By james art | Handbook: |
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On October 14, 2024, California Governor Gavin Newsom signed Assembly Bill X2-1 (ABX2-1) into law. The new law expands the authority of the California Energy Commission (CEC) to adopt regulations requiring California refineries to maintain minimum inventories of state-compliant refined transportation fuels.
Governor Newsom says he called the special legislative session that led to the passage of ABX2-1 because he saw an urgent need to address spikes in gasoline prices. According to the CEC, there is a “significant risk of this.” [gas] prices may rise in the coming months,” and that risk increases if gasoline supplies become tight during refinery maintenance periods.
In a special session in 2023, the state passed SBX1-2 in response to a spike in gas prices that occurred during a scheduled maintenance period for California refineries. This law authorizes the CEC, in concert with government agencies and industry and labor stakeholders, to regulate refinery turnaround and maintenance times to “minimize the impact of maintenance-related production losses on fuel prices.”
ABX2-1 further expands the CEC’s authority, allowing it to require oil refineries operating in California to maintain established minimum inventory levels. The new law authorizes the CEC to create regulations that 1) establish minimum inventory levels, 2) maximize the use of existing fuel storage infrastructure, 3) waive requirements for small refineries, 4) adjust the inventory requirement, and 5) identify market conditions , which allowed the refinery’s inventory to fall below the specified minimum. ABX2-1 instructs the CEC to adopt minimum inventory regulations only if it determines that the likely benefit to consumers of preventing gas price volatility outweighs the potential costs and lists certain factors for the CEC to consider when making that determination. It also requires refineries to demonstrate to the CEC that they have satisfactory plans to recover the losses they incur during maintenance to avoid adversely affecting the California gas market.
ABX2-1 prevents CEC from enforcing its inventory regulations on refineries in a way that would require them to build additional fuel storage infrastructure. Although the CEC previously concluded that sufficient total storage capacity exists to maintain the minimum inventory needed to protect against price spikes, it also indicated the need for continued analysis of individual refiners’ access to this storage infrastructure. CEC’s analysis may be further complicated by the fact that a major Los Angeles refinery, which accounts for 8% of the state’s refining capacity, recently announced plans to close, citing long-term uncertainty.
Under ABX2-1, a refinery that violates CEC minimum inventory requirements will have three days after receiving notice of the violation to comply. After three days, the refinery is subject to administrative penalties of up to $1,000,000 per day of non-compliance.
Assemblymembers Greg Hart and Cecilia Aguiar-Curry and Senator Nancy Skinner authored ABX2-1. Account expires on January 1, 2033.