Senate Standing Committee on Appropriations - 2nd Extraordinary Session

We'll start as a subcommittee. We know that we our quorums on the way, so we'll start as a subcommittee, which means I can bring it to order. We're holding our hearing today in room 2200 in the O Street building. And those members who are on this committee who are listening to me, please come down to 2200.

We are considering ABX21, the special session bill. This measure was amended in the Senate Fuel Supply and Price Spikes Committee yesterday and will be eligible for a do-pass motion today. But let's establish a quorum.

[Roll Call]

Alright, so we will have testimony today on the bill. We'll start, of course, on the presenters. Would we start with DOF on the presenters or just the bill of the authors? Okay, so we'll start with the authors and support first and then opposition. And then we'll hear from DOF.

And in terms of timing, we'll give support five minutes. You can divide it up between yourselves and we'll give opposition five minutes. And remember that this is the Approps Committee. So what we are. The testimony today is on the fiscal impacts. Yesterday was the policy Committee. So yesterday was on the policy impacts of the bill.

Today is the fiscal. So, as I indicated, I'll leave allow for five minutes total time for each. And then afterwards we'll take anyone in the room who can just give their me two s, which will be their name, affiliation and position on the measure. So we have our quorum so we can begin.

And we have our authors, Assemblymember Hart and Assembly Majority Leader Aguiar Curry. You may begin.

Thank you, Madam Chair. I'd like to thank the members of this committee for giving me the opportunity to present ABX21 today. ABX21 requires petroleum refineries to resubmit supply plans to the California Energy Commission ahead of maintenance or turnaround events, and grants the CEC the authority to open a formal, transparent rulemaking process to determine whether requiring minimum inventory levels of fuels will flatten price spikes at the pump and save California consumers money.

Last year's gas tax alone in September 2023 cost Californians an extra $2.2 billion at the pump. The analysis for this Committee states that there will be unknown, potentially significant one-time costs from the Energy Resources Program's account to analyze whether consumers will benefit from minimum levels of supply inventories and unknown, potentially significant ongoing costs for the CEC to administer, oversee and enforce these requirements.

The civil penalties created by ABX21 could provide ongoing revenue increases. The CEC estimates that the cost of ABX21 would be absorbable within existing resources but may require additional funding in the future, once the cost-benefit analysis is complete.

The bill requires the CEC to consult with the labor and Workforce Development Agency when requiring resupply plans from refineries. The California Air Resources Board, labor and Workforce Development Agency and Department of Industrial Relations estimate that any cost would be minor and absorbable.

This measure has the potential to save Californians billions of dollars annually when they refuel their vehicles. This bill will hold oil companies accountable for resupply plans when refinery shutdowns and supply chain disruptions occur, ultimately saving Californians money at gasoline sales.

ABX2 1 is supported by SEIU, UFCW, UDW, local government and leaders, environmental justice organizations, including the Union of Concerned Scientists and CEHA and consumer rights organizations. I respectfully urge an aye vote and with me is Assembly Majority leader Cecilia Aguiar Curry.

Good morning. Oops. Good morning everyone. Members, the cost per the administration is absorbable within our existing resources. As Assemblymember Hart just stated, moving forward, we will need more inspectors at the Department of Industrial Relations to make sure the promises we are making to our refinery workers are kept.

But for today, the bill is straightforward in this Committee and will save Californians billions of dollars at the pump. I respectfully ask for your aye vote.

Great. We can have any additional support witnesses? Just do the add on. All right. So, right. So any other additional witnesses in support, you can come to the mic and do your add-on. Okay. Seeing none, we will ask the opposition to come and give their presentation. So we have opposition here.

Do we want to have two at the table? Okay. We have two spots..

Great morning, Madam Chair. Zach Leary, chief lobbyist for the Western States Petroleum Association. Good to see you all again. Want to just go over kind of the things we've heard over the past couple of days and then get into the fiscal, I think a lot of unknown about this policy.

A lot of unknown about storage capacity, existing fuel supply. Also in the analysis, a lot of unknown potential significant cost impacts as a result of this policy being implemented by the CEC. I also want to highlight the things we do know. We do know that this policy could likely result in supply shortages and increased costs.

What we also know is that the existing programs that the government and taxes fees account for every year is about $18.4 billion, and that's things that are in the control of the Legislature. What we also did here throughout the course of this proceeding is that regardless of this bill, the CEC can and would do an analysis on a resupply storage mandate. So regardless of giving your authority to the CEC, they would do that analysis and come back to you anyway.

I just want to make it clear we are fundamentally opposed to the policy. We think policies of the state continue to drive business decisions on whether to stay or whether to leave. Then we would encourage the legislature and the Administration to focus on how to keep the existing refineries you have, because it's policies like ABX21, that make companies question whether you really want us here, even though the need and demand remains. For these reasons, we must respectfully oppose the proposal that will, in our view, likely increase costs on your constituents.

Go ahead.

Thank you. Madam Chair Jeremy Smith here on behalf of the State Building and Construction Trades Council of California in opposition to ABX21, many of you were here with, I was here with many of you yesterday talking about our policy concerns with this piece of legislation.

I will touch on some of the cost pressures that we see. First of all, in the analysis, it should be noted that it is stated four times that there are unknown but significant one time and ongoing costs, cost pressures. I think that's appropriate to highlight. I'm sure all of you have read the analysis.

It's a very good analysis. One of the longest Appropriations Committee analysis policies I've ever seen. It's very, very good. Thank you for that. But there are cost pressures. If nothing else good comes from this bill for our members, it has hopefully ignited a conversation about Cal OSHA.

There is one inspector for every 121,000 workers in this state at Cal OSHA. In the Assembly, we heard some considerations about, we can have Cal OSHA help with health and safety. We can put an inspector just at every refinery in California. They can't do that. I know the director, the chief of Cal OSHA.

I know a lot of the upper-level management at Cal OSHA. They are all great people. They are industrial hygienists. They are professionally trained to do safety inspections, and they are doing their best. So I look forward in the spring, hopefully to continue the conversation about how do we fix Cal OSHA.

Oregon has one inspector for every 26,000 workers, and the State of Washington has one inspector for every 24,000 workers. And in 1980, FedOSHA had 14.8 inspectors for every million workers. Cal OSHA this year has 8.2 inspectors for every million workers. There's a problem at Cal OSHA.

We cannot depend on them to help our members in a safety situation, unfortunately. And if Cal OSHA is on the job site, it's already too late, unfortunately. Secondly, I want to talk about the gas tax. As the representative from - noted, business decisions are being made by that industry about whether to continue doing business in the state.

The last time I checked, we had over 25 million plus or minus registered vehicles in the state. Most of those are internal combustion engines owned by families like my members who expect those cars to last a long time

And to the cost of the bill, the fiscal committee.

The gas tax is going to start feeling some pressures if we make it harder for people to fill up their tanks and to provide the needed revenue to the state to maintain the infrastructure, and then finally our members' careers. Economic positives that come from the jobs in these refineries cannot be overstated.

Between 2019 and this year, we had 33 million work hours, at least, inside the fence line of a refinery. The economic benefit to local communities, the state government is almost unparalleled in our economy. These provide jobs to help the economy. They helped families buy new cars, fill up their tanks, send their kids to summer camp.

All the things. These jobs could go away. These jobs could go away if the Legislature keeps pushing this industry to stop being in California. And we have thousands of workers in these refineries who are going to have to find a place to go work.

And that has not been contemplated by this bill or any of the bills that we have heard over the last five or six years on this industry. So I will complete. Thank you. Thank you for the reminder.

I will just say we oppose this bill and we are grateful to the committee and the policy committees for the work that has been done to try and make it better. But there is still more work to be done. We oppose the bill. Thank you.

Thank you. Our opposition did go over time. No problem. But if the support side wants to make any additions, considering that you kept to your time, you feel free. And then otherwise, we'll hear from DOF.

No, we're here to hear from Department of Finance. Thank you.

All right. DOF.

Good morning, Madam Chair.

I need to ask if there's anybody in the room who is in opposition to add their me-too.

Thank you. Good morning, Madam Chair. Members Dylan Elliott, on behalf of the counties of Kern, Fresno and the Western Propane Gas Association, all in opposition. Thank you.

Good morning, Madam Chair. Jack Yanos, on behalf of the California Fuels Convenience Alliance, respectfully opposed.

Mandy Isaacs Lee, on behalf of the California Chamber of Commerce in opposition.

Good morning, Chairman-Chairlady Timothy Jeffries, International Brotherhood of Boilermakers, on leadership of international Vice President Tom Baca, standing in opposition.

Good morning, Madam Chair. David Robsberg, iron worker for local 378. We are opposed.

Tom Hanson, business manager, IBEW Local 302. We are opposed.

How are you guys doing? Good morning. I'm Francisco Yanez with local 378 Iron workers organizer, and I oppose.

Good morning. Rachel Shumake with IBEW 302, electrical workers in Contra Costa County. We oppose.

Good morning. Martin Rodriguez, ironworkers 433, Los Angeles. Tri-county building trades President. We oppose.

Renee Palacios, business agent, Ironworkers Local 433. We oppose.

Good morning. Jay Rojo with the Boilermakers Local 92. We cover Southern California, southern Nevada, and. We oppose this Bill.

Good morning. Robert Gonzalez, out of the boilermakers, Local 92, Los Angeles, California. We oppose.

Good morning. Randy Thomas, boilermakers Local 549, Northern California and Northern Nevada. And we oppose.

Great. Any others? All right. Seeing none. Department of Finance.

Thank you, Madam Chair. Good morning, Madam Chair and members. Christian Beltran with the Department of Finance. I'll keep my remarks brief as I'm here to provide a preliminary fiscal overview of the current version of ABX21, as amended today.

So although finance does not have an official position on the bill, finance estimates the cost for the Energy Commission to be absorbable in the near term to implement the enhanced existing statutes and new authority provided to the relevant agencies in the current version of the bill.

Specifically, we believe the Energy Commission could initially redirect current resources and staff to meet some of the new requirements. However, it is possible that additional resources may be needed once the full scope of the regulatory analyses and activities are known and bentor quantified.

Finance also notes that the cost of implementation for the State Air Resources Board, Labor and Workforce Development Agency, and the Department of Industrial Relations are expected to be minor and absorbable. Thank you, and I'm happy to answer any fiscal questions you might have.

And to the extent I don't know the answer, we also have some other representatives from the Administration who are here today to tackle them. Thank you.

Thank you. I actually have a couple questions, and I'll see if anybody on the dais does so, Department of Finance. There's been reference to the small number of OSHA workers per job in California. My understanding is those figures that were cited is the are. Who is currently employed? OSHA currently has a large vacancy rate, is that correct?

We do have data behind those vacancy rates. I'm happy to provide those to you, but my understanding is, yes, there are some vacancies in OSHA.

And OSHA is funded, the budget we approved does have the funding for them to fill those positions. Is that correct?

We do have current funding to fill vacant positions, but just as a reminder, we also did implement a control section that aims to reduce, on a statewide level, 10,000 positions across the state. To the extent how much that impacts OSHA is still unknown at this point.

So the Legislature, in terms of that particular answer, if it, in this coming year, wants to give some attention to OSHA, it could either increase the number of positions allocated, which would be a budget action, or exempt them from that particular action to ensure that the vacancies get filled. Correct?

Of course, the Legislature has the ability to change that in the upcoming budget cycle.

Okay. And then in terms of particular, the refinery inspection type of position, there were some additional positions in that space added. It was a good number of years ago. I think it was in. Those were added budgetarily in 2014. And in my tracking of the budget, those were never removed. Is that an accurate statement?

I would have to verify that statement with my folks. I don't believe we have representation for that answer here today, but I can certainly take that back answer for you.

Well, that would be great, because these were specific people who were specifically trained in being able to do refinery inspections around the whole turnovers and process management. But as far as I indicated, and I did serve on the Budget Committee for most of the year since then, they were never eliminated.

Okay, let me see if there's any other questions on the dais. Yes. Thank you.

Thank you, Madam Chair. I appreciate Department of Finance being here, but is there a representative from the Energy Commission here also?

Yes. Vice Chair Siva Gunda is in the audience to answer any questions.

Would it be possible to come forward? Certainly. A couple of questions. Go ahead. Oh, thank you. Yesterday.

What can do i from there.

There was a lot of conversation with the industry, and I know that you're learning about the complex issue and the nature of this industry. Can you tell us what has been learned from them and maybe some things that you didn't know before as a result of this proposal coming forward?

Yeah. Thank you, Senator. I think the biggest learning from us is really understanding how the overall liquidity flows in the market and really understanding the autonomy. Sorry. The anatomy of the price spikes. So one of the questions we had from the Legislature right after the price spikes of 2022 was, what was the reason? And we didn't have the data to clearly answer that question.

And I think the biggest findings for us is really, you know, thanks to the Legislature, the SBX12 gave us a lot of data transparency and basically we now understand and pretty invaluable information on what happens when the liquidity in the market goes down and how it results in a price spike.

So do you think that your commission has a full understanding of that data and is able to make appropriate decisions based on that, on that new knowledge?

I think I would say we would never be done learning. So we have good information today. As the industry colleagues at the assembly testified. It's pretty complex and I would never undermine the complexity of the industry or the operations.

But we think about that in thresholds of knowledge that we gain and the threshold of knowledge we have really articulates the importance of the next step.

Okay. One of the concerns I had yesterday is Western States Petroleum Association said in the hearing that the CEC has not responded to their comment letters on SBX12. Is there a reason why you haven't, the commission hasn't gotten back to them on their comment letters?

No, I think we've responded. Yesterday there were specific questions on three rulemaking processes that were denied, and most of the comments that WSPA has provided usually make it into our reports. So as far as the rulemakings, three were denied.

And as we mentioned yesterday, the denial of the three were on procedural grounds, but also it was directly intersecting with the previous special session.

Okay. I appreciate that the maybe some specific questions to the cost of this bill. The Assembly, Petrie Norris assemblywoman Petrie Norris said in a hearing on the floor that the CEC convinced her that this would only cost $50 million and that avoiding one price, one price spike would save 2 billion annually.

We don't know what it will cost, primarily because this regulation has not been written yet. What do we know is CEC has no idea on how much it really costs. So let me go through some points here. Here are some variables that CEC may not be considering in their calculations for consumer costs. Days of required inventory.

It is one day or 15 days. The bill is not specific. And this will tie up working capital costs. Introduction of a new trading mechanism. This is similar to a cap and trade and the lcFs, which we know costs will be associated supply shortage. To build the inventory, a refiner would have to withhold supply from the market.

This will create artificial shortages. What is the cost impact there? And gasoline production slowdown. Feeling the heel of the tank will make it more difficult to produce more product and blending components. This requirement will now create a pinch point in the refining process. That may actually slow down getting gasoline to the market.

What impact will these issues have on the price of gasoline at the pump, as DOF and WSPA has mentioned, is going to drive the cost of gasoline at the pump to our constituents?

Yeah, absolutely, Senator, again, thank you for that line of questioning just there. I want to kind of split this into a few different ways of thinking. So I think the DOF has been talking about the administrative cost of the CEC.

So I'll put that aside for a second and first kind of estimate, the totality of the consumer burden. So the consumer burden, both the Energy Commission and DPMO have done our own analysis. And just for the record here, and we set it in the Assembly, DPMO is an independent entity.

And so while they are a collaborative state agency, we will take their input into our docket as anybody else, and we'd verify their analysis. But between the CEC and DPMO, we have cost estimates between one to $2 billion of what has been incrementally paid by the consumers at the pump.

And just want to further also state that those costs do not include the cost from crude oil or the tax and fees. So we eliminated them as a part of that. So we're looking at one to 2 million, 2 billion potentially cost reductions at the pump. Then the question of what would cost that.

So you've asked a series of questions there, and if you're okay, I will take the time to answer them.

Yeah. And if I need to restart, if. I could just interrupt for 1 second. And Senator Jones, please, you can continue your questions. I just wanted to be clear that the charge of the Approps Committee is the assessment of the cost to the state for implementation.

And whether we think this is good or not, the Legislature has not given any particular committee or entity the responsibility to do those consumer, the impact on a consumer. So you can continue the questions, but I wanted to make sure that, just to clarify that that is really not our jurisdiction.

Thank you, and I appreciate that. And in addition to the consumers, obviously I'm concerned about the state costs on this bill as well, because the state buys a lot of gasoline, you know, to fuel all of its vehicles. So there is a state cost that's going to be as a result of this bill also. So thank you.

Yeah. If you want to take those in, however order you would like to, that would be great.

Yeah. So just kind of then, as I just mentioned, the cost at the pump has been preliminarily established between one to 2 billion, based on the analysis between CEC and DPMO, and those analyses will continue to be defined for each year. And this is just for 2023.

2022 was higher. And the downstream impacts of higher costs on the economy is still to be investigated and estimated. As Senator, you would imagine the higher price at the pump will translate to consumer products downstream. So that's something. So we would, you know, couch it between one to 2 billion at this point preliminarily.

And in terms of providing a solution to mitigate that, this is where the 15 days that you mentioned, again for the record, as we stated yesterday and in the Assembly hearing, and if we look at 15 days, is not a magic number.

It just seems to appear that when 15 days worth of supply is in the market, the price spikes don't happen. Once you dip below that, the price spikes begin to happen. So the task, as we perceive from the Legislature, if this were to pass, is to look at everything we can do to be closer to that number.

And the worst that it has dipped down in 2022 was only 12.5. It never got down to zero. So we're talking about a cushion at the maximum of two and a half days' worth of supply. That's what we're talking about. So when we talk about two and a half days' worth of supply, that's about 100 million gallons.

When we talk about 100 million gallons, I buy and I sell and I lose about $0.20 on the market. Assuming the existing infrastructure is what we are going to use, you're talking about $20 to $25 million. So for $20 to $25 million worth of supply, you could potentially eliminate the billion to 2 billion.

Now there are a lot of other questions that have been raised in terms of administrative costs and other pieces, and that's the whole point of the rulemaking, would be to investigate them thoroughly and within the constraints and the guardrails that the Legislature imposes on the CAC.

If we deem that ultimately this is not implementable without significant costs, we would not go forward with the rulemaking.

I think that's an interesting point of the bill also, but thanks for bringing that up. Mister Leary was asking for attention. Can I have ask him to respond? He had a comment to respond, and then I'm done with.

Yes, Mister Leary.

You may ask him.

Thank you, Madam Chair. Appreciate the ability to respond. I think, you know, part of the question and the unknown of this bill is where is that supply? Where is that capacity? What is the cost going to be to implement a policy like that, to hold two or 15 days of supply. You're holding that back from the market, there's going to be a downstream impact to consumers

Those variables are very important throughout the rulemaking process to be analyzed thoroughly because the bill is very specific in looking at the annual cost savings to consumers, not the everyday cost savings to consumers.

So if your baseline is going to be 2023 and no price spike happens, but you've now increased costs on consumers, the math is just not working out. So appreciate you highlighting those, Senator, and those are some of the unknowns.

Thank you, Mister Leary. Thank you Mister Gunda. I appreciate it. Thank you.

Great. Let me see if there's anyone, ah, Senator Seyarto.

Yes. Thank you very much. So if the costs are absorbable and minimal and absorbable, then why are we here? Obviously they're not.

So what I heard from our Department of Finance was that the people that are going to be charged with figuring this out are just going to get moved over from something else that they're supposed to be figuring out and used here. So from an administrative cost, I would like to know what the man hours are for that.

Who's going to be switched? Not specifically who, but how many people are going to be switched over so that they can work on this, what department they work on, are they all in CEC?

So there's a cost for that labor and if it gets shifted over here, we can't say, well, we kind of borrowed it from somebody and we're not going to count it. So there is a cost for the administration of just setting this up and then we can talk about the other part.

Senator Seyarto, thank you for, sorry, Seyarto. Appreciate the question. Specifically to your point about redirecting a resource, it is a very common tactic that many departments and state entities do in order to temporarily be able to implement laws that are passed by the Legislature.

To the extent that that does drive costs is another question and is usually typically approved by the Legislature through the budget process. The administration always does our very best to implement these laws to the extent that is fiscally prudent and we're able to maintain and not ask for additional resources.

So to the point that I made earlier in my opening remarks about redirecting resources, that would be our goal, working with the CEC to redirect some of their existing resources. I don't have the specific units or divisions that they would redirect from at this point in time.

But what I can tell you is that the purpose of redirecting is to maintain our current budget position, which of course is not as necessarily nice right now as we would like it to be. But that is, of course, trying to exercise good fiscal prudency.

Right. I understand that. I do. But there's a cost to that. That means this program is absorbing a cost that was being given to another project. So if you're not spending it on that project anymore, what are we spending on this project? That cost, do we know? [Not at this point.] We have absolutely no idea.

So ongoing costs, a yearly cost, there has to be some cost involved in administering and monitoring and fining and enforcement. All of those things. And some of the costs we talked about, we don't know yet because they don't know if they're going to have to hire a bunch of OSHA people. People.

Do they have any estimate of those? Because I heard one estimate from one of the Assembly Members was $50 million. Is that something that, we have no idea about that either.

The Administration is projecting it to be, again, minor and absorbable at this point. So that is the best information.

The ongoing costs are going to be minor and absorbable?

For DIR and as well as the state Air Resources Board and the labor and Workforce Development Agency, we're expecting those to be absorbable and minor.

And then for the CEC, we do believe that there could be potential cost pressures in the out years once we understand the full regulatory scheme and process that they will have to go through as put forth in the bill.

All right. So because there's other costs too, and some of it is related to what you were talking about, the $2 billion thing, that figure, you guys keep throwing that figure out and it's kind of like using algebra when you need calculus. And there are so many other factors that drive those type of price spikes.

The global market. If something happens in the Middle East, I can tell you if something happens in the Middle East, oil gets shut down, the first thing that's going to happen is a price spike here. Probably within the week, we get a price spike and no amount.

And the premise of this is somehow that we're going to store some oil or store some gasoline in California, it's going to offset this thing. And that equals $2 billion. That's not an actual cost. The additional part of this cost analysis needs to be, well, what happens if this type of a program drives them out?

And now we have less product, less tax money? Because remember, $18 billion, that's what we collect every year in tax and fees for every gallon of gas we all go buy. What happens is there's a cost factor there, too. So we haven't analyzed any of those costs. We don't know what the administrative cost is.

We don't know what the ongoing cost is, but we're going to sit here in appropriations and give you the green light to go do it. So I'm probably not going to give you the green light, but it doesn't really matter in this Legislature.

But, yeah, that's my concern is we have absolutely no idea what this is going to cost, and there is potentially a huge future cost, and we're not even, we have no idea what it is that's not responsible.

Senator Bradford.

Thank you, Madam Chair. And my questions were pretty much along the same lines as Senator Seyarto. I'm really concerned with being minor in absorbable when just last month we saw dozens of bills that didn't have nowhere near this price tag held in approps. Or vetoed by the Governor. But now, based on my reading of.

This, this could easily be north of $6 million a year ongoing cost to stand this program up. So how is that considered minor and absorbable?

Again, my comments were focused on the near terms, Senator Bradford, so appreciate definitely the concern that you have in terms of the potential costs in the out years that we may see cost materialize. CEC is again funded by ERPA, which is certainly something that is a challenge for the budget process.

And we would look to continue working with the Legislature on making sure that ERPA is solvent in the upcoming budget cycle and future budget cycles.

But to the extent that these costs do materialize in the out years is certainly open and working with the Legislature in the future to make sure that we are able to implement this bill to the extent that it is highlighted in the provisions.

Well, it says they're requesting 3.8 million just for the first year of ERPA. That that's on SB 1, which is part of this, but.

Right, that was last year and that has already been approved.

But again, those costs will only grow. They're not going to diminish at all.

So I'm just trying to understand how it would be any less for this measure.

I cannot give you a specific number at this time, Senator. We really have to go through the regulatory process in order to understand the full scope of the costs, right?

Senator Wahab. Senator Becker. Senator Becker first, then Senator Wahab.

Yeah, thanks. I had a few similar questions, but one of the witnesses piqued my interest when you talked about Kelosha and our staffing compared to other states. And, you know, we've talked a lot about this Bill and policy Committee about the safety pieces of this, but there is obviously a financial aspect to the Cal OSha hiring. So could you just walk us through again? How is the CalOSHA hiring going now and what really needs to happen?

Well, thanks for the Senator question, Senator. And Senator Skinner hit on a bit in her back and forth with the Department of Finance. There's been action here at the Legislature to create, you know, p wise for Cal OSha. What I'm to understand is, I mean, this is a problem that predates Governor Newsom, Governor Brown.

It's been happening for a while. You know, these are certificated professional workers, industrial hygienists, safety engineers. And it's harder for the state to compete on salary. So I believe I'm not in Sydney wedding today that there's no attempts to hire, that hiring is not happening. It's just there isn't enough people hired.

And part of the reason is the competitive nature of the salaries and just attracting people to come work for the State of California. That doesn't absolve the state entirely. I think that under a previous Director of Dir. There was some hiring issues, some nepotism perhaps, and Calhr had to get involved.

And I think there's been some hurdles, inadvertent hurdles put up making it even harder to hire a kelosha. I mean, I don't want to get in the weeds today. This is probably the form for that. But I look forward to talking to all of you in the spring about this some more.

But the fact of the matter is there aren't enough people there at Cal Osha to ensure the safety of any workplace in this state, let alone these refinery situations where they are even more dangerous than your average workplace.

Yeah. Well, I appreciate it. It's always frustrating for me when we have these vacancies and we, as you say, put up even more roadblocks to hiring people. And I just need to make sure when we're discussing fiscal aspects of this Bill, we're thinking about that going forward because obviously we need these people in other areas, as you say, but especially in this area.

And I, and we need to make sure we're budgeting for that and that we exercise our oversight role to make sure those people are actually hired. So thank you for that.

Thank you. I will say this entire process has been very frustrating for many people, including in the Legislature and the average person. I do want to highlight, if, you know, we constantly talk about California's blend. Right. California has a very unique blend.

And in the report here, it also states that we have refiners shutting down of the handful of refiners, the refineries that we have in the State of California, roughly about nine refineries. What are we doing in regards to increase that particular number or potentially even create some more competition to support California consumers?

Who are you directing your question to? Okay, representative from WSPA you can answer.

I appreciate the question, Senator. I think we've seen the number of refineries dwindle over the past 30 years. In the eighties, we had over 40 refineries. That's a lot of redundancy, a lot of resiliency in the system.

We are now, we just had two convert to renewable diesel, which is a success story of the Low carbon fuel standard program, but they are no longer producing CARB gasoline. So we are down to nine, really eight refineries, major refineries, producing the gasoline that this state needs.

I think for us, our concern is the year after year of Bill after Bill that isn't contemplating that transition and the actual demand in California. There's this shift to electric vehicles, which, you know, is important. There's merit to it, but the infrastructure, it just isn't there. I think the CEC projects that they need a million charging stations by the year 2030 to give consumers the comfort that there is charging. They're at 100,000 charging stations as of this year. And I think the bigger picture is.

We are steering away from the Approp's charge and jurisdiction. This is not the Policy Committee. I will remind Members, again, you may continue through questions, but we need to stick to the questions that are the assessment.

So it's very specific in the sense of what is the industry doing to ensure that costs are low for the State of California? We have supplies. You know, we speak of redundancy.

And I want to be very clear to the larger public when we're talking about particular supplies and potential reserves, it is incredibly important to be able to pivot very quickly when there is a situation, you know, whether it's in the Middle East or somewhere else. And our supply lines are obviously impacted. So my question, again, still comes back to the supply lines is, why is this something considered negative by the industry?

I think for the particular proposal, we think it creates a pinch point in the refining process that if you're not able to fill up your tanks because you are now required to have a minimum inventory, that the production coming off of your refinery is going to have to slow down because your tanks are already full.

So we see it as an impact to not only our operations, but to the market itself, to consumers, because if that fuel isn't able to get out, then there's going to be potential fuel disruption, I think, as it relates to what are we doing as an industry to increase supplies, increase redundancy?

I think first and foremost, we've been advocating for more supply, more ability to produce the energy we need in the state and not rely on import strategies that is being contemplated in the CARB scoping plan. We think refineries staying in the state is important. We think production in the state is important because the bottlenecks at the port are real.

But isn't this Bill doing exactly that?

No, I think there are a number of factors outside of this Bill that impact supply production. We have a separate regulator for production that we are not receiving permits to drill. That impacts supply. We have port constraints that is impacting blending components, finished gasoline, crude oil from coming in to California. Those are outside of this Bill.

This Bill is very specific to refineries, not the other market players in the system, like wholesalers, distributors, energy traders. This is just looking at refineries.

Okay. And then to the Department of Finance, I just want to be very clear. This is to direct the CEC to develop requirements on refiners to maintain resupply plans, to cover production loss during maintenance events and maintain minimal levels of supply inventories, correct?

Ok. And you believe that this would support, if there is a disruption to the supply chain, as we've seen during the pandemic, as we have seen multiple other times, that this would potentially benefit not only the state but also consumers.

Correct.

Senator, I believe that's more of a policy focused question. Finance is here just to provide estimates of a state level implementation for CEC. And the costs related to CEC for implementation of that.

Assemblymember?

Yes. Senator, specifically to your question about why this applies just to refineries, because this Bill is aimed specifically at that problem of supply constraints that occur during maintenance events. It's not intended to solve all of the gasoline price spike problems that come up when supplies are limited because of international events.

This is designed specifically to ask the CEC to create rulemaking, to work with the industry to try and incrementally increase the available inventory at refineries. So that when there is an issue of constraint in supply because of maintenance events, we have resiliency in the system that will protect consumers. There has been historically a $2 billion cost to consumers when that specific event occurs.

And this legislation is aimed to try to prevent that from happening, to protect California consumers, working collaboratively with the industry, identifying the stores capacity that they have in existence now, because seasonally that supply is available at different times of the year, it dwindles during the summer months to a place where it is tighten. And the idea is to work refinery by refinery to find a way to increase that supply incrementally and prevent that spike from.

Thank you. And can I have the individual from the CEC also respond to the same question? CEC.

Thank you, Senator. I think I just agree with what the Assembly Member shared. I think, again, the overall point here for us is working through, in partnership and collaboration with the industry and through the constraints and also the stakeholder groups, including the workforce and labor, to figure out.

Again, I think that the way we would articulate this is as we pre plan going into a summer with the industry and collaborate with them, what efficiencies can we gain ahead in pre planning, including improving our inventory levels to reduce the downstream reactive behavior in the spot market, which really drives up the price prices. So that's what we'll be focusing on as a part of the rulemaking process.

And for the CEC, you guys are interested in the end goal, at least for me, which is the consumer price.

Yes, that would be our sole focus.

Ensuring that it's reduced, correct? Okay. So I will be supporting this, and I do want to just highlight that this is a difficult Bill. I am disappointed that we don't have enough information regarding the cost from the Department of Finance on a number of things, as well as the long term planning of what does this really look like?

But for me, for Californians, very much the most important thing is ensuring that we have minimal levels of supply inventory, as well as some type of backup plan when price spikes happen or there is some negative effect to our supply chain. So thank you.

All right. In a moment, I will ask you to close. I will just point out that it has been brought up, and this is legitimate, that the state does purchase gasoline. So if there are impacts of causing gasoline prices to go up due to this Bill, that is a legitimate assessment.

However, I would note on page five of the analysis how it shows that the Bill is constructed to prohibit the CEC from adopting a regulation unless it determines that the likely benefit to consumers, avoiding price volatility outweigh the potential cost to consumers and in this case, the cost. The consumer is also at the state.

So I just wanted to make sure, remind us that that is a component in the Bill. And of course, yes, by authorizing it, we are entrusting the CEC and the division to follow it, and it will be on the Legislature to provide the oversight if they do not follow it.

But as has been pointed out so far, this Bill is not. Its focus is not to address any and every circumstance that causes gasoline prices to go up in California, but purely and solely those aspects of, of our, that are, we could say, though we could say are more within our control.

And the external things of Middle East crises and ukrainian wars and such like that are not in our control anyway. So seeing no one else on the dais will allow our authors to close and then take a motion.

Thank you to the Committee and Members for hearing abx 21 today. This is the 19th and I think the 20th hour of hearings that we have had on this legislation and appreciate everybody's participation and contribution to the discussion as we continue to work on meeting our state's ambitious climate goals and transition to a clean energy economy.

Gasoline is still needed to fuel cars that have an internal combustion engine. This proposal is a common sense measure to provide relief for consumers who rely on gasoline to drive their vehicles to work and children to school. I respectfully urge an aye vote.

All right, so the motion is. We have a motion from Senator Wahab. The motion is do pass. And if we could do a roll call?

[Roll Call]

The Bill passes. That's on a four to two vote. And thank you. With that, Senate Appropriations Committee will adjourn.