that, look on different apps and whatnot.

The bigger concern is that if there's some unknown unknown here structurally in the retail gasoline market, that's uniquely, where you have a Chevron refinery giving through a subsidiary to a Chevron truck, then to a Chevron gas station with contractual incentives, depending on the timing of that sale, to either push, you know, to sell more, push prices down, or to sell less.

Like there are all kinds of tools in these contracts that I just feel like we don't know the answers to those questions. I think they do affect from a trade worker to an SEIU worker to me on the way to drive my kids to school. Right. I mean, it affect everybody.

And I just, I hope that we resolve, out of moving this legislation, to commit ourselves to that sort of more comprehensive look at things going forward. Getting these agencies fully funded. Yes, looking upstream, but also going downstream. I think we should be open on some of the ABX29 issues raised around.

We should look at the ethanol question, I think we should look at production enhancement strategies. I thought that those are things that may make some of the stakeholders that I'm close to uncomfortable, but I think all of us should be willing to stretch and explore some of these options going into next year.

So maybe my suggestion would just be not to treat this as the end of the story, but at the appropriate time, I would like to move the bill and get this done. But really counting on our experts here and on industry to do that collaboration. Like let's get out of the courtroom, stop suing on data sharing, and just get into it. So anyway, thank you, Mr. Chair, for the indulgence.

And through the chair, if I may respond. I think on the retail side, largely, there is a, refiners have really gotten out of that business. Most of the retail gas stations are franchisees, small business owners that have their contractual relationships with whoever they buy their fuel from.

I think on the diversification point you made, Senator Stern, as it relates to other fuels using existing infrastructure, there was a bill this year that the Building Trades supported. We supported as well, SB 983. That would have looked at existing infrastructure and how to incorporate potentially hydrogen or electrification. Unfortunately, that was vetoed due to cost pressures at the CEC.

Just kind of to add to the question that Senator Stern asked earlier. Senator, the fuels assessment has about 15 to 18 different options, depending on how you bucket. And we hope to continue to revise that per mandate every few years and bring better fleshed out options to the table for you to think about.

Thank you. Senator Gonzalez.

Yes, thank you, Mr. Chair. And I just want to say thank you to the author for bringing this forward, and I really appreciate the healthy debate. I know it's not been easy for any of us to come back in this special session, so thank you. I just want to hit on the points.

I know this is part two from the discussions we'd had about a year or so ago on worker safety, and I know it had been talked about. Many stakeholders have come together, including our Senate President Pro Tem, but it has to be very much a top priority. And we know that consumers are feeling this spike every single day, as been mentioned. And coming out of the Assembly from your good work. Just have comments here, but I just want to clarify what the worker safety amendments do.

First, the CEC will now be mandated that any new regulations required to protect the health and safety of employees, local communities, and the public has been mentioned, but more specifically, that the Commission must prioritize worker safety in their rulemaking process, which is fantastic.

And then second, as been mentioned by Senator Skinner, the amendments make very clear that the regulations can't interfere with the authority of employees to perform an emergency shutdown of the refinery process, of course, and necessary maintenance on safety. And then to add to that, cannot interfere with existing law regarding California occupational safety and health standards and worker protections in the health and safety code.

And lastly, they insurer, which I think is really great, the opportunity for a labor representative to the Independent Consumer Fuels Advisory Committee to be from a labor organization with experience in refinery operations, ensuring that the voices of men and women that are working on the front lines in our refineries actually have a say at the table.

Again, I know a lot of discussions will continue to be had on this component on worker safety, but we wouldn't have gotten here if we didn't do this together. And I thank the Assembly for bringing this forward, bringing the stakeholders forward as well. And I look forward to moving this alongside Senator Stern. So thank you, Mr. Chair, back to you.

If I may respond to the chair, and appreciate the Senator's comments. I think for us, looking at this from a safety angle along with the Building Trades, and I think Mr. Smith touched on it a bit. I think the language really matters here on where this new authority is coming from.

So now existing law is the refiners, DIR. That is kind of the decision making process. South Coast Bay Area AQMD have some role in how you do your maintenance because you got to update your facilities as it relates to rules that are now being implemented at the South Coast level. So you gotta do that kind of maintenance. As it relates to the language in the bill, I think where you're hearing our concern from as it relates to safety is in page 42. So this is where the new inserted authority is coming from.

That before a refinery can commence a turnaround, they have to demonstrate to the satisfaction of the executive director of the Commission sufficient arrangements for loss of production during the turnaround or maintenance event. And I know Jeremy touched on this a bit, but I think that that language there is important, because what if the commissioner is unsatisfied?

Does that mean before we can commence our maintenance, he or she has to become satisfied? And that's where the decision making and the imposition of the authority is. Let's say they say no, and our refinery can't do its maintenance but is continuing to operate and serve the market. If something goes wrong, who's liable I think is part of our question. Because we've asked to do the maintenance, we weren't able to satisfy the requirement. And that's where that decision making process has us concerned about safety.

Senator Becker.

Thank you. Well, I, first of all, I appreciate the discussion. I appreciate bringing the bill forward, appreciate the effort to address prices. I was just rewatching an NBC story about the station that's essentially across the street from my district office, which was charging $7.09 in April. It was down to about 6.40 when I drove by yesterday.

For regular, by the way. Yeah, yeah. Down to about $6.40 for regular. So, you know, echo some of the comments of Senator Stern in the sense of, you know, wanting to look at the big picture. I know we have had a number of hearings on some of the bigger picture issues.

And I know here we're focused obviously specifically on this solution, but I do similarly look forward to discussing some of the other dimensions here. We mentioned retail, we mentioned a few other pieces. And also then the CEC report, which, which talked about this, also talked about conservation. Right.

And I'm kind of curious, for the administration does the plans to, last couple years, there's been bills to focus on super users. So to try to really target our incentives for Clean Cars 4 All a lot better on those superusers. The people who are driving, who we know are driving 30,000 miles a year. And just haven't been able to kind of get that going for some reason. So I wonder if you could sort of comment on that and kind of openness to efforts to look at that side of things as we go forward.

And then just to circle back on the worker safety piece, I appreciate my colleague, Majority Leader Gonzalez, addressing that. This has been a big thing. We certainly brought that up in some of our internal discussions, and happy to see the amendments, although I know it sounds like there's still issues on that score. But maybe I'll just ask the administration if you could sort of comment on some of those bigger picture issues.

Yeah. Thank you, Senator Becker. I think, just to kind of reiterate one of the points around the fuels assessment. The opportunity there was to really think through as a whole state, including stakeholders, industry, but also CARB and other agencies, taking their input into what the different options could be to navigate.

And I have to thank CARB because much of the ideas and options around demand side reduction actually came from the scoping plan and CARB's insistence to be included in the overall assessment. The next step of the process for SBX 1 2 is developing the transition planning process.

So within the transition planning process, we are required to work, CARB and CEC are required to work together to think through operationalizing and further studying most of those options. So that's something we are undertaking right now, and we are hoping to put that analysis out soon. And I think that's a commitment to further some of those opportunities that you mentioned about.

Yeah. And certainly equity in that process is going to be critical. Would you comment as well?

I appreciate the comments, Senator, on the bigger picture. I think you're absolutely right. I think the bigger picture that should be focused on and that we would encourage the Legislature and the administration is to keep the remaining refineries you have. I think what the, and kudos to the CEC on the transportation fuel assessment.

I gave the compliments in the last hearing, but they did a really good job of looking at the market, supply and demand. I think we're on the razor's edge as things have been noted. And I think the bigger picture, losing another refinery, we could see cliffs with hard landings as opposed to the smooth transition, I think, that the state wants to see. And those conversations I don't think are going to be successful without industry at the table having those conversations. Labor at the table having those conversations about our future in this state.

And I think we would encourage, and we talk about this all the time, the policies that are making California unique from the rest of the United States. And it's that unique continued advancement of a bill to do x, y, or z that is making refiners, oil companies question whether the state really wants us here during that transition.

And I think I would just heed that caution as we think about the big picture because we do see ourselves having a role in the low carbon energy future. We do see ourselves as part of that transition. You've seen two of our refineries convert to renewable diesel. 60% of our diesel market is now produced by renewable diesel. That's an amazing accomplishment for the programs, and we want to be here to be part of that.

Yeah, just to wrap up. I think that, yeah, that is an amazing accomplishment. And we have to be concerned about, when we talk about the transition plan, obviously price spikes for individuals, but also we don't want to increase our importing of oil from other places we know have many issues in the exploitation. So anyway, I appreciate all that today. Thank you.

Before I go back to other Members. I'm going to afford the United Steelworkers opportunity to state their tweener position. Is that correct?

Yes, that is correct. Thank you very much for the opportunity to speak. So it all boils down to health and safety, which has been mentioned, and we're very pleased to hear that. We're very pleased on the movement that was made from the Assembly and the amendments that came out of that.

But to get back to the health and safety piece, there's three pieces to that. Safety of the community, safety of the workers, the health and safety of the refinery, which is what we're talking about with turnarounds. It's the health and safety of the equipment. That's the piece that, when it goes wrong, makes the headlines.

That shuts down the 405 freeway, that causes gas spikes, as it did when the Chevron Richmond incident happened in 2012. Same thing that happened when, pardon me, when ExxonMobil had their incident in 2015. All of the things that are being discussed are being discussed on assumptions that the refinery is up and running, and that's not always the case. So a very important piece to the health and safety of the worker is stop work authority.

We struggled a very, very long time to get that as, as a safety provision that we had in the regulations, that if something's wrong, we can stop it and we move forward. There's no second guessing. You know, we fix what needs to be fixed with that. If the employee's done the right thing and is spoken up, and if the company's done the right thing and stopped it, that shouldn't trigger the company being fined for not necessarily having the, the excess capacity stored.

We've done the right thing, the company's made the right moves, and at the end of that, there shouldn't be a fee, there shouldn't be a penalty because they did that. So that is something that's of concern. We're happy that it's being considered that there's going to be a labor person on the board. That's very important.

Those were the basics. Again, pleased with the moves that have been made, we're still waiting to see that very key piece as far as the stop work authority gets addressed. And one other item I would mention as far as safety regulations go is that they change. That they change. In 2017, we got updated refinery safety regulations.

This time last month, those regulations had been in place for seven years. Now, a month later, those regulations have changed because there was a lawsuit that undid a very important piece of those regulations.

So that's something else that needs to be kept in mind as we move forward that what we think and hope is the situation as far as safety regulations go is the same moving forward. Thank you for the chance to speak.

Thank you. Any additional... all right, Senator Ashby?

Yes, thank you, Chair Bradford. I'll keep my comments brief because I can align myself with a few people who've already spoken before me. But I want to start with the really clear positive in this space, which is everyone universally agrees we, we want to provide relief to Californians.

I think we're just talking around what's the best way to do that, and how do we keep people safe while we're doing that, and how do we manage the storage component and who's in charge, and how do we make sure people have a voice in this process. So for me, if I step back and I'm thinking of myself as a, you know, a Californian, I'm grateful. I'm grateful that the Senators are here.

I'm grateful that all of the experts are here, grateful to Assemblymember Hart and the majority leader from the Assembly for having the conversation, because we certainly all agree that something needs to be done around the pricing. I think that seems to be universally accepted. And so I appreciate that we're all working from that common space.

And then for me, this really breaks down into three issues. Then the storage component, the health and safety component, and then the relief for consumer component. For me, those are the three sort of top lines on the storage issue, I guess I have more of a question for you all, and that is, I think it's a fair question to ask about storage, although I would argue, you know, be careful the question you ask, because I think the language benefits you.

Now, it says they can't force you to build something new, and so therefore, you would logically believe that the requirement is going to be something that can be achieved within that framework, which I think would benefit you when I'm looking at it. But I do think it's a fair question. So I wanted to present it back to you.

What is the strategy moving forward to be reasonable in the expectation around storage, especially given what you've heard about refineries that have left, down to the number that we have and other states being somewhat reliant on us and us extending the comments that we have to them, to say, we're taking you in mind, too. Can you address that, please?

Yeah. Thank you. Senator Ashby, I think you've kind of laid out some of the context really well and just kind of looking at how CEC would go about this. I think the three threshold questions that the Assembly contended with and the Senate is contending with is one. And I think you laid it up really well, which is we all commonly agree that during the price spikes, the consumers pay, and we want to mitigate that if possible. I think that's the threshold question we all agree on.

The second threshold question is the point that you're making right now, which is, is there opportunity to do that through the specific proposal in front of you, which I will expand on just in a minute. And then the third threshold is, if you were to delegate authority to a state agency to work on that issue, what guardrails would you put to make sure that we do it right? So I think the third question and the first question has been a lot of debate, but I think they're coming together.

The second one just on storage. I just want to be very clear that based on the data that SBX1 2 requires to be submitted to CEC, which none of the refineries have, that because they all only have it for their own refinery, but not in totality or the trade Association, we have absolute faith that the numbers that we see provides insight that there is a threshold level efficiency we can gain here within that, existing, within the existing thing.

Again, to just kind of take this opportunity to crystal very clearly speak when we talk about the market as a whole, what's happening in the market, what we've observed over the last two years is when the liquidity in the market goes down, what happens is the refineries are trying to scramble to figure out, how do I honor my commitments?

When they try to honor their commitments, they're going to the spot market to buy it. So what we're saying is, by advanced planning, could we reduce that reactive behavior in the spot market? So then, kind of walking backwards, how do you reduce that reactive behavior is by planning a little bit more.

And then the question becomes, what metric could we use? Industry uses different metrics. For example, industry looks at the pad five inventory and a number of colleagues that we talked to, and I keep referencing them as colleagues because we have had excellent conversations with independent refineries over the last several, you know, several months.

I personally have visited all the refineries. We meet with them once, if not multiple times a week, either directly our office or other staff. But basically what we look at today is if you, they're looking at pad five as the inventory and say, hey, you know, 30 million gallons on pad five, we're good, so we can quickly get it from Washington if needed. But as the inventories go down, everybody scrambles.

So the metric that CEC has worked with industry consultants with on is called the days of supply. All we are trying to say is, when we look two weeks ahead, look at the inventories we have, look at the information that we have on planned and unplanned outages, and look at all the ships that are coming to California. If you look at the totality, are we looking pretty liquid or nothing? Right. So that's the question. And so that 15 days, just so.

That you would find out two weeks in advance that something was coming, not necessarily that you are planning for those full two weeks, but that you would know. We would know with some notice. Okay.

We would know if it's a planned outage, we would know 120 days ahead based on the statute.

Right.

So we have that. So all we've been saying is if we look at the entirety of data and the 15 days seems to like a reasonable number to aim towards, how do we plan to get as close as possible to that? And then the question comes, what amount of storage capacity do we have? As I mentioned in my testimony today, based on the information we have, the total amount of storage capacity just in California is 24 days worth of it.

And so the idea is, if the minimum that we have seen in 2022 is about 12 and a half days, we're talking about two and a half days worth of incremental room that we want to gain in the system. So that's what we will be looking at in the rulemaking process.

Okay. Fair enough. I appreciate the explanation because I think storage is key to how we move forward with this. The second issue for me is health and safety. And I don't think I need to go into this really deeply because our majority leader, Senator Gonzalez, laid out what's sort of in the Bill, the requirements.

I just want to say it out loud because Jeremy's existence here, the boilermaker's existence here, makes a few of us nervous. We want to make sure they're safe. That's a really big part of what we do here. And so in case you need to hear it from one more person on this side of the dais as you implement this, you got to make sure they're safe. You got to put those codes in place. You got to uphold all the pieces that have been written in here.

And I want to thank our chairperson, Senator Bradford, who doubled down on some of that and circle back around to make sure in the last week or so that I've sort of heard conversations, this has been a top tier issue for Senators at least wanting to know that we're doing all that we can on this front end to make sure that whatever decisions get made on the back end that we take care of our people. Okay? Sure. Yeah. You want to say something?

Sure. I just wanted to add perspective to what you just said and that Senator Gonzalez laid out earlier all the health and safety labor language in the Bill that's all going to be enforced by Cal OSHA. Cal OSHA was reinstated 40 years ago or so by the voters. They are currently operating well below optimal staffing levels.

And this is a budget Subcommitee conversation to have in the spring. But it's important to remember that all the stuff in the Bill that was added, it's an understaffed calosha. It's an understaffed process, safety management Department of Calosa that handles the refineries and these types of facilities. So I just want to make sure everybody has that perspective.

They do great work there. I know a lot of them there. But they're doing Yeoman's work more with less, and they need to be doing more with more.

Yeah, that's a really fair statement. And it kind of goes back to Senator Stern's comments about being able to do more than one priority at a time. So we need to make sure they have the resources and we'll have, we know you will keep us on us on it. We expect you to keep us on us on it, too, and make sure that that's happening. At least that's this Senator's perspective. And then last, for me, is just the relief to consumers.

You know, the Senate, you know, we wanted to make sure that this had legs before we came back to talk about it, and now very clearly does, and it's been very clearly laid out.

But at the end of the day, for all of us, I think this is about the consumers, and I appreciate being a part of a body, both the Senate and the Legislature as a whole, and State of California leadership that would reach in and do these have these tough conversations the same week that, you know, lots of other things are happening in our worlds, but it's that important to us.

So if there's a takeaway here for Californians who are out there just trying to get to school and work and get to pick up their kids on time and figure out how to pay the bills, it's this, we're here, we're grappling through these tough issues because we're trying very hard to get to solutions that make gas less expensive for people in the State of California, at least.

I know that's why we're all here. And I know we probably can't all agree today on exactly how to do that, but I just want you to know I appreciate very much being a part of the conversation to try to give it an effort, not give up and keep trying. And I appreciate all of you for your commitments, too.

And through the chair, may I respond? Appreciate your comments, Senator. I think your first comment was on existing capacity. And I think a question I think should be raised, and I think from our perspective should be clarified, is in the Bill, it says a process for maximizing the use of existing infrastructure.

So it doesn't explicitly prohibit the building of new, but I think that needs to be clarified. So is there room to build new storage going forward if you're not able to maximize the use of existing storage? It doesn't seem to be clear on. Just on that piece.

Yeah. Well, it is written into the beginning portion of the Bill where it says the Bill would prohibit the Energy Commission from applying a minimum inventory requirement to a refiner in a manner that would be met only by the construction of additional storage infrastructure as determined by the organization.

So it's pretty, and I think the point is only so you have existing, but do you need new?

Right. And so, and I think he's trying to lay out other mechanisms, too, like how you would be able to include inventory that's on its way over. So I'm confident you guys can work your way through that. But I agree that the storage issue is a piece that will need to be laid out a little bit further. Thank you. Thank you, Mister chair.

And then on your second point, Senator of relief for Californians, I think just for contextual sake, the transportation fuel assessment did a good job kind of wrestling with this issue of do we want low gas prices or high gas prices? And I think the conclusion was, no, we don't want low gas prices because that will result in more driving and more pollution. And, you know, the policies of the state are sending carbon pricing signals. We know that there are regulations that are going to affect in 2025 that are going to impact consumer costs.

And I think that just needs to be a reality for relief to consumers. As we transition from a fossil based gasoline to zero emission vehicles, other technologies, there is going to be this growing carbon market that is putting more costs on consumer goods. So just wanted to make that clear when we talk about relief for Californians.

Thank you, Senator Limon.

Thank you. Thank you, everyone for the information. The robust dialogue, one of the issues that's come up pretty consistently in this conversation, both in the Assembly and here, has to do with capacity for storage. Commissioner, you said that you have information through previous legislation.

You know, Senator Skinner's legislation last year, that gives you full confidence that there is existing capacity for storage within existing infrastructure and refineries. And I want to note that because I think that that's both really important. We have given the Energy Commission that authority to have that information. No other refinery has it.

Certainly no agency but yourselves have it. And that was done by design to protect the market. The challenge is you're the only one that has it. So we're trying to find that same level of trust in trying to determine whether or not the capacity exists. So my question is, how does that get resolved?

How does the dispute get resolved if there really are different perceptions? Right. Like, what I'm hearing right now are entities saying we do not have the capacity for 10 to 14 or 15 days of storage. And there are folks who you yourself have information that we just don't have, and we're not going to have. And that's on purpose, and I'm okay with that. But help me understand how a dispute is resolved.

Yeah. Thank you, Senator. I think I want to just observe a couple of pieces in your question, and I'm sure, like, different industry groups are kind of meeting with you to provide that information.

I think the question, again, I would ask is, or at least I would set up, is, do every refinery under their current operational structure have room? And I will say right now the answer is no. Some. A very small refinery or a particular refinery that's operationally maximizing their storage might not have room for it.

But overall, when we look at independent refinery information that we have, we see that. We see that information. So as a rulemaking process, what we will have is the ability to under, you know, we'll. We can break law. We can't lie to each other. And so we'll have DPMO as an oversight entity as well.

We will be requiring that information to be like, the burden of proof will be on the refinery to show us that they do not have operational room. So, I mean, I do not get too technical on this, but if you would permit what the refineries do in terms of operational kind of efficiency every day, is that, I mean, we've heard this at the Assembly hearing a lot, which is called the linear programming model that they do.

So what they do is basically looking at every tank capacity they have available, and then they optimize how to do their operations with the objective function being maximizing their revenue. Again, I would not say maximizing revenue is a bad thing, but they do that. And then in any optimization problem, you're maximizing and thinking to the constraints.

In this case, what we would ask our colleagues from the industry is, could you run a couple of scenarios for us? And we will partner with them, because it's best done by them to provide us a couple of scenarios on, if you were to maintain a little bit more here or account for a contingency, what would that look like? And that's the kind of information we would be working with them. And hopefully with the oversight and other, you will have oversight as well. We'll be able to resolve those issues.

And if I could add one point as the Vice Chair, talking about confidential information, that's refinery by refinery, but you can aggregate that data and report it out. And so the data points that I shared on June 2022, April 2023, February 2024, CEC has something called the weekly fuels watch.

They put all those numbers together about both finished gasoline and blending stocks, and that's published weekly. So what I was just referencing is something that each Senator and or Members of the public can look to see what those numbers were historically, and so don't have to go into the sensitive parts to have confidence that these numbers are accurate.

Great. Thank you. The other piece, and I really appreciated, you know, the steelworker saying that safety is three things. It's workers, community, and the facility. And you have heard, I think, resounding in both the Assembly and from colleagues here, how important that is. And as I think about those three things, I think about a situation, and I don't know who this is for. And I'm hoping someone can just walk me through what this would be.

If there is an emergency, and I am someone who lives within a refinery and that emergency needs to resolve, what confidence can we give the workers, the community, and the facility itself that they are going to be okay in that moment? Because there are emergencies that don't have that happen at midnight. Right. Offices aren't open, but what does something like that look like? Walk me through that.

So that as we're having these conversations, if I'm a Member, if I'm a worker who works there, if I'm a Member of the community who lives nearby, I have the confidence that if something happens, there isn't going to have to be an approval process that will delay immediate action. How does that work?

Two points. And I would welcome Director Milder to also mention. So the first thing is anything, any best practice that's in place, and we've heard from USW on hard fought rules and best practices that are implemented today. Those would be taken in as given and those would not be challenged.

So we would look to labor representatives both on the Advisory Committee. But, you know, we also think, we talked about in Assembly, we are going to have many working groups with labor representatives to get their input. DIR, Cal OSHA, their word is the start and the end. Energy Commission is only taking that as an input. And if their input to us is under these circumstances, there should be an exemption. That's what the Commission will work towards in the rulemaking process.

And I just want to give you that confidence that it was raised before, that the Executive Director will have delegated authority, but the Executive Director works and operates within the confines of the Commission's vote. And so the direction we will give them will be dependent on whatever the rule making process yields.

I also wanted to sort of strike a hopeful note here. It may be not readily apparent with the trade representatives and representatives from the Administration, but the working relationship between the Energy Commission and the individual refiners is very, very strong. And that back and forth, that collaboration is absolutely there.

And I want to credit industry not in terms of maybe the arguments they make in this setting, but privately and otherwise, they take this incredibly seriously. And I think their record has improved a lot with labor's participation in the ability for labor to stop work if something is dangerous. And that interplay that has developed.

I just want to say on behalf of DPMO said this before, it really is about continuing to have that decision in the hands of the people on the ground. And having a buffer of more supply doesn't change that. In fact, it makes it, it empowers labor, in my view, to be able to say, no, this is unsafe, let's stop operations. And so that continues to be a decision with DIR and with the skilled labor workforce that's there on the ground. And CEC here is focusing on protecting consumers with having a buffer, but that doesn't take the decisions out of those critical hands.

And I just wanted to respond to the good conversations that are happening between DPMO, CEC and the refiners. Those same people you're having conversations with are the same people that I represent, and I'm having conversations with them as well.

And they are saying, hey, for this, we think a rulemaking would be not this Bill, but in General, 1322, the data that's being reported, we said, hey, there should probably be a rulemaking to get clarification on these issues. We were denied that rulemaking on the fuels forecast we were just denied this past Thursday on that rulemaking.

So I appreciate the conversations that are happening, you know, behind the scenes between DPMO, the CEC. But we've asked for this collaboration. We've asked for rulemaking so we can understand what exactly the CEC wants and needs, and we've been denied. And so I just wanted to make that clarification.

If I may, again, just kind of providing the full context of what has been shared. The first two rulemakings were denied because the rulemaking petitions happened right when the SBX1 2 conversation was happening. And in our denial, we noted that specific thing that we would want to wait until what SBX1 2 provides.

That's last year before we go on to that rulemaking. The latest rulemaking process that talked about the denial is we have a workshop and a rulemaking in process that duplicates that work. And that was the reason for denial.

And I would love and ask my colleague from Vispa to provide that full context when shared and also want to just share legally. Legally, we cannot start an emergency rulemaking process without pre rulemaking process. So all three petitions asked us to do a rulemaking, an emergency rulemaking without any emergency rules provided to us.

And we said and noted in our decision that we cannot do that without a public process. So just wanted to say we were operating under the constraints of the existing law and the context and just want to clarify that.

And just for clarity, though, this doesn't change that piece of it, though, that will still be the law. And you will have to go through a process before you can go through the emergency process.

Yes.

Okay. And, you know, one of the issues that's unresolved as it relates to worker safety is the stop work authority. Can you tell us how that you think that that will be resolved? Is it through the rulemaking process? Is it something, you know, prior, after.

The amendments in the Bill specifically retain the stop work authority? That is an existing law. And in fact, the amendments that were added through the work of the Committee are specifically aimed at clarifying that the existing law that protects worker safety has not been changed in any way by this.

Legislation. So I think we, this has been a consistent concern both in the Assembly, here in the Senate. We've heard very clearly from labor representatives and communities near refineries that this is, worker safety is a paramount concern, and nothing in this legislation diminishes that at all.

Great. Thank you. Well, I appreciate it. I've had a chance to talk with folks over the last week and days and even weekend right about this, this Bill in particular. And I want to recognize that a lot of the work that has been done in this space is only one Bill at a time, one issue at a time. So what we are seeing today is really consistent with what's happened in this particular space.

And I think we share goals of wanting to ensure that the market works not just for an industry or for a state agency, but ultimately works for the consumer. And I think that I've seen in the last two years that we've taken on this issue in a more critical way, and it's been challenging.

But I do see that we've made a level of progress in terms of a discussion that we haven't for a very long time. And I think that's important. And recognizing it also makes it more difficult because we haven't engaged in this type of conversation. So I appreciate the opportunity to be able to have this conversation.

I do know that I think one of the things that will be really important is to continue to build trust, and that is we can't legislate that. Certainly legislation helps, but to build trust with our workforce, with all sides and all parties involved, with really stakeholders, that this is a process that works. I understand that at this moment, there's still feels like there's a lot of, you know, a lack of trust because it's new, and a lot of things that start off new feel that way.

But I do think that the Legislature is going to continue to follow this issue and wanting to make sure that the actions, any votes we take are consistent with doing the right thing for our community. But understanding that it is difficult.

I mean, many of you know, the work that I do in the Legislature, and I have to say that I spent, I mean, you should all see, my colleagues can see the number of notes and pieces of paper and conversations I've had because even for those of us who spend time thinking about this on a regular basis, we want to make sure we've grasped it in a way that is the right direction.

So I appreciate the efforts. I think you want to add in something. Welcome to add in something. And I appreciate just everyone's response and willingness to have a conversation.

Yeah. And thank you, Senator Limon. Always appreciate working with you many years in a row. I wanted to respond to your comment regarding the kind of layering of policies, multiple policies. This Bill isn't the only one.

I think one of our concerns is the CEC is still considering and imposing a margin cap and penalty that was a result of last year's special session Bill, which we warned we think could have production and supply issue implications. I think the Legislature had that same concern and could have implications on prices at the pump.

And so wanted to take that into note as you're giving this new authority potentially in ABX2 1, that there is this other mechanism that I think hasn't been evaluated together, that if these two pieces are coming together, then there may be bigger disruptions in our view.

Yeah. Just a quick response, I think. Senator, first of all, I just wanted to thank you for calling out trust building. I think as an Energy Commission and I think as a state agency, we are best situated when we can have the trust of stakeholders and the public, and that is whether we do that well or not any given day. That's our absolute commitment.

Just as you, we are in a tough situation between a lot of different stakeholders having a lot of different opinions. And no matter where we land on any specific decision as a Commission, we never make everybody happy. Having said that, we would never antagonize any stakeholder.

Our commitment is to work with them, figure out the best path forward as it pertains to the rulemaking process. Our hope would be to create the most flexible solution that allows for all the guardrails that you mentioned with the goal and singular goal as a state agency to protect the consumers at the pump.

So we'll work on that carefully. And as colleague from VIspa mentioned, depending on who we talk to, stakeholders, some stakeholders are very upset with us that we haven't done the penalty yet, but the same reason it's delayed is the deliberative process. We are not taking that loosely.

We are trying to do the analysis necessary to really establish that the benefits outweigh the costs and we can mitigate those risks, and that's what we would do with this as well.

Great. Thank you. And I do appreciate that. And I will say that one other piece that has been brought up that is going to be needed for trust is to really figure out how to work and strengthen Cal OSHA and their ability to enforce. That is not lost on me.

It has been part of a conversation in many spaces, and it's not part of this Bill, but I do believe that that is going to be very critical piece as we think about the future of strengthening the laws that move forward. Thank you.

All right, quick question by Senator Seyarto.

Thank you. On the point that he had pointed out on that last hearing that we had, we had established the benchmarks that you had to, you had to find the findings that you needed to get to before you could go on to trying to figure out what this fine was going to be.

I asked you directly the three questions, and I remember you said, you know, zero, those are good questions, but they were your questions. They were in your report, and you did not establish that you had met any of those. And yet here we go on to talk about the penalty. And that's my concern about what we're talking about here, is just because we say we may do it, or it has this protection mechanism, even if we don't make the benchmarks, it seems we go on to the penalty part.

And that's what I'm concerned about with this Bill, too, is we're saying we have protection against going forward or making decisions that might not be safe in the long run, but we really don't because we kind of ignore those and just keep going on and marching on instead of just calling it a day and saying, you know, what?

We couldn't prove there was gouging. And so, you know, we move on to now a penalty when we couldn't prove what we were supposed to prove before we even got to that penalty.

Thank you. Vice Chair Dahle.

Thank you, Mister chair. Good to be back here with you. I thought we were done, but apparently nothing quick. I got a quick. So there's, I think, nine refineries. I don't. Is that the number? Nine. Some are big, some are small. The smaller refineries, do they have the ability to store 15 days worth of product? Are they all the same or.

Kern would be the smallest. It would be under 50,000 barrels in a processing capacity. The rest are slightly larger. We have to work through the refining capacity for each one of them, but based on current kind of geographical location, it's unlikely that they have a lot of capacity. But we have to work through that. And establish that through the process and storage as well.

Yes. Okay. And then I had a follow up question on the blends during these price changes. The Governor did change the number for the blend so many times, I can't even keep track. I mean, when the price goes up, they go to winter blend or summer blend, whichever one's cheaper.

Is that taken into consideration for these changes in the prices that you've seen? Because California is unique, that we have special blends that other states don't have. Correct.

Right. So you're right. Vice Chair, the last two years, both in 22 and 23, right about this time in October, start of October, we moved towards a winter blend where you add up in a bunch of butaneous and increase the overall liquidity in the market. So that has been done twice in the last couple of years.

The price spikes that we have established through our analysis do not include those things, those types. What we look at is the overall price at the pump, and we remove the contribution of our particular tax and fees. We remove that, we remove the contribution of crude oil, and we establish just the refinery and the retail margins.

So that's kind of how we try to establish the price spike as we compare to the rest of the US.

So you're trying to exclude out all the things that they're required to do to figure out if they're actually manipulating the market in some way.

Yes, we account for all the variables that would be similar to us and the rest of the US. Right.

So you take California special blend, you take. They're converting over. You're taking that when they. I mean, I thought it was interesting when we did the last special session that, you know, talking about profits. Well, it wasn't all California profits.

It was profits for crude was going up and some big players and crude play in California as well. So you want to compare apples to apples to California. You're talking about California market exclusively, not the global market for these companies. You're absolutely right. We try to isolate all of that. Okay, thank you.

I wanted to get those things out. So you're going to figure out how to work with those smaller ones. So basically we're talking about what's the number? How many small ones do we have that don't have the capacity versus large enough ones that have the capacity.

So again, Mr Dahle, not to be circular about this, we haven't established through the Commission vote who has and not, but I would kind of commit to saying that the small one, especially current, which is very small, I would imagine it's highly unlikely that have the ability to store product. So that's the only one that's really small, that's under 50,000.

Everybody else is going to have storage and has the ability for a lot larger than 15 days.

So most of them will have storage. We have to go refinery by refinery to establish their past practices. Some of them do maximize their storage because it fits their business model. So we'll have to work with them refinery by refinery.

Okay, so the other thing I want to ask is about storage in other states. So I don't, and I don't know this. You have to educate me, but I know we pump fuel to Reno, Nevada from our refineries, and we pump it to Chico and places where I know our company gets fuel. So is that counted as a refinery fuel or is that counted as is somebody who has that pipeline?

So we are currently not considering, within the context of this conversation, things outside like Kinder Morgan and things which, for example, Kinder Morgan pipeline would be most of a buffer. Things come in and flow out. They won't really have capacity to store things as it may.

So we're talking about refinery gate, we're talking about commercial storage space that they could use. But we're specifically talking about the nine refiners and their ability to use existing storage within California to comply with something like this.

If I may respond through the chair, I think on as it relates to Kinder Morgan and other players in the market, there is other capacity in the system that is outside of the refinery gate, but they are not subject to this type of Bill.

And so you're not getting the full picture when you're ahead looking at a system wide data to justify refinery specific requirements. It's a bit comparing apples to oranges. And I think we just heard that, no, not every refinery has capacity. Kern doesn't. There are other smaller refineries that might not. And I think that's a big unknown for moving a policy forward with the authority in it, with not having those questions answered.

If I could just respond. And I think, again, I want to just respectfully offer to my colleague from Vispa, this is the whole point of the rule making process, right? I mean, we have confidential data today, as I mentioned, we have a threshold level information that's already submitted to CEC that shows available capacity.

So the next question that we have to ask in collaboration and partnership with the industry is, could you use that existing space that we see based on the information that you provided us, that you have operational flexibility to increase storage? That's the next question, and that's where we're going to be working through in this rulemaking process.

All right, thank you. That's all the questions I have. I just have some comments, though, Mister chair. I'd like to make something that I've been dogging the whole year. Is that rate payers for electricity are paying for the CEC, and this Bill is going to up that price and the rate payers for electricity are going to pay.

Senator Stern touched on it a little bit. Something that I've been frustrated about is that when we talk about funding here, somebody that doesn't own a car or use gasoline is paying for people who use gasoline, and that's where the rates go. So I just want to be on the record again to say that that's what's driving some of the cost is driving up our electricity rates. The other thing I wanted to say is that Senator Blakespear asked the question of the author about the advisory.

So you talked about, and also Senator Skinner talked about this area, about the Bill and about the rulemaking and the regulatory part of it. Also, you talked about proprietary information or stuff, you know, so you're asking the legislators to basically this Bill is saying, hey, we have information that we can't talk to you about. Right.

You just said, I can't say I can't share that information. And we're going to vote on it, though, and we're going to give you the power back. Now, if you go to 2535.4 of this Bill and you talk about that, you're going to develop the regulations and develop, impose requirements for refiners and operating in the State of California at a minimum level.

So what we're really doing here is we're giving all the power, just like we did for the California Air Resources Board to the CEC to come up with these regulations on businesses. And so for me, I think that's a problem at the same time allowing them to be able to fine $100,000 a day and up to $1.0 million a day. So I don't see how that's going to help drive down the cost of fuel in California.

And I was struck by the fact that, you know, we need, if you're going to ask us to vote for a Bill and you can't share all the information with us, I think that puts the legislators at a disadvantage. And I think that we deserve the right to, if we're going to pass a law, which this is, and give you the authority to be able to regulate, because that's what this is doing.

This is giving you the authority to say, you're not going to have to come back to this board or this Legislature and you're going to be able to regulate. I think that's very rocky, scary ground for Californians, unfortunately. Unfortunately, and we've seen that with the California Air Resources Board.

We've seen that with many agencies, DTSC, we try to rein those guys in and do all these things. And I think it's not good policy, quite frankly, to just carte Blanche, give this to unelected bureaucrats. So no offense to you, but I'm just going to say it because I think it's not right.

And I don't want to talk about price gouging a little bit because I think the biggest price gouger in this state is the state. What do I mean by that? According to the CEC, you say there's $1.42 in taxes that's collected on every gallon of gasoline that's paid. You're the biggest product of winning in California.

You make more money than any of these companies, than anybody that passes fuel along the California taxpayer you're receiving. And I can go down this federal excise tax 18 cents. The taxes are the biggest one that's causing the rate to go up. It's a $1.42 a gallon according to the CEC.

So I think it's really interesting when we talk about 15 cents a gallon we're going to save here and there or somebody's price gouging and all these things that the biggest person, the biggest people that price gouge in California is the tax system. Think about that. 15 cents, I think you said, added up to $2 billion.

Think about what $1.42 does every single day in perpetuity. It's billions of dollars that Californians are paying and getting, you know, I know, yeah. We got a train system that's getting built and we got all these things that are happening supposedly saving the climate. But in my mind, I don't think we're doing a very good job.

We're burning our forest down. We don't talk about those things. But anyway, at the end of the day, I just want to say I don't think we should be giving the power to unelected bureaucrats to be able to find companies, to be able to put the regulations together later. I mean, here we are in a special session for that. So for those reasons, I'll be voting not no, but just hell no.

All right. All right. Well, I think we've had a thorough discussion and I too have some comments to make. And as mentioned, I have four refineries in my district. And I think we've all agreed that refineries are complex facilities that require regular maintenance to ensure safety not only to the employees but to surrounding communities as well.

And this maintenance is often referred to as turnaround or performed roughly every two years. And when time between these turnarounds is extended or the scope of the work performed is limited, workers and the surrounding communities are put at risk. And we don't have to look far back to 2015 in torrents in my district.

Those constituents still remember that explosion that happened, and that's still on their minds. SB X1 2, which was last year's special session Bill, granted to the Energy Commission the authority to consider ways to manage necessary refinery turnarounds and maintenance that would minimize the impact of maintenance related production losses on fuel prices.

While this measure required consultation with the labor and Workforce Development Agency and labor and industry stakeholders, it did not require the consultation with the Department of Industrial Relations. That's why last year I authored SB 842 to address serious concerns as it relates to refinery safety that could be left up to bureaucrats with no real world experience on how to operate a refinery, and many have never even visited a refinery. And that's real talk.

SB 842 would have required the Energy Commission to add the Department of Industrial Relations to the list of commissions that would be consulted if they developed regulations related to scheduling or rescheduling a maintenance of refineries. This would have ensured that there was coordination across government entities that have a role in regulating refineries and ensures safety is at the forefront of the Commission's efforts.

842 was vetoed, as we all know, last year, and would have required the Commission to consult with the labor industrial stakeholders in order to avoid adverse impacts to the safety of employees and the surrounding communities. I continue to raise those same concerns that the decisions regarding scheduling a refinery and maintenance should not be left up to bureaucrats, but should be in the hands of the men and women who do this work on a daily basis of operating these complex facilities.

They're the ones who not only work there, but they live in the community and, I'm sorry, live in the communities and maintenance should not be neglected or compromised. They live in the communities and understand the risk not only to their families, but to their neighbors as well.

I'm encouraged by ABX1 2, which includes a provision that requires an independent consumer fuels Advisory Committee to meet annually and ensure labor organizations have a seat at the table, and that's critical.

However, since the passage of, again, SBX1 2 last year, the Advisory Committee, whose job is to advise the Energy Commission and the Division of Petroleum market oversight on the myriad of gasoline policies, including safety, has yet to meet because the Administration has yet to appoint to six individuals to serve on that Committee.

So how can we say safety is a priority here when we have yet to convene this Committee? ABX2 1 proposes language that requires refineries to prepare resupply plans or other arrangements to ensure the loss of production during turnaround or maintenance does not have a negative impact on the fuel market.

But refineries are already obligated to meet these gasoline supply agreements during turnarounds. As noted by labor groups, nothing should delay or prevent necessary turnaround. Work Members, we have seen over and over again the consequences of legislative overreach, and I think my Vice Chair kind of spoke to that.

The amendments here today move this Bill in a better direction, but I still have strong reservations regarding this legislation. Proponents argue that refineries control an extreme portion of the market and create conditions for price spikes. But Californians have adopted a policy to phase out oil production or to move away from petroleum, which sends a market signal that has a direct impact on costs and reduces production as well. And as he stated, we also have LCFF, we have gas tax, we have cap and trade.

All those have to be factored in that impact prices that don't exist in any other states. So I fear many times that we're putting inventory quotas before safety and before real pricing. So those are some of the concerns. And I just had a question as it relates to the intercontinental is now three months behind in releasing the report on the gross gasoline refining margin data. What's causing that delay? And how can we justify more requirements on refinery?

Or how can we justify more requirements on refineries when our own agencies have failed to respond in a timely manner?

Thank you, Senator. Thank you for your comments as well. As always. We have, as of April, stopped putting the information out specifically because while we're gathering the information, none of the information is independently vet by CEC. We report faithfully the information that's been provided to the CEC.

And as Director Milder mentioned earlier, some of the information that has been provided to us did not comport with what other data points are showing. So we have requested the industry to come back to us again. I will note first and disclaim that the industry has been really good partners on providing the information.

But in this one case, specifically around this data, it has taken us multiple months of request to correct that data. We're just getting that information now, the corrected information. And so once we have it and we process it, we'll post it again. It's not for lack of data collection, it's just we just don't want to inadvertently put out publicly inaccurate data.

Okay. And some of my colleagues have already asked the question of how do we stockpile this fuel? If you're already at capacity at certain parts of the year already, how will these refineries address that or be able to meet that requirement?

Yeah, and fair question, chair. I think we're not talking specifically about the whole year. We're looking at specific months around July, August, September, October. That's the time when we really deploy in California. So we're going to look back on those average inventories.

We're going to look at the space that's available, based, again, on the partnership with the industry, taking into account all the guardrails you're putting in, and look for any efficiencies that could be gained. Threshold level information which we can provide to you today that's aggregated.

We're not allowed by law to provide you individual refinery data, but aggregate, we can show you that there's plenty of capacity that we firmly believe could increase the efficiency of storage. Again, it depends refinery by refinery, and we're going to work with them closely.

And as we stated, our dependency on these petroleum products are not going to go away anytime soon. But understanding the reduction in production and extraction here in California, do you think it leads us to be more dependent on foreign resources that takes as much as 30 days to import?

So, again, that's kind of, I cannot comment on the broader state policy, but I would note that, you know, as Vice Chair Dahle mentioned, many of the legislative actions of the past have been taken to protect the consumers in other ways.

And I think foundationally, you know, different to the legislative body, but also, you know, the Administration on how best to structure the holistic plan. But within the confines of what you've asked us to do within the transition plan, we are going to put that out carefully. Looking at all the options on the table.

Yeah, I wanted to just respond to the system wide, kind of broader energy policy in California as it relates to petroleum production in California. We did provide information to the CEC and shared with your offices that there is an impact to imported crude, and we provided third party data to show that. I think the CEC data is also showing that if you're importing crude, there's an additional cost associated with that from the Middle East. It's five to $6 from the Silicon Valley or the San Joaquin Valley pipeline. It's about a dollar a barrel.

So there's an impact to importing versus having it produce here in state as it relates to imports. I think what the CEC data is showing is that port traffic is probably going to pick up. We are probably going to rely more on finished gasoline product coming into the state which is going to crowd up to the ports.

What we have going into effect January 1, 2025 and we've raised this concern with the CEC is the at birth rule, and that is a new requirement to either plug in or have capture technology to capture the emissions coming off of the ship. We don't see a pathway for compliance for that rule. And we have serious concerns about the supply implications that will have come January 1.

Being redundant because many of my colleagues have already asked questions as it relates to just storage, storage that we've already addressed. And I'm just hoping this doesn't have a negative effect of driving up prices. I mean, this is all about the urgency of now, but nothing here will have an immediate impact on fuel prices starting tomorrow or next 30 days or the next six months.

So I just want to be mindful that we are doing it in a safe and methodical way that really takes in all those factors, not only safety, but the consumer as well because I support the measure and I understand what we're trying to do here and it's important, but I think we just need to be careful about what we're doing here. All right, Senator Hart, would you like to close?

Assembly Member Hart is ready. Thank you to the chair and to the Members of this Committee for the robust conversation and for the hard work of Committee staff. I'd also like to thank Assembly Speaker Rivas and Senator Pro Tan Mcguire for convening a second extraordinary session to address surging gas prices in our state. We do not have to trade off worker safety for consumer protections. This Bill can be implemented while safeguarding existing state and federal labor regulations.

The data shows that crude oil supply is not a cause of refined fuel supply constraints and has not led to gasoline price spikes. Current storage infrastructure at the refineries and terminals are sufficient to maintain potential minimum inventory requirements.

This Bill will hold oil companies accountable for resupply plans when refinery shutdowns and supply chain disruptions occur, ultimately saving Californians monies on gasoline sales. ABX2 1 is supported by SEIU, UFCW, local government leaders across the state, environmental justice organizations, including the Union of Concerned Scientists, and SEHA and consumer rights organizations.

Colleagues, I urge you to vote aye on ABX2 1. Let's take action now to provide relief for Californians from gasoline price spiking. The status quo is not acceptable because it is costing consumers billions at the gas pump.

Thank you do? We have a motion on ABX2 1. It's been moved by Senator Stern. Secretary, please call the roll on ABX2 1. And it's a motion to adopt and send to Senate Committee on Appropriations.

[Roll Call]

That measure has nine yeses, two no votes. It's out. That will conclude our hearing. I want to thank everybody for their testimony. I want to thank Assemblyman Hart for his work here today and all of our witnesses, our Vice Chair, for being here today. And this will conclude our Committee on fuel supply and price spikes. We're now stand adjourned. Thank you.