Senate Energy Utilities And Communications Committee

All right, let's call the Senate Committee on Energy Utilities and Communications to order. Welcome, everybody, to today's oversight hearing on managing the transportation fuels, transition issues, pricing, and update on ensuring affordable and reliable fuel supply. We certainly all know that there's lots of concern out in the public about the rising costs of gasoline fuel. It's been an issue for many years, of course. It's what inspired our legislation back in 2022, my bill, SB 1322, which created a whole mechanism for greater transparency about the cost of producing gasoline sold in California by requiring our oil refineries to report specific data to the CEC, our California Energy Commission, to better understand what's driving gasoline prices. Those efforts were then further expanded by recent legislative special session bills. There was SBX12 from the special session that we all held a few years back, which requires additional reporting to the CEC as well as the authority to implement a gross refining margin cap and penalty on refiners, among other provisions. I think we're getting some feedback from that computer. We're getting feedback.

But we're really proud of the transparency that has been provided by that legislation, and I think it's making a difference already in helping. Actually, several of the presentations I think you see today will be informed by information that's been gleaned from reporting coming out of SB 1322. So it's certainly been my hope that all of these tools are providing at least some greater transparency and better understanding of all of these many forces that are impacting our transportation fuels market here in the state. We've heard earlier, and many of you know, about Professor Bornstein, Severn Bornstein's mystery surcharge that he's written and spoken about extensively. That's one thing we certainly have had some more information about. That's that unexplained additional cost that Californians have been paying on every gallon of gasoline since the 2015 Torrance refinery explosion popped in there. And then, of course, the refinery came back online, but the prices haven't come back down to where they might have expected to have been. So, the second extraordinary session, the special session, provides the CEC with the ability to regulate minimum supply inventories through refinery turnarounds, maintenance events. That with ABX 2 which is also another one of the special session bills that came out a couple years ago So we got lots of challenges associated with supply We know that our two additional in refineries were preparing to close Phillips 66 in Wilmington, Valero, up in Benicia. That's bringing our in-state refineries to now seven. In-state refineries producing California's unique gasoline blend. We're also, of course, working toward all sorts of fuel-efficient and zero emission vehicle and cleaner fuels transitions. There's potentially less demand for petroleum-based fuels in the future. But I think one of the things that we've been discussing as a caucus and with others is that the decline may be more gradual than the planned closure of refineries. And so one of the challenges is how do we make sure that we ensure that there's enough fuel supply that's a reliable and affordable with so much volatility in the world right now. And so we've got this – we already had a whole slew of challenges. Then, of course, at the very end of February, President Trump launched the coordinated attack on Iran, killing the supreme leader there, pulling the U.S. into what's now, I think, the 14th week of war. Retaliation from Iran then closed the Strait of Formos, where 20 percent of the global crude supply is shipped. And that's exacerbated a lot of the fuel cost challenges that we've had. By all accounts, it's increased the dollar per gallon. It's increased costs by about a dollar per gallon since the start of the war. So we're going to be hearing from a lot of really exciting voices. And I'm glad to see that we've been able to pull together a really good mix of perspectives. So we're going to hear from the administration, specifically our CEC Vice Chair, Sivagunda, the Department of Petroleum Market Oversight, Chief Director, Ty Milder, and then also we're going to be hearing from our Air Resources Board, California Department of Tax and Fee on the status of various requirements of the special session bills, regulations and reports, as well as the SV237 assessment, evaluating near-term options as recommended by Vice Chair Guinda to the Governor. We're certainly, then we're going to be hearing from some stakeholder perspectives, including Jamie Court from Consumer Watch Dogs, Zach Leary from WISPA, Jeremy Martin from the Union of Concerned Scientists. So we're very, there's a lot of interest here on this committee, on this topic, as you might expect. We're interested in the status of the current supply. You know, as crude oil and shipments and feedstocks are being affected by the war, you know, refined fuels, they may be further affected in California due to the closure of in-state refineries, the need to depend on more imports. I think we're going to be hearing discussion of some new, you know, pipelines that could make a difference that are under consideration and that could make a difference for our supply in California. So let's get started. let's have the first panel. So we'll ask Vice Chair Gunda to come up. And then I know we've got Gentian Troboniku, who's the Chief Deputy Director from CDTFA. Ty Milder, who's here from the Department of Petroleum Market Oversight. And then Matthew Botel, who's the Chief for Industrial Strategies Division at CARB. So let give you guys the opportunity to all present in that order and then we will open the floor to questions and discussions

Well, this chair had a very long night last night.

We've got to get this done.

Yeah, well, it's a long night last night.

Yeah, yeah.

Yeah, Mr. Vice Chair.

Yeah, I know, I know.

I'm Siva Gunda, currently serving as the Vice Chair of the California Energy Commission for the record, and thank you for the opportunity to be in front of you today and walk you through the interest around the fuel supply and the long-term transition opportunities for California.

So this kind of slide just sets the stage for our conversation. just elevating a few pieces here in terms of the Californias. In the long term, we've always discussed that California is less connected through pipeline networks to the rest of the U.S. It creates this island kind of effect where we, when we need fuel, we'll either have to produce in California or bring it through imports. So marine imports are continuing to increase. That's an important piece. And as Chair Allen just mentioned, we are beginning to see that the market overall is transitioning in how it supplies California fuel. One of the exciting opportunities and potentially a game changer for California in terms of connectivity is the proposed gateway pipeline by P66 and Kinder Morgan. It's a joint venture. There are other options that are currently being considered, but basically what this does is connect us to Gulf Coast and potentially bring as much as 200,000 barrels a day. This is another setting the stage slide, but I wanted to pull together again, reiterating a couple of points that Chair Allen mentioned here. the overall refining, the number of refineries in California has been declining or contracting in terms of what we can produce in California. And I'm going to walk through how that is changing in terms of import composition, but also how the refineries are producing different blends. What you will see here on the Y-axis is we approximate the output of the refineries in terms of gasoline at about 55%. and I'll show how that has changed in the past, you know, upward of 60. So as you see here, we have structurally moved into an import in a state starting 2015, right after we had the Torrance event, and it kind of coincided with that. And since then, we have been continuing to import more and more fuel. And wanted to also recognize here that some of the imports we bring in and the defined capacity in California does serve our neighboring states in terms of Nevada and Arizona. And similarly, some of what's produced in Washington comes to us in California, and there is a regional connection here. In terms of overall import dependency in 2025 we got to about 165 barrels of gasoline at an average to fill and we are seeing that the market is responding Apologies, I'm just kind of trying to. Okay, so in terms of just looking at how the refinery production has changed, I want to call your attention to the overall stack of what's being produced in California. Over the last 10, 11 years, the overall gasoline production has gone down in terms of share. It was as high as 60% when you take into account both Carbob, but also some of the fuels we produce for our neighboring states. It was about 60%, and as you see there today, it's come down to about 55%, and some of that reduction has gone into jet fuel production. And that is very much related to long-term increase in jet demand that we see. While the gasoline demand is going down, we will continue to see increased jet fuel demand in California. Yeah. So I think the main takeaway there is, while there is a little bit of flexibility on what the refineries could do, there isn't a lot, and they are exercising that to match the demands of the market. Apologies, this is, I'm not able to move the slide, okay. So this slide here just gives you an overall picture of where our dependencies are coming, the imports are coming from, both in terms of crude as well as refined fuels. As most of you know, we are currently dependent of about 75% of crude from outside of California. We produce 25% of crude here. 10% of the 75, meaning 65 left, comes from elsewhere internationally, but the other 10 comes from Alaska. So what you're seeing there in brown and orange shades is where we are having the largest dependency. And as the war has progressed, some of the lost battles from the Middle East have been made up through South American battles as well as Canadian crude. On the gasoline refined product side, because we import both, we have a significant dependence on the rest of the U.S. So those battles are coming from both Gulf Coast but also the Northwest. One of the things that you'll see there is the Bahamas. Bahamas is largely a U.S. product. So some of the refineries, because of the constraints on the Jones Act vessels, send the fuel to Bahamas on non-Jones Act vessels and then bring it back to California. So the Jones Act waiver recently from the Trump administration has significantly helped us in terms of making sure the fuel flows well. But also important here is there is a lot of dependency on India and South Korea and more and more Japan and other Asian markets. A piece here is as we have more dependency in California, there is more of a signal globally that California would require a refined product. And that is making some of the refineries in other countries really start producing carb up. Based on the information today, we see about 10 refineries outside of California are producing California blend or blend stocks. And those are coming through a variety of ways over the waters. So just to kind of then provide a kind of continued context from 2025 into 2026, really we have seen some historically high increase. Imports coming into California even through March, April, and May. And as you see there, the U.S. kind of dependency from Gulf Coast is really increasing as well as India, South Korea, and other Asian markets. Okay. So here's kind of a quick look at month-by-month imports coming in. And as I mentioned, we've seen some historically high levels of average imports coming into California in 2025. But in 2026, especially after the closure announcement of Valero and the war, we continue to see some of the highest levels of imports coming in. Just to kind of point back to an earlier slide, we are looking at about 165 to 200,000 barrels of import dependency into California and our neighboring states. and we are seeing some historical levels of imports coming into California, and that will be reflected in why the inventories have been stable. So then kind of looking at how the composition of the marine terminals and how the imports are changing. So what this is doing is not just looking at the refined fuels, but it is stacking all the different imports we bring into California. So what you're seeing here is averages over the year, So if you look at the chart, I want to point and draw your attention to a couple of things. One, the overall average levels of imports that include crude, gasoline, diesel, and jet fuel collectively seems to be coming at about 1.3 million barrels roughly. But as you see there, also the second point that the crude has gone down because of the refining capacity shrinking in California. The crude is going down and that is being replaced with import gasoline as well as jet fuel. So the next slide will kind of show, while that is the average, what we've added here is a second column showing you the months where we had the maximum amount of imported refined fuels, not crude, imported refined fuels. So what it suggests again is there is a significant amount of surge capacity still in the system. And the system is using that during these extraordinary moments. One of the things we depend on internationally, especially UK and Netherlands, is some of that fuel really comes into California as when we need that surge amount of blended components. So again, as you see here, it's important for us to recognize that we do have a good amount of import capacity at this point. and what we are trying to do at the Energy Commission as per the statute, the second special session, ABX 2.1, is looking at how to evaluate the import opportunity for California, whether we have enough refinities across the globe that can produce it, whether we have enough vessels to move that around, both internationally but also domestically, do we have enough dock space in California to unload them, and finally can you distribute? So what we're hearing more and more is there is a real kind of a congestion or an opportunity for us to work on around the distribution level. While there seems to be enough refineries with advanced notice that can make carb up and the blending stocks, it's really important for us to think about how to move that within our distribution network. So that kind of brings to a few slides on where we are in terms of the overall kind of inventories in the pad five as well as the US So the first one you seeing here which will be very similar in the next few slides is pad five which includes California Oregon Washington Nevada Arizona Alaska and Hawaii And when you look at composite, all of the existing fuel inventory, the gasoline inventory, we are kind of tracking at the lower end of the 10 years. But as you see there, every time we dip below, it starts coming back up again. So that is kind of what the signal to the rest of the importers is and the traders and shippers to bring that additional fuel. We have seen a dip in the last couple of weeks, but then again it got stabilized. One of the reasons why we saw the dip is we had a couple of refineries in the west. both BP, Sherry Point, and P66 Ferndale had a little bit of an outage, which had back online, and that kind of stabilized things again. But also recognizing that every time those are down and the prices, pot prices go up, that's the signal to attract more imports. And everything that you see here is very much corresponding to how the rest of the U.S. is. So in terms of jet fuel, so we are actually tracking at the highest levels. As you know, there has been a lot of information around what's happening with the jet fuel across the globe. One of the pieces, one of the important things about the conflict in the Middle East is much of the refining capacity that got impacted in the Middle East is mostly jet and diesel. And that serves Europe. So much of that impact was initially felt in Europe. But we as California and the rest of the U.S. is largely self-sufficient. But self-sufficiency will not help us from price increases because it's a globally traded commodity. So on slide number 12, quickly showing you that similar to that on the diesel side, we are actually on the lower side in terms of diesel inventories. while much of California's diesel use is renewable diesel, we do produce fossil diesel, and that kind of sometimes could become the barrel where we are trading the spot market trades are based on, so it's important for us to track that. But more recently, renewable fuel is trading at a discount to fossil fuel. So while there is a fossil fuel, but to the extent that we use fossil fuel in California, it still will be pegged at that. But how does all that come together into an important metric that we were able to develop? And I just wanted to take an opportunity here to say, you know, share my gratitude to the legislature for giving us both the ability to collect more information through the special sessions and giving us those permissive tools to use if we think it's beneficial in public interest. One of the core pieces that we've developed was what is called days of supply. This takes into account four variables to normalize and try to compare apples to apples as much as we can with conditions previously. So what it takes into account are four specific metrics. One, it looks at the demand. Obviously, we know the demand's dropping in California about 1% to 1.5% a year, and so that takes into account. It also takes into account what the inventories are, both in California and more in the West. And then it also takes into account what production we see forward-looking two weeks. And finally, we're able to kind of watch imports. So as I mentioned, imports have come really well into California. We don expect them to diminish you know in the near future But as you see there the DOS or the days of supply metric is right in the balance So we feel comfortable and I said this in our assembly hearing on the topic what we know is, you know, even under extreme situations that days of supply will not fall behind, you know, the 10-year range up to, you know, six or seven weeks, right? So what we meant to say at the assembly hearing is that's the visibility we have. That doesn't mean that we will run out of supply in California. As the supply gets tight in California, the prices will go up and attract more imports. So this kind of coming down a little bit, now moving into the long run trends here. This is a slide that you all have seen in the past. Three lines here, blue in California, average price. The black is the U.S. average prices, and the green is the difference between California and U.S. I also want to point to you, there's a little bit of a difference. There's a second line under blue and green. The black dashed line is something that you don't see because it actually overlaps. What those two lines are is two different resources we have. So one is the AAA opus data, which is more widely open for people as well as EIA. So those two resources use slightly different ways of collecting information. For example, AAA looks at the credit card transactions every day and averages that out across the state. Versus EIA takes a sampling and does a volume-weighted pricing. So because of that, you see the delta and want to observe that the delta is very visible for California, but for not the rest of the U.S. And it's important for us to note. We regularly overestimate California's price by about 10 to 15 cents. And so then kind of drawing your attention down to just the U.S. California differential, it's important for us to recognize a number of different trends here. So one, after the price spikes that we had in 2022 and 2023, and again, thanks to the transparency tools and the ability to understand what's going on with the industry, the kind of the U.S.-California differential increase that we are seeing right now is not similar to what we saw in 2022 and 2023. It's structurally very different. So as you look there, a couple of trends. One, the overall, the price increases and decreases, the volatility has been a lot more stable since 2024. And there are a few different areas that we kind of shaded, and those do incorporate times when we had outages. For example, in 2025, we had two specific issues, one in spring where we had three refineries, one after the other had unplanned outages. And similarly in fall we had an extraordinary event where we had a couple of refineries out at the same time. But what I want to point to is while there was a slight elevation or escalation in the overall differential, they were much more muted given the coordination that we have been able to do. But I also want to take this opportunity and to address a couple of things that colleagues from the Consumer Watchdog has mentioned in the past, which is while the escalation right now is really tied to the war there was a pre escalation that did occur And I want to just be very clear that we saw that directly related to the early idling of Valero Valero gave us a one-year notice in April 2025, and as they were coming close to April 2026, they started idling their units earlier. And similarly, the PBF, Martinez, which was supposed to come online in February, as they were turning it on had time to completely come online. And so every time you had a delay, that was a market signal as if it were an unplanned outage. So those did impact. But as you see there, as we were beginning to come down in the California-U.S. differential, the water really kind of started moving us back up again. So there was a question on whether resupply would have helped, you know, I think a well kind of structured resupply statute could definitely help, but I think what we're trying to do over the last few years since the special sessions is take the whole issue around two refineries leaving California and the decreased amount of in-state production and the totality of the context as we develop those rules. And one of the things that the Energy Commission tried to do with the given resources that we had really point towards figuring out whether some of the assertions that were made by the industry were true, look at the analysis to understand where the price spikes were coming, but also thinking through how best to use the permissive tools that you've given us to help in the long term and take them in the context of the mid-transition. So through the amendments of the PYRA made in SBX12, to refinery operators in California are legally required to report to CEC any planned refinery closure at least 12 months ahead of time. The law, however, does not specify what type of operations they need to do during the time. So as we've learned from the last couple of years, the important part for us is as we think about the resupply rules, how do we take the lessons of the last couple of years to make sure that those resupply rules are actually beneficial in reducing the price spikes. And finally, the CEC can and has adopted refinery maintenance guidelines, which include a requirement that refineries provide resupply plans before conducting any planned maintenance. For example, if a refinery conducts planned maintenance during a 12-month period before it shuts down, it is still legally required to maintain resupply plans and provide notice of those plans. So it has been very helpful for us to see the data and work collaboratively, not just through a regulatory frame. So then kind of pointing to the gasoline price spikes and what we've seen since the start of the war, just calling your attention here, you know, the whole U.S., the prices have gone up. So if you take February 28th and see where the prices are today across different states, California's prices have gone up by $1.35, and we stand about 21st in the ranking today. And as you see there, Utah is the highest, given that they are really landlocked more than us. And when the WTI prices, the crude oil prices go up, it really hits them. So it really translated for them versus us. And the other pieces here are you see some of the states like Indiana and others have gone up for a while, and then they're coming down now. It's because it's a combination of grass tax waivers that have been put forward by some of the states. and some of them had supply constraints because of refinery outages. But overall, we've been right in the middle of the pack the entire time. So finally, a couple of slides here. As we look into, you know, the prices have gone up and what contributed to those prices, you know, I always want to recognize that California's prices generally are higher because of the taxes and environmental costs we have in California. but it's also simultaneously true that those don't go up and down and those don't spike. So as you see there, at the bottom, the tax and environmental costs in California have not increased. It's about five cents, and that is really tied to the taxes. So the other piece is really coming from the biggest increase is coming from the crude oil costs. The crude oil costs have gone up significantly. And as you see there, sometimes the prices were over $100, $110. So let me kind of take a moment to just translate this to the senators here. Every time the gas, the crude oil prices go up by $10, it will be 25 cents at the pump. So if, you know, from where we are today, if there is an increase of the crude oil prices by another $30, $40, dollars, it's going to just translate straight to a dollar at the pump, plus any exposure we might have in terms of global trading. So while we kind of think that the crude oil prices might have stabilized at the moment, depending on where the conflict could go, if the crude oil prices continue to go up, it will be a direct translation to the price at the pump, not only in California, but everywhere in the U.S. And finally, the industry margins have been going up as well, and it's important to make sure that we articulate that clearly. So the industry margins as a whole, which includes both the refinery margins as well as the retail margins, have gone up by 75 cents since the beginning of the conflict. Based on the analysis we have, currently 76% of that has been in the retail, generally on an average, But in this case, about from off the 75 cents, roughly 73 cents has been on the retail side and few cents. But during the middle of the time here, sometimes the refinery margins have gone up significantly higher. So it's important to note that the refineries are making money at this time. One of the reasons for that is the in-state refineries have wider margins because the marginal barrel is still an import barrel. While their costs of acquisition of crude oil might not change day to day, if the import barrel which is being sold at the rack is priced marginally at a very high cost, that delta will be captured by everybody who's selling in California. So the refining margins are going up, but the retail margins have also gone up significantly. And that's important for us to note. So finally, I wanted to close off with this slide and pass it to my colleague, Genty, from CDTFA. Just at the top, one of the statutory responsibilities of the SBX1-2 was to develop a pricing report jointly between CEC and CDTFA. In 2024, the report we started from ground up, really we mapped California infrastructure establishing some baseline price comparisons against other states and laying out how tax revenues flow In 2025 that work deepened significantly and considerably and thanks to colleagues from CDTFEA who have put a significant amount of time we started looking into a spot market in imports and how that impacts. We also deepened our analysis on the retail prices, margins by brand and local competition. And this year, 2026 report, which is the third one, which we are hoping to send it to you soon here, we continue to deepen our analysis, and I would rather see the TFA speak to that. Thank you.

Thank you, Vice Chairman Gunda.

One of the areas we'd like to focus is retail outlet ownership and concentration. Some large companies, including some refiners and private equity firms, are taking ownership or ownership interests in large numbers of California retail gas stations. The data we currently have does not capture this, so our teams will try and find ways to assess the extent of ownership and pricing control concentration. Next, we'd like to explore the use of pricing software, algorithmic pricing, surveillance pricing, dynamic pricing and however some folks refer to and how that affects consumers Retail pricing appears increasingly driven by commercial pricing software These algorithms tell sellers what to change to maximize profit It appears that many in the market at all levels using such software, and many are using exactly the same software. It's really opaque, and an area could use some more sunlight. A recent study in Germany analyzed retail prices for about 14,000 gas stations and found that when stations adapted algorithmic pricing, their margins increased by as much as 15%. The study concluded that pricing software weakens market competition and possibly facilitates tacit collusion. Various other studies across industries have analyzed the impact of pricing software and found that these systems negatively impact consumers. Another area I would like to explore is continuing studying the widening retail margins and the price divergence and try to better understand pricing strategies and impacts on the broader market. Also, local competition, some preliminary analysis we have done suggests that shows the local competition at the retail level can have an impact on prices and possibly can lower the gasoline prices. Before I turn it over to Director Midler, let me summarize three main takeaways from my presentation. First, retail margins are increasing, especially for branded gasoline. Second, the retail market appears to be diverging with a growing gap between lower and higher price stations. And third, retail pricing strategies and business models are becoming increasingly important drivers of how much consumers pay at a bump. With that, I'll end my presentation and turn it over to Director Miller. Thank you.

Third, retail pricing strategies and business models are becoming increasingly important drivers of how much consumers pay at the pump.

Thank you, Todd. Yes, sir. So I think we have a second set of presentations now moving away from the Iran conflict and the observations from the data that we have Again I want to thank colleagues from CDTFA DPMO for the different analysis of the data that we have and be able to tell a compelling story overall on what's going on with the market. I want to just start by saying, as we go into the other parts of SPX-1-2 and ABX-2-1, which are usage of certain permissive tools that the legislature has given us and the opportunity to iterate on long-term transition pathways for California. So what I wanted to kind of share before I go into this specific slide is just in order to reiterate what Director Mildermis mentioned, the new transparency has significantly advanced our understanding and regulations are an important part to get this right. So I think what we have seen over the last two years between the analysis that we all have been collectively doing because of the tools that have been given by the legislature is getting sharper and sharper in diagnosing the problems that exist across the ecosystem. Data transparency has been transformative. Legislature but gave us some statutory guardrails to use during implementing the regulatory authorities that you've granted in the special sessions. Analysis of the impacts to supply and care about impacts to business decisions was an important part of the statutory language and your guidance to the CEC. We were also asked to look at the health and safety protection for employees, local communities, and the public. And overall, your guidance has been to ensure that the benefits outweigh the costs of implementing the tools and ensuring that the business decisions are consistent with the benefits to Californians. Specifically for GGRM, the statutory language notes that finding that the likely benefits to consumers outweigh the potential cost to consumers. For resupply regulations, the statute directs us that it shall protect the health and safety of the employees, local communities, and public. And for the minimum inventory, which was the third tool, regulations shall protect the health and safety of employees, local communities, and the public. Findings that likely benefit to consumers for avoiding price volatility outweigh the potential cost to consumers. You've reiterated that to us over and over. Recent events and resources redirected to coordination to a holistic approach. P66 announcement to close its Wilmington refinery and Valero's announcement last April to prematurely idle their Benicia refinery further emphasized the need to thoroughly understand potential impacts to market. Furthermore, the governor directed collaborative work with the refineries in the wake of the announcement from Valero to ensure that they see value in serving the California market. And it was another important directive and guidance to the CEC as we moved forward. Limited resources to work on special sessions tools authorized, you know, the regulations meant we had to divert those tools to more of coordination to ensure that some of the assertions that were made by the industry in the wake of the special sessions are fully understood so we can take a holistic view and the mid-transition framework in implementing our tools. And it's also important for us to really note that the CEC's primary role is coordinating across a variety of agencies. The CEC doesn have the statutory authority to implement safety implement aid regulations or implement you know price security Our job is to understand how to coordinate all those different expertise that are within different agencies and coordinate a transition that ultimately benefits the consumers of California For example, DPMO, as they presented today, is an important voice in flagging the potential for market abuse. And that's an important part of CEC to take those insights as we develop our regulations to the point that CDTFA mentioned. It's an important voice for us to understand how pricing is being done at the retail stations. stations. Agencies upstream like CalGEM and production, fire marshal's office provide very specific inputs on different areas of expertise. And finally, the DIR, our Department of Industrial Relations, are extremely important in providing voice on worker safety and what it means to maintaining reliable impact. And our job, CEC's job, has really evolved over the last two years to ensure coordination and consultation with a variety of agencies and make sure we bring them all into a single room and de-silo the conversations to ensure a long-term transition. So to that end, Petroleum Task Force has convened over 10 meetings. Roundtable with stakeholders have been about 11. This is the roundtables that we mentioned about including industry, environmental justice, Enviros in the same room and talking through. we have been meeting once a month on an average with the local agencies and aid districts particularly to get their input on how to make sure our regulations can move forward and the convening of ICFAC. These are important parts of the conversation and we needed to make sure that we have a full context before we implement regulatory tools. So with that, I wanted to kind of point to one of the important parts of the statutory requirements is to start thinking about how do we mitigate the prices, price volatility, but start thinking about the long-term transition in California. So our 2024 transportation fuels assessment was our first attempt to start looking at it. And I think we've got a lot of support from the legislature on making sure we laid each of that strategy with both pros and cons. And that is extremely helpful as we move towards the transition because from the vantage point of CEC, this is about tradeoffs and making sure we reduce the impacts and maximize the benefits to the consumers. Consumer protection means prices. Consumer protection means health. And consumer protection means jobs. All of them together. And the CEC's mandate has been how do you bring them together to ensure a transition. So in our first attempt in 2024, we have laid out some strategies which we continue to sharpen with every iteration and every year. And I wanted to call out colleagues from California Resources Board for incredible collaboration in a number of these elements and the entire group that participates in the task force. So first, you know, I think the important takeaway from 2024 was continuing to double down on our clean energy trajectory in terms of reducing demand and moving the miles, vehicle miles traveled more to cleaner vehicle miles traveled. That was an important part of the first element or category of solutions. we kind of uplifted the importance as we move forward here. It's industry at large and stakeholders at large continue to agree that we are going to lose refineries from California as the demand declines. And as we move from point A on where we are and as the refineries contract in California and our dependency on imports continue to increase, it's important that the imports become competitive. You get those imports in a competitive manner to help with the price stability in California. And that includes some of the access to the infrastructure. So that's an important part of what we talked about. Similar to the electricity system planning, you have solar and wind. You need to match them with storage to ensure that the intermittent resources are well-matched with storage, and that has been an important part of our work on how do you balance these intermittent resources that are going to come into California on vessels far from Asia, sometimes Gulf Coast, multiple days, and how do you make sure that doesn't impact volatility, and that's really around storage strategies. We also talked about there is a pathway here for us all to consider if we want to retain refineries and the monopolistic or oligopolistic situation materializes in California, there is a pathway to consider a cost-of-service model, And that's something that we raised as a potential pathway for California to balance the supply long term. So those are some of the core elements, including state-owned refineries, which is what some of the countries have decided to do. So I'm going into...

Do you want to give some extra?

Then kind of moving into what happened in 237, the legislature came back to us and said, okay, we gave you tools and you've given us some initial ideas, but we have two refineries that we just had closure notices on. Give us a holistic transition plan. And thanks to many of you on the dais here who worked on making sure we had further clarity on how to move this forward. And one of the core pieces that came out of the conversation was three buckets of conversation that we set up. One, before we understand the impact of losing more refineries, there is some level of stabilization that we have to do reactively. But the important part here is we cannot be in that reactive mode by having every asset that decides to leave California something that the California state has to solve. Some of these decisions are privately made, but it's important for us to think about immediate impacts of a crisis. The second part of that was to think about to the extent that we know that the refineries have to be here, some of them have to be here as to think about the long-term transition, how do you stabilize that investment opportunity in California? That was the second bucket that we've uplifted in the last year conversation. And finally, the proactive transition governance. and it's really important for the CEC to continue to make sure that we uplift. This came not just from CEC. This came from very vulnerable and honest conversations between many stakeholders who generally don't tend to sit in the same room. This is our faithful representation of all the needs that they've laid out in front of us. Not all of them agree on all pieces of this, but it's important for us to say these are not or, but these are and. And it's really important for us to think about long-term proactive governance because some of the work or transition issues, long-term climate goals have to be done as we think about having a managed transition away from the fossil fuels. So that kind of ultimately, that letter that we wrote to the governor from our office made its way into the 237 assessment, which we published earlier this year. It really double downs on the idea of making sure all those three elements are done carefully we do uplift the importance of not having reactive crisis asset by asset behavior and really doubling down on long transition plan And here I would like to offer to the members here, there are a multitude of modalities that the state of California can go. On one side, we can work on every regulatory pathway to keep every refinery in California, even if it means to export fuel from California. That's a modality that the state could choose. The other modality is we rapidly adapt to contraction of refineries with imports. I think it's somewhere in the middle. It's important for us to think about the risks of losing another refinery in the immediate. As we understand the ability to import enough fuels, while we are trying to continue to solve for workers and communities, it's important for us to retain the refineries that we have and have the plan before we continue to move forward. So the recommendations here, again, just a quick, you know, we can come back in questions. You know, we continue to want to manage the transition deliberately, really prioritize buckets two and three, which is stabilizing the investment environment in California and long-term transition. thinking about within the long-term transition, there's a bunch of issues that came out in terms of worker funding, understanding the liability to the communities as these resources exit, and then thinking about what the state needs in terms of toolbox to support this transition. So I will leave there. I wanted to rush through because of the number of slides, and with that I'll pass it to my colleague Matt from CARB. Matt. Thank you, Vice Chair Ginda, and good

heard from the vice chair, and brings forward information on the changing fuel demand and supply conditions across the gasoline, diesel, and jet fuel markets here in California. It also provides insight into how the transportation fuel system may adapt in the future based on projected future fuel demand, the role that imports and exports of finished fuels play in meeting that demand, and the role of regional and local economies and communities. The draft TFTP includes potential mid- and long-term transition strategies for fuel supply and demand, as well as transition strategies for workers and communities. Our goal with the draft TFTP is to provide the legislature, state and local agencies and the broader public with insights into the evolving transportation fuel system, as well as a menu of policy and program options that, if pursued, have the potential to support a more affordable, reliable, equitable and adequate transportation fuel system. Many of these same strategies are talked about in the 237 analysis and are things that we are continuing to work on as state agencies. And with that, I want to thank you all for being here today. Happy to answer any questions you have. been a marathon session, so looking forward to the questions.

First, let me say thank you very much for your testimony here today as well as the reports. I, like you, have a hard time concentrating on the details the day after the election, but here we are. So let me just say that fascinating information. I probably would have a different question on each one of the presentations, but let me start with the last one because it's what I heard last. And you talked about the TFTP, and I will read it in detail. It's briefly mentioned in our document. And what I want to make sure that we include in that document, and it may be there, so I apologize that I haven't read it ahead of time, is the workforce. And I say that because I think we've ignored to a large part alternative fuels that move us in the direction of using renewable resources and that could give us what we looking for in terms of equitable adequate reliable affordable fuel We have subsidized solar and wind energy, but we haven't really subsidized alternative fuels. And other countries are going to be looking at biogases in particular, but also hydrogen, to move the maritime in particular. And since we have pretty active ports, the ability to be able to refuel here in this state is going to be pretty important. So I'd like to keep a focus on that as we proceed in the future. but also hydrogen because it's being, well, CARB has basically said you've got to use, we should be using 1,700 times more hydrogen in order to meet our goals, and we're not really moving on that very aggressively. And I wonder if you could talk a little bit about how we make this transition because then this gets back to the issue, I think, that was raised earlier, about making a transition that doesn't leave people high and dry, that doesn't end up costing so much to continue using a fossil fuel that people feel like desperate about it. So first of all, it's the workforce, and I'm very concerned about that, in particular because much of the fossil fuel extraction happens in the Central Valley, which is what I represent, but also because those are the kinds of jobs that our second-chancers really can take advantage of and be very productive in. And we want to make sure we're creating good jobs that provide good livable wages.

Thank you, Senator. I think I would kind of double down on what I think I just wanted to add that it has been an important part of the conversation as we write both the transition plan but also the transportation assessment on thinking about how best to support labor as an important group. As you noted, I think you said the second chance programs. I was in Kern County and I had a chance to visit with a number of people there. I think when we think about current, it's a good example where you have the largest amount of clean energy resources currently being on the electric grid coming from Kern County in the state of California. Because of the 237, we will have some opportunity on the workforce as well as stabilizing some of the refineries in California on the upstream. And to Matt's point, I think it's really important for us to think about how do we have the transition in a way that there's a durable funding mechanism for the workforce to transition into other jobs. And I think we place your importance right in the middle of all the work we do. And I appreciate you raising that.

Thank you, Senator.

Thank you, Mr. Chairman. I have quite a few questions, so I'm going to ask them as quickly as possible, and I'm going to ask if you could respond as quickly as possible. First, Matthew, could you submit your comments to the record for the committee? So we have a record of that. And I'm going to throw out my questions to everyone unless it falls specific to someone. The original climate goals that we were hoping to achieve through the reduction of producing crude and you know refined fuel what were those goals? And based upon those goals, if we achieve a decline of 1 to 1.5%, how long is it going to take us to get to those goals? Or do you foreseeably actually see us meeting those goals? That would be my first question.

Okay. What does that look like, though? If you were to say we're going to have 85% emissions reduction, what does that look like? Does that mean we have 25% of the vehicles currently now? We have 25% of the trucks that we currently have. What does that translate to real world? What do we expect to see?

Out of respect to my colleagues, because I do have quite a few questions, I need, though, for you to really answer the question. My question was, if we're to achieve 85% reduction by 2045, what does that look like? Now, you told me that means we would implement zero emissions vehicles. We're going to implement reducing the grid. We're going to do this and that. But have you told this committee and Californians what is that going to look like I asking you a very direct question I saying if you going to complete zero emissions are you saying that no Californians would be driving gas vehicles, 15% of the people would only be driving gas vehicles? I think we have a responsibility to paint a picture to the Californians that if we're going to achieve these goals and if we're going to implement these strategies, this is what California is going to look like. And I think this committee, this body, the legislature, and the American public should have an opportunity to say, is that really what we signed up for? Because in my community right now, I would venture to say, if you were to do a study and say how many people actually drive electrical vehicles or hybrid vehicles or different types of vehicles or how many people in my district have solar panels. And all these strategies that you were talking about, a lot of people in my district are not utilizing that. So that's why I'm getting to the question of, in order for us to achieve this, what is that picture going to ultimately look like? And then I think we have to say, okay, well, how are we going to get there? So if you don't have the answer to that question today, and I respect that, that you may not, I would just ask that you'd return back to the committee that information. But I really think, and I'm new on the committee. I've only been, this isn't my first rodeo, but I've only been in the Senate for a year and a half. But I think part of my role of where I can be helpful on this committee is to really ask those, I'm not saying I'm anti of implementing the goals, but I think we have to be honest in how are we going to do that. and what does that look like, and are people prepared to be that? And I don't think we've honestly answered that question, which leads me now to my next question. Do you have the answer to that question, or would you like to get back to it?

Again, the question that I'm asking is I'm asking you a tangible question, and I think you have a responsibility to give us a tangible answer. What I'm asking you is if you're saying, okay, some people are still going to drive gas vehicles.

How many? And so if we end up saying 50% of the people currently now who drive vehicles, let's say are still going to drive gasoline vehicles, then that leads me to the next question. If we're still going to need 50%, how many refineries are we going to need to fulfill that? Because then what I don't want to be a part of is implementing regulations, driving legislation to create something that I don't even have a picture of what it means. so then here you have legislators who are sitting here and going oh my god okay well we need to close refineries well who is going to finally tell us you know what actually you can close them all in fact you going to need some of them And what I asking is how many are we going to need Because at some point we need to have an honest conversation with legislators with Californians with the industry of okay if we going to achieve our goals what does that look like What is the end game? How much are we still going to need? How much are we going to use? So, by the way, we protect it because I'm in the boat of I think we're tottering very dangerously having now had two closures. That what's to say that the industry just goes, okay, you want to import everything, import everything. And I think then we have other problems. So what I'd like for you to do is to follow up with the committee. Maybe it's a subsequent hearing. I don't know what it is. I'd leave that to the direction of the chair. But I really hope that at some point we could have an honest, broad discussion about, okay, we're going to these goals, but what is it going to look like and what is it going to cost us and what does that mean? What else are we going to need? So we're not talking in these broad, oh, well, it's declining. Okay, it's declining 1 to 1.5%. So if it declines 1, 1.5% each year, where does that put us? We need to know more specifics. We have roles as legislators. I realize you work from an agency perspective, but that doesn't resolve us from our responsibility to make sure the right things are happening because we actually answer to the people. You don't. We do. You answer because you're appointed and you're hired, but that's not how our role is. So if you would kindly provide us with that information so we can have broader discussions of how do we plan legislation going forward that we're not just, you know, planning something and in the end we did the wrong thing. Which leads me to the next question. I'm concerned that when I hear all this talk about importing, I really believe you have a responsibility to us, to Californians, to say, what is that impact going to be of importing? I don't think it's fair to say, oh, we're just going to keep importing. Okay, well, sir, let me tell you, how are you going to import? It's coming through my district, the Port of Los Angeles and the Port of Long Beach. So you have yet anybody here to have told anyone in my district, how many more trucks does that mean? How many more storage tanks does that mean? Where are those tanks going to be? What is the security vulnerability to that? Do we, in fact, by importing this fuel, is what we're getting better than what we already have here now? And if it's not, I don't understand how we're really meeting our goals. So I just, Mr. Chairman, I appreciate this information. In fact, this is probably one of the best overview, kind of helping to understand kind of the strategy that we've gone down. But I really think we're missing the key points of so what happens when we do it? What are the impacts when we do it? And I really think we're doing a dereliction of our duty to be encouraging further imports when you're not telling me, okay, and you did say impact, to your credit, impacts to local communities, to the workers, and so on. But, again, what does that mean? Does that mean that our ports now are going to grow in size by 30%? Does that mean we're now going to have how many more vessels coming across? What does that mean to the impact? Because right now not all of those vessels are connected to a grid system. How long is it going to take us to create a grid system? I mean, why aren't we having those discussions, I think, need to be had of how we're implementing this strategy, how do we do it and what are the impacts? So at some point I think we have a responsibility to say, is that really what we said we wanted to do? And so I have probably ten more questions. I will put my questions in writing and submit them to the panelists, and I would ask with all due respect that you would respond and through the chair that all the committee members would have it. But I just think I let me end with this point. I grew up in Los Angeles. When I went to school, you could not see downtown from where I lived. You couldn't see it. Smog, you know, asthma, everything going on. And to the credit of this body, to a lot of hardworking stakeholders, to agencies, people have come up with better fuels, come up with amazing things, that now most mornings when I drive up the 110 freeway, I can see downtown, that from outside of my backyard I can actually see Catalina Island. So I do not want to be remissed in saying that where we're going is helping and is getting better. But my question, the question that I just want us all to make sure that we can answer, is as we go forward and as we continue this process, I think we have to answer all the questions, not just the questions of, oh, yeah, you know, we're reducing. Oh, you know, we're going to import more. Oh, we're doing this and that. But we're not saying all that other stuff because all that other stuff may not necessarily answer, are we on the right track or are there adjustments maybe that could be made? And maybe 85, I don't know who came up with 85%. Did anyone say when we came up with 85% what that would look like? And at this stage of the game, I think someone needs to say that. Maybe we say it's not 85%, maybe it's 80. Maybe it's not 85%, maybe it's 95. Maybe we can go all the way. Okay, I'm there. but we just have to make sure we're answering the questions and we're not jeopardizing the goose that lays the golden egg, and now all of a sudden we're going to have some serious problems. And I'm just not convinced from what I'm hearing in the presentations that we are answering those questions. And certainly this hearing wasn't intended to answer all questions. I get that. But I just think at some point we have to, when we have these kinds of hearings, because people are listening and thinking, oh, okay, we're doing okay. We're importing more. We're reducing. Everything's okay. And I'm not sure everything's okay.

And as you do so I be interested in your thoughts on some of the pipeline opportunities that might be coming down the pike as well beyond just shipping oil in Thank you Chair and Senator Richardson

Just real briefly, I think the vice chair did an excellent job of summarizing it. I just want to extend, yes, we do have quite a bit of additional detail and data on how fuel demand could potentially decline and the various different scenarios going forward. Happy to work with you in your office to answer those questions, so look forward to being able to do that.

Senator, I just want to reiterate. I just want to say thanks to you and the body at large. it has been incredibly helpful for us to get those pointed questions from you. I think in the best form as state agencies, we are here to provide you with the best information that you could guide the decisions. So I really appreciate that. And just as closing, again, just on the opportunity of the pipeline, the contemplation right now is for a pipeline to be built from the Gulf Coast all the way to Arizona and connect it to the existing pipeline, Kinder Morgan pipeline, and reversing it back into California. Again, it provides opportunity, but to your point, the reversal just doesn't happen. The reversal comes with certain safety considerations that we need to actively think about and whether the constituents and the perspectives align with that. So absolutely, and we look forward to continuing to talk to you.

Thank you, Senator Richardson. We're going to continue now with Senator Becker and then Senator Grove.

So we are working on that. Obviously, we did a lot of work last year. And, you know, we built this year bills to tackle utility incentives, utility profits, as well as dealing with wildfire costs, which are a big percent of bills. So those are things we have to look at. But in your view, you know, take that heavy truck, for example. Why are we so much lower than, say, a country like China? So, Senator, if you're okay, just we'll take it a little backwards and then we'll pass it to Matt as well. So today the gasoline demand in California right now is about 800,000 barrels a day, roughly. And if we have to meet the carbon neutrality goals and go through a rapid transition that the carbon neutrality contemplates we need to drop that to 100 by 2045 So it's a very rapid reduction, and I think to your point, it directly implicates the importance of electrifying both light duty, but also heavy and medium duty. I wanna just talk about a little bit of the electricity planning we're doing, and I'll pass it to Matt on specifically the programmatic opportunities. In terms of, you know, one of the barriers for electrification has been the transmission infrastructure. So both PUC and CEC have been working on figuring out transmission corridors that allows for trucks to move north and south. And that also means that we have to do a better job thinking about allocating the load to specific bus bars and providing that proactively to the utilities so they can do the upgrades. So I'm going to just talk from the requirement of the infrastructure. I think that's important. Second to your point, principally, the parity, the cost parity of the vehicles is something we need to think through. And I think I would differ to Matt on this issue. And to your point, no matter the cost of the parity, operation costs are important, and important for us to think about long-term reduction of the overall prices. And I think I continue to thank you and grateful to this committee and your colleagues and continue to work on demand flexibility as an important strategy to reduce the prices and reducing the denominator. So with that, I'll pass to you.

Okay. Yeah, we'll follow up on that, have some other ideas. I'll probably just do one other question for now. To focus on the crude inputs, looking at some of this data, it looks like about 29% probably of total crude imports are from the Amazon region. Looking at some of the data here, and I think it's increasingly understood that the Amazon itself is at a tipping point. This came into focus last year with the first ever COP. conference in the Amazon region and the governor's trip there. They just completed the first ever international conference on transitioning from fossil fuels in Colombia, and we did have a California representative there at that conference. So as you think through that, you know, that aspect of our import, you know, do you think there are ways that we can look at this? And I appreciate, you know, you, Vice Chair, and I think the members of the administration also meeting with representatives from the region. But thoughts on that?

Yeah. Thank you. Well, thanks for all the data on the pricing as well, really eye-opening both in terms of the costs of the Iran war, the $50 billion price tag, and as well the impact to the California consumers of this war, as well as the difference between branded and unbranded, really eye-opening important stuff. So a lot of other questions, but we'll turn it over to my colleagues. Thank you. Thank you, Mr. Chair. I really appreciate it. I just have a couple questions. One for Mr. Milder. In your presentation, it seemed like you got to the point where you were talking about market manipulation. Have you found evidence of illegal market manipulation in price gouging by any California refineries?

Going back to it, it would have, but have you found a California company price gouging? Have you convicted any California company that price gouged? Currently, right now, as we stand, has any company been convicted of price gouging in California?

It seems to me, but again, a central focus seems from the DPMO is the public messaging is price gouging, but there hasn't been up to this point any company that has been convicted of price gouging. Is that correct?

But has the Attorney General's Office had a conviction on that case?

Well, there's many different reasons why that can happen. Is that correct?

Yes, including the industry margins that have also gone up. And one of the other things I wanted to ask is, have you put forward any recommendations to reduce regulatory barriers to improve the business environment and climate for refineries?

I've talked to industry. I'm sure they're going to come up here. But, you know, we've, as policymakers, talked to a lot of the folks who do this business and the regulatory environment that they're in. Have you focused on any part of any recommendations to kind of reduce the regulatory barriers to improve the business climate so we don't have a shutdown that just happened with Valero or Phillips 66?

And then I have for Mr. Gundah, your report says California has become more dependable on import fuels. Does the state's view think that that's a greater reliance on imports? Is that a success for California?

Thank you. A follow-up question. You mentioned a pipeline that might go into the Gulf Coast. How would that work when we have a California-formulated gasoline to get oil from, or refined oil? coming from Gulf Coast?

And what would be that timeline for the pipeline?

Okay. And then I don't want to take up too much of the other members' time because I know we've been here a long time. If I could just end on my own time and say I think that my good colleague from Wilmington, I believe, is her hometown. Is that right? Or is it Long Beach? San Pedro. Thank you. Thank you. I think my colleague said it exactly clear here. What does this look like? I don't think a lot of at least people in my district have the same goals as some that's coming out of CARB. And I understand CARB's implementing what some of the legislature's done. But if you have these big goals, you know, for example, no gas-powered cars by X amount of dates, we want to know what that looks like as elected leaders. And we want it to share with our constituents because I do believe when we do know what that looks like, I don't think it's going to be as popular as everybody thinks it's going to be. especially when we talk about the economic impact on our jobs and hardworking California families, when we talk about the price of fuel and the price of gasoline and what the cost, the offset cost, is moving forward. So, you know, on one end, it sounds great when you say it, but then I think my colleague said it best, and I would like to see that as moving forward in a future committee. What does that look like?

And so I would end with that. I want to thank my colleague from Bakersfield for allowing me to go because I had to get going, and I appreciate everybody's time here today. Thank you. Your colleague from Bakersfield. Thank you, Mr. Chair, and thank you for being here today. I have the utmost respect for the chair. You all three have street cred because he's sitting next to you, just to let you know that. I want to follow up and I want to echo my colleague from Long Beach's or Orange County's comments regarding the statements that were made by our colleague from San Pedro. Cut and paste her comments so I don't have to reiterate all that. We want to know what it looks like. But I want to ask some questions based on the comments that were made instead of making long statements. In 2016 years ago when AB32 was put into play 15 billion gallons of gas were used every single day in California consumers In 2022 it 13 to 13 billion gallons In 2024 it 13 billion gallons And in 2026, it's back to 13.3 to 13.4 billion gallons every single day. You guys have all made presentations before this committee and the legislative body as convened both on the Assembly and the Senate side. You've all mentioned the transition, and now it's a mid-transition, and we're changing that phase. Again, with all deepest respect, what does a mid-transition mean? And are we there? Are we halfway there? Are we partway there? Because based on the numbers that I have before me, we are not reducing consumption, and we have spent anywhere almost up to $100 billion implementing AB32 at taxpayer expense, or when I say taxpayer, the producer, the refiner, the people who are buying allowances, all of that stuff to stay in business in California. So what does that look like? What is a mid-transition phase, and are we there or where are we?

I appreciate that. And, again, the deepest respect to you, Mr. Vice Chair. going over the numbers that are here with the decline, okay, from $13.4 billion to $13.3 or $13.2, there's a range there, at $100 billion cost. That's a significant cost per gallon of gas for the California consumer. Significant. Hundreds of thousands of dollars per gallon, basically, to try to implement this. I don't want to say when do you throw away the towel. You can't do it. I realize that we're going to do a transition. But my question is, is that at what cost? $100 billion to implement AB 32. And my other question to that is at what cost to Californians, but also, We do ocean board or ocean born and we import a lot of fuels. Those foreign companies and those, excuse me, foreign countries and those companies that are producing either refined fuel or crude oil that we're bringing to our ports, they're not buying allowances. They're not competing with California producers or California refiners. It's cheaper to produce, Japan or India produces a lot of fuel for us. It's cheaper to produce it in India and transport it over here with 1.6 million metric tons of carbon emissions to bring that ship here, which affects air and air quality. But yet they don't pay the price that we do to produce it. And how is that even beneficial to Californians?

I do, and I appreciate that. But you have 90% of Californians, 90% of 40 million people in this state that still drive gasoline cars. I mean, and we've been doing this since 2008 at $100 billion cost, roughly. There's an estimate. It's $80 to $100 billion, but roughly I said the high side. I should say $80 billion. 90% of Californians in the last 10 years still drive gasoline-powered cars, and this is all supposed to disappear in 2045. Are we going to make it?

Is that really a reduction? I don't mean to interrupt you. I know the chairs, we're on close on time, and I know you guys have been here for a long time. Is that really a reduction or is that just a pay, like buying allowances to operate so you're not really reducing it, you're just paying money to pollute?

Yes Right because that was gasoline and diesel total at 13 billion gallons includes both of those values As the vice chair mentioned in his remarks in the diesel fuel pool now

Thank you. Given California's current market demand on gasoline with only six refineries left, and I'm going to preface the fact, and industry is probably going to just come uncorked when I say this, but it's actually just four companies. I mean, we're getting to a monopoly stage here, and they're going to hold all the cards because this body has driven most of them out of the state, and we need them.

Is that correct, or is it three companies?

I mean, all these things that come out of this building. So I just want to make it clear that I think we're going to a monopoly situation. I'm getting that dirty look over there. But what other options exist for meeting the demand for gasoline besides importing? I mean, I know we're importing, but again, 126 million metric tons of carbon emissions to bring those ships to this shoreline so that we have a refined fuel or a crude oil price or a crude oil that we have to have in order to maintain these 90% of Californians that are still driving gasoline vehicles, they don't pay into the cap-and-trade program. They don't have to buy allowances. They're not competing on the same wavelength that we are required as producers and refiners for California-compliant oil. I'm looking at you, but it could be anybody.

And what that means is less control by those few companies here and more competition. And so in the years 2024 and 2025, when we've had more import competition, we've had lower and more stable prices. So part of this is around opening California up for business, both making sure we have in-state refiners, but also competition. That's coming from marine imports, also potentially from a pipeline, as you've heard, in 2029. So that would be three different sources of supply, and that's what the northeast of the United States does, where they don't have the same kind of price spike. So that's a real truism in antitrust is if you have less barriers to entry and you have more competitors, then you see more competitive prices. And in terms of the distance fuel travels, the vice chair laid out very clearly the total number of imports is actually pretty stable or even declining. It's a shift from crude oil, which may also be coming a long distance, to refined products. And so that doesn't necessarily mean more congestion at the ports or longer distances traveled. It's a shift in the types of products that are coming in.

You can make a comment in closing.

Thank you, Senator. So we'll submit the slides. So one of the slides that we showed is, you know, we said last time when we were here that we can credibly look at six weeks of supply, you know, liquidity that is not going beyond the 10-year average. So that doesn't, you know, it was a little misconstrued that we said that we are going to run out of fuel. So I just want to make sure we updated those numbers. Again, over the next seven to eight weeks, we see good liquidity in California. And we don't expect even under, you know, kind of critical scenarios for our overall days of supply to fall below the 10-year average. and then the second part is if we continue to dip it will be a signal for the market to import into California And you know what we have seen over the last three to four weeks three to four months is some of the developing economies cannot pay such high prices. So what's happening is the molecules are being diverted to countries, including like California, where there is willingness to pay, and we'll continue to see those molecules come at a higher price. Okay.

Yeah. Thank you, Senator, and I want to uplift both your question and Senator Richardson's question earlier, which really is asking the state agencies to look at this more holistically across different lenses, whether it's employment, whether it's revenue, and so on. So we do have a product by statute, the transportation fuels assessment, the second version that we need to submit to you by the end of the year. And one of the things we are hoping to do is continue to sharpen our analysis from the first transportation fuels assessment, the 237 assessment, the joint transition plan, and to really provide you with the overall, here are several pathways for transition, including a potential edge case of having all the refineries continue to stay. And each one of them, I think you will see pros and cons across a variety of metrics. And I think given the entire conversation today is really pointing to an industrial transition. This is a huge part of California's economy. Everything we do here will impact economy, environmental, and equity considerations. And we want to put those information in front of you and get your guidance. And that's what we're going to try and do this year.

No, we said we are continuing to monitor six weeks ahead. And as of today, we look good between six to eight weeks. We're good. That doesn't mean that after six to eight weeks, under a bad scenario, we're going to run out of fuel. What we meant to say was we are under a bad situation. we could dip into lows that we haven't seen before, and that might attract imports, but it'll come at a cost. Okay, thank you.

Come get your solar panels. We'll go to Senator Stern.

On the local markets issue, I believe we do have the authority. It's more of a resources question. So looking city by city or even within zip codes, we're starting to try and tackle some of those questions looking at hotspots, but it's a question of prioritization. The Iran conflict has created a lot of different demands on both DPMO, CEC, I'm sure CDTFA as well. So I do think we could try and tackle some of those issues in the future. I can't answer the authority part of it, but as we notice these trends and looking at data analytics, that's one area we'd like to explore further. So these are some of the trends we're noticing, analyzing large amounts of data, tens of millions, hundreds of millions of dollars of pricing data. We notice these trends, and that's one area I would like to explore further in terms of market concentration and ownership.

We have tools. Sometimes we don't have the data and information, but we have the technical ability to do analysis. But at this point, maybe not the sufficient data to do that analysis. Maybe the tools to do so, but not necessarily. We are a very talented data analysis team and well-versed team that could do that analysis.

Yeah. Senator, I think there is a little bit of an issue here on the data, which is while the gathered data could be shared by us through interagency agreements, some of the subscriptions are not readily shareable. So, for example, we get AAA information, opus information, and usually those information comes with a lot of caveats and what can be shared, what can be published. So we're continuing to work on it, but I think there's an issue around resources and how well to share the resources and data and how much latitude we can get from these subscriptions to be able to publish and use. So we'll come back to you with additional information on that as well.

I believe it was the German context we were talking about. Yeah.

Well, as I mentioned, that was a study that recently, maybe a couple of years ago, came from Germany, And that's one area that, like I mentioned, we noticed that and, you know, hearing and doing some more research. We noticed in other industries that are using algorithmic pricing, surveillance pricing, dynamic pricing. So that's the thing we thought that is another area that we'd like to explore further into the future. If what those studies are finding, the increased margins due to adoption of this pricing, there's something worth for us exploring further and trying to find more information.

Yes, Senator. So we have notified market participants, I believe AB325.

Yeah, so using a common pricing algorithm, if companies do that and it has the effect of fixing prices, that is certainly something that's actionable.

That's correct. We have the ability to require companies to provide information through subpoena, and we have the mandate to look beyond just violations of law to market structure problems, market power abuses, other things to raise it up for policymakers. So we're continuing to try and shine a light on why these high prices are there, not necessarily having new statutes that we can enforce, however.

We sure have.

Absolutely. Do not comment publicly absent, I think, different circumstances around what we do, but in that arena because we have to keep a lot of it confidential. but our team is small but I think very effective in terms of the number of market participants we engaged with both in the first instance collaboratively or voluntarily but then also using subpoena power if we need to Okay All right Well that a thread I want to keep pulling going into the future is just how to better

I did want to inquire with you, Vice Chair Gunda, is there currently, I mean, we've told you study a lot of different options, but we haven't, from my understanding, we haven't really given you a clear directive to start pursuing any of these options. Is that correct? Sort of explore it all, but not a lot of, you know, say on this point about diversifying our fuel sources. We haven't said to you, go maximize that or go figure that out. Is that correct? Yeah, I think the current statute requires us to bring back to you, both in case of CARB and us, a menu of options or what we're trying to, this time around, Senator, as we go into fall, really bring to you some credible pathways from point A to point B that uses the work that CARB has done and put in front of you the pros and cons so we can get the directive and the tools.

Yeah, and I think I want to take a two-part answer to that, Senator. I think the first part on, you know, kind of the timeliness of the conversations, I just want to put a pin in that, you know, the conversations we are having are ongoing, so we welcome those discussions on an ongoing basis. And to the extent that the legislature is able to do incrementally work towards that longer path absolutely willing to be there and accessible for those conversations On the second part on just the imports as you noted we are right now tracking about 10 to 12 refineries maybe more because we don't have refinery by refinery, refineries in the world, both in the U.S., globally, that are producing both Carbob and the blend stocks. And so what that has been doing, and the reason why it has slightly started growing up, is there is a very credible signal that California is short now. because structurally we are short 200,000. That means 20% of fuel has to come. So there are two elements that we need to think through, and we are modeling that and happy to share that with you. How do we make sure that the import barrel coming in does not make the California refineries uncompetitive? And I think that's been a huge question for CARB, and I know your leadership on that. And the other side is while we make them competitive, how do we increase the supply liquidity so that there's more competition. So to your point, we are tracking, again, in interest of confidential conversations, we are tracking at least three conversations that are really interested in increasing the presence in California. And what we are beginning to really see is we need to think about the vessels. So a lot of the Jones Act vessels that we have today are coming to end of life. So we need to figure out how to make sure that we have enough Jones vessels. Second, the storage access, and this is something that DPMO raised as well, the importance of having the infrastructure accessibility for these people who can compete in California. But the last one, the third one that is really important for us to proactively solve is how do we de-bottleneck the infrastructure? For example, the Concord station, if you think about Northern California supply, There's a lot of tightness in the distribution network of the pipelines. So what we're actively looking at with collaboration with other state agencies is to think about whether there are idle pipelines that are useful. So we're going to circle back with you. I think if we did it right, there is a huge opportunity, and we have several scenarios on what the price impact could look, and we'll share with you.

Yeah, absolutely. And I want to just take it as a linear thing, Senator. So as we think about what happened since the passage of the second special session, we had two closure notices that came our way, both P66 Wilmington and Valera-Benecia. And one of the most important things, again, we're all resource constrained, and we noted that earlier, CEC has limited resources on the overall resources for CEC have not significantly increased, and we didn't ask for it during the special sessions. And I want to note it, and I know the nods from the dais. We needed to move them towards really understanding whether the assertions that were made by the industry during the special session were accurate or not. And then for that, we convened a task force. 13 agencies sat together, and we went through assertion by assertion to understand, you know, which are true, which are not, and what we have taken from all those conversations And again, from CEC's perspective, we are taking each agency's expertise into our process, but ultimately we have, as a commission, the delegated authority to put these regulations to maximize the benefit. So what we've kind of thought through is the most important thing to do at the moment is make sure we understand the data better. So as a part of resupply, it's not that we did not do anything on the resupply. We had the maintenance regs where the industry has to provide us what their resupply plan. And without breaking the confidence of Pairai, I want to note this, CEC has visibility on which refineries has a planned outage 12 months ahead. So we were able to, in 2025, see whether they were planned outages or no. And so the importance of regulations for us meant, you know, try to do it voluntarily, try to figure out a relationship with the industry where we can collaboratively work with them to bring in the necessary imports. And if you look at the events in spring and fall, especially fall, when we had two refineries in the north out at the same time, our prices didn't really go up. And I would say it's a testimony to the coordination and the long-run visibility and long-run planning on, voluntary planning on resupply. And I also want to note that some of the refineries currently do resupply on their own for long-term contracts that they have. what we were able to do is have conversation to bring in more imports. And that's what we've been trying to do, and I think that's a point that DPMO raised in our conversations about the importance of having resupply through imports rather than in-state cannibalization. And we have done that in a collaborative fashion. And I wanted to say, finally, us kind of taking a little bit of a detour on thinking about the mid-transition and holistic framework does not mean that we're not going to move forward with the regulations that are important. We have a June 8th workshop coming where we are restarting the conversation and resupply based on all the information we had the last two years.

So as with any of these strategies, Senator, I think it's the implementation, right? Ultimately, what we're talking about is does any of the bills, legislation, regulation that we do ultimately increase the overall competition and liquidity into the state? So if we relaxed the car bob, let's say, and we said we would put the surcharge, which is contemplated in some of the bills, too high, what is the motivation for an importer to bring in fuel? So it has to be in a way that it should make a meaningful sense for an importer to bring in fuel. And then the other side is, we've talked about today, we don't think we can afford to lose another refinery in the near term until we have clarity on the long-term strategy and an agreement. And that means whatever we do should not impact the in refineries So I think that balancing point of having the right correct level of pricing could both help and then could be meaningful

And for us at CARB, I think this all centers on what are the health and emissions impacts of potentially changing the fuel blend in California. Certainly, we have CARB up here in California in our fuel specs, and that's existed for the better part of a few decades. And that is, you know, specifically designed to reduce the incidence of non-attainment days of ozone emissions, which lead to asthma and other adverse health impacts. And so if we're interested in looking at what would it take to change California's fuel specifications, which I've said publicly before that I think there's merit in evaluating that question, for us it's a scientific one. What would the emissions changes be if we were to change the fuel spec? And this is something that we've discussed with CC. It's reflected in the TFTP and the 237 analysis work that CARB is now undertaking to understand, And, you know, if we run different fuel specs in California through California vehicles, what could the emissions changes be? So we're undertaking that analysis now. That will take a little bit of time. That's a scientific analysis. It requires laboratory testing. And once we have some of the outcomes from that analysis, we'll be able to answer that question more directly.

More directly.

Well, I think you can appreciate that, you know, what that requires is actually procuring different spec fuel, requires getting vehicles, requires testing those vehicles, doing the data QAQC. So I'm going to put it on multiple months towards early next year at the best case scenario, and we're working this problem and happy to kind of follow up on it a little bit later.

If I could briefly address it. Please, yeah, and then I'll yield back, Mr. Chair, when we're done with this. Just from an economic, so defer on the specification question and the health impacts, obviously, to CARB. and just from a competition standpoint, it really raises a great case study. So if you look to the northeast of the United States, there they have RBOP. So it's not the same standard as CARBOP, but it's higher than CBOP. There they have supply. They had in-state refiners, regional local refiners, some of which became uncompetitive and have closed due to larger mega refineries. It's a trend around the globe. So you've had some local refineries closed, but the efficient ones are still operating there. They have pipeline imports and they also have marine imports and their fuel specification is more fungible So what economists will say is that lowers barriers to entry to California fuels market You have more potential suppliers You have people deciding should we send a ship to New York or should we send a ship to California And that could ease some of the price spike-type situations we've seen before.

We know our current LCFS model, OPG, really uses averages, sectoral averages beyond our borders that are pretty loose. how to get the carbon intensity, say, of Iranian oil or Russian oil. It's not something you just go over to Moscow and go collect and do the same kind of testing you guys do at the airport, right? We have to make assumptions.

Yeah, I appreciate that the carrots are there now with the MDI, right? That's only for our instaters. But the reverse is just sort of making sure that we have an accurate intensity for LCFS purposes as well as cap-and-trade purposes of those, you know, fuel intensity of those imports. And at the rack everything is just treated as okay what the just from a combustion perspective what the intensity but not how are the Korean refiners you know what fuel inputs are they using right And what are the Indian refiners using So I just feel like to make a really complete story what I hoping is as you sort of start to finalize your integrated analysis and get this fuel assessment really in shape and sharpened, as the vice chair said, let's find out how to either update OPG or get a better plan for getting that import-based emissions intensity. So if you could take that back to the mothership, I'd appreciate it. Thank you, Mr. Chair.

Thank you, though.

Thank you, Chair and members. Thank you for the opportunity.

Can you hear me? I think you have to press the button.

And am I doing my own slides, or is someone else doing them? Yeah.

You're up on screen.

You're on screen. You're on screen. You're on screen right there now. I got it. Yeah. Okay. I just want to take a moment, though, to thank Senator Allen, because all the data we're getting today comes from SB 1322, which is a bill that he did in 2022, single-handedly, went to the legislature and said we need more data. We need to have the data on what the oil refiners are making per gallon per month. And all this data started with that SB 1322. It was the single most important transparency reform we have today because it's what the public can see. It's posted every month, and it's 45 days late, and it's a tribute to the fact that the public has this data. The CEC has a lot of data. We don't know what that data is. We rely on them for interpretation. But because of Ben Allen, we have this data, and it's something we can see what's happening in the market. So let me show you what I think is happening in the market. This is data, SB 1322 data, showing the refining margins going back to 23 when the data from SB 1322 was first published. And you can see we had a rough year in 23. These margins were high. And the work the CEC has done at deterrence has really helped in 23 and 24 to lower margins. But as you see, in 2026, we're going up again. The margins were $1.02 in March per gallon, and that was just getting going. These are CEC slides from January all the way to March. And I want to show you something about these, a couple of things. Gas was $4 a gallon in January, and it was $5.26 in March. And you can see that this is not due to environmental fees or taxes. Those have remained stable. The refiners always talk about environmental fees and taxes. actually driving up the cost, those contribute about 87 cents a gallon, more than the average U.S. state. Everything else is what the refineries are making. And if you go from $4 to $5.26, you can see that that crude oil price is a big part of it. It's about 70 cents. I think they said 75 cents now per gallon. But the rest of it is refining margin and retail margin. It went up by 50 cents. And if you notice, the gallon of gas today is $6 a gallon, according to AAA. And the crude oil costs are stable. So they're about $97 a barrel, $100 a barrel. So when we project out what the refining margins are going to be in May, when gas prices are $6 a gallon, it's going to come out in the refining margin. It's going to be another $0.50 to $0.70.

Can I ask you quickly, just because you bring it up,

No, 2029.

So is she totally. Yeah.

Well, thank you, Mr. Quirk. Appreciate it. Let's go next to Zach Leary, who's here from WSPA.

Thank you. All right, let's now hear from Jeremy Martin, and then we'll open it up to everyone for discussion.

All right. Thank you. Thank you. Okay. Questions and thoughts from our colleagues, for our panelists.

I hear you loud and clear on the refining side. Yeah, I mean, I do. Obviously, when we're looking at Chevron making 89 cents and Costco taking 27 cents, that's a big problem. I just don't have a way of seeing the retail margins. The thing that the value of SB 1322, Mr. Allen's legislation, is we can see those refining margins every month, and it's self-reported. We don't know the retail margins. The retail margins are calculated based on what's left after the refining margin. So everything else is filled in, the LCFS, the tax, the crude cost, the refining margin, and whatever left over is what they give to the retail margin. It's not an actual reported thing. So that's why I have a lot of concerns, and I would urge everyone to go steer away from branded stations because they 40 cents more and you not getting any different gas But fundamentally the difference between making per gallon as a refining margin when refining margins were like 50 cents in January, that's a huge difference as opposed to a retail margin climbing by 10 or 20 cents.

Yeah, Senator Stern, and I'll follow up with you after the hearing, but there is data that looks at California's retail market, and it looks at the complexities of really largely small business owners operating in California's highly complex, highly difficult business environment. And you're seeing, as compared to the rest of the United States, much more branded versus unbranded. So probably difference there in ability to operate investments to the rest of the United States. You're also seeing a lot less gas stations per capita in California. And honestly, that's a testament to the business environment here. You have cities and counties proposing gas station bans, which gas stations allow consumer choice. It allows what you mentioned earlier, that you can go to where you like. You have a brand preference. You can go there. You like their bathroom. You like their coffee. You can go there. It's on your way to work. Go there. But at the end of the day, consumers have choice.

Yes, there have.

There were seven jurisdictions that adopted different bands.

Yes.

which I know folks like to point to in the narrow margins and that you're really just making money off. Can you sell a Slurpee or a Slushie or a coffee and that it's not actually made on the gasoline you're selling? That's a very small part of it for some retailers.

Not really aware of kind of the relationship. I think with franchise agreements probably comes more certainty on supply. When you're buying as an independent, you're likely buying on the market, not guaranteed.

Well, the refining margin is when it leaves the refinery gate, the retail margin theoretically is what they're making at the station.

And if Chevron's charging its gas station 40 cents more for the same gas it's giving the Costco for 40 cents less, Chevron's getting that extra 40 cents.

That's how it works.

Californians every day so that we don't end up in the situation that we have seen before in the United States where there is not supply, there is not fuel. The system has to work together. Largely each segment of the business is separate So refiners pipelines production retail those are separate businesses largely And so all those need to function together in optimal health to ensure that your constituents at the end of the day get the fuel they need. So to that point,

I don't have a position on individual projects. Nothing on individual projects.

Well, I think the CEC would need to look at,

You're talking about increasing imports from folks who don't have the same standards that we have in California. And that's been a decision. That's not the case. The Western Gateway Pipeline, refiners would have to meet the Carbop standard to put it on the refinery.

Well, after last week, there's not many obligations.

I don't see where those obligations are.

And that's a policy choice that the state's made, but let's just – and if we're trying to preserve and protect the remaining refineries, we have to know the impacts of issues going forward.

I think Iraqi is the main other source of crude.

Look, Senator Cern, we've been big proponents of pushing for more local production.

And we've advocated for that, and you and I have had.

so they're still on an island because they've been crowded out.

And so you've boxed out because the president favored one offshore driller.

Our Kern producers aren't.

We did seek reform and a lot of hard votes and voted for oil production.

And yet we're not actually seeing that impact pricing because of all these exogenous factors of people don't want there to be competition with our domestic producers.

I don't want anything in my gas tank, frankly.

But that's what I get.

There it is.

So how do we fix that?

I think one of the things you can do as legislators is ensure redundancy, resiliency, and ultimately for the crude production, ensure there are customers at the end of the day. Because without refineries, crude has nowhere to go to be turned into gasoline, diesel, and jet fuel. And that's why the customers in the north were important. because it allowed an offshoot of crude production from Kern County. But we are seeing, I'm not sure, PBFC,

There's just not that base up there.

Look, you're in a tricky position, and I don't envy you or the folks who staff WISPA to be

on the one hand, you have companies like CRC that are actually trying to bring real crude to the table from California and do it in a competitive manner and do it in potentially a net zero manner, and they started injecting carbon. I think last week into the ground. Like, we embrace that.

and is going to rely entirely on what looks like conflict zone petroleum as their source. So I just find the message to be a little bit discordant where you're saying, on the one hand, you know, help us be more competitive in state,

has an entirely import-driven strategy where they are the prime contractor in Venezuela right now.

I'm sort of channeling my inner Shannon Grove.

So how do you square – I mean maybe it's a rhetorical question, but how do you square that – those totally different business models? Yeah, and I think the business models haven't happened in a vacuum. I mean, we aren't in this position for lack of us trying to warn against the position we would be in. We warned the legislature during the first special session, during the second special session, that all the rhetoric that was being tossed around in those first and special sessions, that's not helpful for business investment in California. Those policies didn't provide more certainty to investments in California.

So the decision by Chevron to the shareholders, they wrote down $6 billion in assets or more and decided to start going after Guyana-Equidor well before we passed these refinements.

Yeah, and I'm not trying to explain their position.

And based on the policies of the state and the policies matter if there's certainty or if there's not.

Thanks to your good work, Senator.

We've seen more investment coming.

Right. I just going forward to think about how to get that crude to market, because we'd be remiss in when we stretch, like you said earlier, finding those sweet spots, those uncomfortable spots, whether it's, you know, to Mr. Court's point, the very uncomfortable but potentially necessary decision at CARB last week. if, in fact, that's going to keep us more competitive.

And then you're saying, well, you open up Kern.

We still don't want pipelines coming in from the east.

So it's just trying to get to that place where we have a clear counterparty to negotiate with and really understanding. And I get it very hard because you do have a membership that is you know there are different it not one unified voice perhaps maybe in petroleum in the West And may I respond Please And Senator we really appreciate the work you done And I tell you that was for one segment of the business and it hasn been enough And we did work with the CEC in good faith to show, here are the policies.

the 20 years of systematically dismantling the fossil fuel industry, there was a lot of policies between then and now, and there's a lot of things we have to address.

A lot more work to be done.

I mean, they just keep coming back for more cookies.

And I have no doubt that refiners made a choice based on that.

We have a conscious transition.

And we've diversified sources to marine, to pipeline. You're looking at it like it's a bad thing that we're closing refineries in communities. If we have sources of fuel to backfill them, it's not a bad thing. The state has to choose it as a conscious strategy.

for branded gasoline. I mean, there's a whole, I mean, franchise agreements, investments by the companies in the property. I mean, there's a whole host of issues. I mean, it's just so much higher than typical states. Well, also in other states, don't do this. That's the real key. It has to do with consolidation in the market. It has to do with what happened after the Torrance explosion in 2015, because before that explosion, there wasn't this problem. In 2015, the Torrance explosion happened. The refiners were offline for like a year. They got used to making higher profits. When we started to get supplies to backfill, the refiners wanted to find another way to keep making higher profits, and they started charging their branded stations 40 cents more, and that was their way to do it. And they could do it because the market was so few refiners controlling so much market share.

But I think, yeah, look at the market. It's harder to compete in California for small, unbranded mom-and-pop shops. That is just a fact. But we just saw the numbers said we're actually increasing, that the Hypermarts are now. That's the Costco's, the Safeways. I'm talking about Joe Schmo's gas station that doesn't have a brand that is on the corner competing with the others. and those are typically lower costs than a branded station.

But there's obviously money to be made in retailing gasoline in California if people are investing and Costco is investing or the hypermarts are investing. So it's not that it's a zero margin market. I mean, you're able to make some money. I think it's based on volumes, and I think folks have larger volumes than say a mom shop on the corner Let go to the vice chair So two points One would it be fair to say that you had mentioned earlier that

Yeah, I think you're right, Senator. It's not going to happen overnight, and it's going to happen by listening and learning from each other. And it's not necessarily about undoing specific things. In some cases, it may be. But it's thinking about it in a different way. Thinking about it in a way that does lead to compliance, that is feasible, that is cost effective. And I think we can have those hard conversations, and we have. We have done that with Sivagunda. And to his credit, he's done a great job listening, learning, understanding what's going on in the market. CARB board chair Lauren Sanchez, same thing. We've had a lot of conversations with her just about the impact of CARB regulations, CARB goals, CARB mandates, X, Y, and Z, you name it. We've had really good conversations. Now it's about acting on what we know the problems are and finding the right solution to ensure that there is ability for compliance and that there is certainty in the state and that it's making us more competitive, not less competitive.

I'm not an expert in the pharmaceutical space, but I would liken it to Cheetos versus cheese puffs. I mean, there's branded and there's unbranded. There's different components that go into each of them, brand loyalty, commercial, you name it. There's a ton of things that go into why branded is more a different cost than unbranded.

No, not necessarily. Because, well, it's sold at the same terminals.

Because, of course, there are branded gas stations all over the country. and the difference between branded and unbranded gasoline is much, much smaller in the rest of the United States than it is in California.

Yeah. Your comment, sir, Mr. Court, was the fuel is the same.

But my question is, is it truly the same fuel? Because I know that when you cross the line and go into Arizona or wherever you're going, the price is lower. Does that mean the refinery and the product isn't as clean as it should be?

It's the same gas.

So I guess that's the bottom line is consumer choice, right? And that's it. But the responsibility lays on all of you because the consumers in California are looking to us and to you to bring the prices down. And, of course, earlier today we talked about what's happening in Iran and everything else, which does have an effect on the industry. We know that. But right now, our chair and all the members here are concerned about the prices and how quickly we can bring them down. Do you see that other than what's happening in Iran because your hands are tied to that?

And I think it's a bit irresponsible to say we keep asking for more cookies. We were directed by the governor and the legislature to work with the CEC to identify problems and barriers and how to stabilize the refining market So we not asking for cookies We identifying problems And that was the directive was hey get with all these stakeholders

So the bottom line is you're saying that had we not imposed so many restrictions on you, requirements on you, you could make that adjustment and probably a lot sooner than we're seeing right now.

Could you give me a sense, Zach, of why you're not embracing this? With that statement made, why there's opposition to the UCS idea?

Yeah. Right. We're all in a – you're sort of complaining about the rules, but then you have to then invest so as to be able to incorporate the rules. But the flip side is if it's really about making things better for consumers and creating options that won't harm the air, Their proposal seems a really good idea.

Okay. All right. Thank you. That's well said. I appreciate the discussion and the robust and differing opinions.

Will Breger from State Strategies. I represent various climate groups. In a prior life, I was a lawyer, climate and fuels lawyer for 30 years. So I could get into a lot of issues that have been discussed today, but I'm going to try not to. I really just want to say that I am grateful. I'm excited, and I am focused. I'm grateful that we have the kind of intelligence we've heard from today, both panels, really a lot of great thought about supply in California, looking out for consumers, looking out for the men and women that work in the fuels industry, and that's important. I'm excited because some of these ideas if they're taken up could lead to wait for it price competition in California for gasoline wouldn't that be great we saw those margins up on the slide unbelievable we have a lot of problems in this state that you and a lot of little factors go into gasoline prices but those margins speak for themselves We need competition And I hope the legislature will push those ideas as fast as possible that will not make our Texas overlords happy. And I say Texas because Valero, Tesoro, Chevron, BP, North America, Shell, North America, ExxonMobil, 76, and Phillips, 66, are all in Texas. So the big paychecks, they write, are in Texas. Not our concern. It's the men and women in California that we need to worry about. And finally, I said I'm focused. And I'm focused on a different goal than we've been hearing about. This, just in, I really don't like when witnesses read, but I'm going to read a short section of something that this body wrote.

In 1974, thank you. In 1974, the California legislature established the CEC. And this is what the statute says. Over-dependence on the production, marketing, and consumption of petroleum fuels as an energy resource in the transportation sector is a threat, 1974, to the energy security of the state due to continuing market and supply uncertainties. So we've been, quick aside, we've been talking about 20 years and 20 years. This is more than 50 years we've been on this course. In addition, petroleum use as an energy resource contributes substantially to the following public health and environmental problems. Air pollution, acid rain, global warming, and the degradation of California's marine environment and fisheries. That is a goal we need to keep in mind. We're talking about supply and a reliable supply and affordable supply. But let's not forget, the real goal is to leave gas stations in the rearview mirror. So I ask this body and every agency to stay the course. Stay the course. That's the goal. And we cannot lose sight of that. Thank you.

Good evening. Allison Hilliard with the Climate Center. I hope you all are doing well. I just want to express support to the CEC and the partner agencies for their efforts to establish proactive transition of governance. That fosters an equitable and smooth holistic transition away from fossil fuels. California must make the transition easier by preventing supply shortfalls and price spikes while accelerating transportation electrification to reduce fossil fuel demand. The state should quickly implement the resupply rule and minimum inventory requirements already authorized by APX2-1. We fully support the policy concept outlined by Dr. Martin at UCS to establish a CARBOB waiver to create an equity-centered fund for clean air transportation. While the Transportation Fuels Transition Plan identifies important priorities, it does remain too general. The final plan should include binding community-led phase-out timelines, eliminate the multi-billion dollar cap and invest and LCFS giveaways to fossil fuel industry and other combustion fuel industries and also produce a detailed plan that outlines how the state can achieve its climate goals. Lastly, the recommendations in chapter should be greatly expanded upon in the final TFTP, and much more emphasis needs to be placed on integrated demand reduction strategies for both fossil and non-fossil combustion fuels. Thank you.

Jackie Onis, behalf of the California Fuels Convenience Alliance. Appreciate the conversation here today. Two things I wanted to highlight. One, it came up in the last panel around gas station bans. There are, in fact, 17 different localities in the state that have banned the construction of new gas stations. So we'd certainly invite the legislature to look at that and how that hurts competition, the opportunity to create more, to lower gas price for consumers. The other thing, just to briefly touch on, the discussion around brand and unbrand stations, I think Senator Archer-Ledda made a great point. Brand stations tend to have higher brand requirements around like lighting and signage that will lead to higher gas prices. The other thing I would also highlight too is brand stations have less flexibility when it comes to the fuel they can purchase. They are required to buy it from certain sources, whereas unbrand stations have more flexibility to shop around and get the best price possible for consumers. So, again, appreciate the conversation. Happy to follow up.