SACRAMENTO, Calif. (CN) — The California Senate’s Special Committee on Fuel Supply and Price Spikes approved a bill Monday that supporters say will keep gas prices under control. If passed, Assembly Bill 1 would give the California Energy Commission the authority to change fuel refinery maintenance schedules and establish minimum fuel storage levels for refineries.
Although Governor Gavin Newsom supports the bill, which Democrats believe will regulate fuel shortages and reduce price spikes, Republicans have opposed it, arguing that alternatives like eliminating the special gas tax, would save consumers significantly more.
Governors in Arizona and Nevada have also criticized the bill, claiming that it will have a negative impact on their respective gas markets.
Following a brief floor session, the California Senate convened its Special Committee on Fuel Supply and Prices Spikes, and 13 senators questioned a panel made up of regulators and representatives from the gasoline industry.
Among other things, the bill would allow the Energy Commission to establish requirements that refineries must meet before shutting down for maintenance, an event lawmakers claim consistently causes fuel shortages and price increases.
Furthermore, the commission would establish a minimum level of fuel storage that refineries must keep to prevent consumers from experiencing these shortages. Refineries that fail to meet the minimum fuel levels could face penalties ranging from $100,000 to $1 million per day.
Democratic Assemblymembers Gregg Hart of Santa Barbara and Cecilia Aguiar-Curry of Winters were present to advocate for the bill they authored.
“This bill will hold oil companies accountable for resupply plans when refinery shutdowns and supply chain disruptions occur, ultimately saving Californians money on gas,” said Hart.
During a presentation to the committee, regulators began their case for the infant bill by identifying the causes of these price increases — low inventory and a lack of planning.
“The data is clear. Low inventory levels combined with planned and unplanned maintenance lead to price spikes. ” said Tai Milder Director of the Department of Petroleum Market Oversight.
Furthermore, regulators argued that if left to their own devices, refineries would not address these issues because price increases are often profitable for them.
“Like any for-profit company, refiners seek to maximize their profits within their market and regulatory structures,” California Energy Commission Vice Chair Siva Gunda said, adding that the current structures don’t incentivize refineries to protect consumers from price spikes.
According to Gunda, some refineries in California keep an adequate amount of fuel on hand in case of maintenance shutdowns, but that’s not always the case, because there is no incentive to do so.
Regulators also argued that the storage levels they seek are already within refineries’ capacity. Most refineries use only 40-60% of their storage capacity, which they claim could be used to increase California’s current fuel reserves from 12 to 24 days. As an olive branch to concerned refineries, Gunda reiterated that the law would prohibit the commission from requiring refineries to build new storage containers in order to meet their fuel storage requirements.
Industry representatives criticized several aspects of the bill and presented a two-pronged argument against it, citing worker safety and technical issues.
Jeremy Smith, Deputy Legislative Director of the State Building Construction Trades Council, expressed concerns about the commission’s ability to set maintenance requirements, saying he was willing to work with regulators but was unwilling to sacrifice workers’ safety for pennies on the dollar at the pump.
Zachary Leavy, a lobbyist for the Western States Petroleum Association, disputed regulators’ claim that refineries aren’t using their storage efficiently. Because different types of fuels are mixed in these containers, which cannot be done if they are full, many refineries have a “working capacity” of 50-60%, he explained.
Regarding the suggestion that refineries fill up their tanks more, Leavy said: “If you’re not able to take those materials into your tanks, you might actually have to slow down the process to accommodate having your tanks more full.”
Leavy also stated that refineries’ primary concern was determining what the minimum fuel levels would be. Regulators have not yet established a specific number.
Senators’ reactions to the bill varied.
“The amendments move this bill in a good direction, but I still have strong objections,” said Committee Chair Steven Bradford, a Los Angeles Democrat.
Others were more critical.
“I don’t think we should be giving the power to unelected bureaucrats to fine companies and put the regulations together later. For those reasons, I’m not just voting ‘no,’ but ‘hell no,’” Committee Vice Chair Brian Dahle, a Redding Republican, said. The senator did not wait for the meeting to end, leaving immediately after he cast his vote.
The committee passed Assembly Bill 1 in a 9-2 vote. The Senate Appropriations Committee will consider it Tuesday.