Sacramento –

As worries grow about refinery closures leading to higher gasoline prices, California’s legislative leaders put forward a last-minute proposal aimed at boosting oil production to support the struggling fossil fuel sector, even as it further restricts offshore drilling.

This compromise, negotiated by Governor Gavin Newsom, Assembly Speaker Robert Rivas, and Senate Pro Tem Mike McGuire, seeks to simplify environmental approvals for new wells in Kern County, which is rich in oil. The proposed bill would also make offshore drilling tougher by tightening the regulatory and safety requirements for pipelines.

With backing from Rivas and McGuire, Senate Bill 237 is anticipated to pass during the busy final week of Congress. Newsom’s office noted that the governor “looks forward to signing” it once it arrives on his desk.

If this measure is delayed, Congress may have to extend the 2025 session, originally set to end on Friday, by another day.

Introduced as part of a broader energy policy initiative, the bill aims to tackle escalating concerns over affordability and refinery closures in California.

Valero and Phillips 66 are planning to shut down facilities in the San Francisco Bay Area and South Bay in Los Angeles County, which would cut the state’s oil refining capacity by approximately 20%. Experts in the industry caution that losing refining capabilities could result in volatile gas prices.

This closure has become a contentious issue, drawing criticism from both newspapers and the Democratic Party of Japan, as it threatens long-term clean energy ambitions amidst rising living costs.

The proposal attempts to strike a balance between the oil sector and climate advocates, but neither group appears fully satisfied. Environmental organizations have criticized the deal, while industry representatives are still weighing their options regarding the bill.

Michael Walla, director of the Climate and Energy Policy Program at Stanford University, expressed some excitement about the potential impacts of the legislation.

He noted that the crude oil produced in California only forms a fraction of what refineries convert into gasoline. So, while increasing production might stabilize local oil companies, it won’t necessarily advantage the refineries.

The bill allows for the statutory approval of up to 2,000 new wells annually in Kern County, a region that accounts for about three-quarters of California’s crude oil production. Legislative amendments effective through 2036 are expected to bypass longstanding legal challenges from environmental advocates regarding drilling.

Despite the state’s commitment to progressive environmental policies aimed at reducing carbon emissions, California’s substantial oil industry—valued at $1 billion—remains crucial for the economy and political landscape. Although production is steadily declining, California is still the eighth largest crude oil producer in the nation, according to the U.S. Energy Information Agency.

Hollin Kretzmann, an attorney at the Biological Diversity’s Climate Law Institute Centre, voiced concerns that the law “is taking radical steps to support the harms of oil drilling while acknowledging it.”

He added that “removing environmental protection measures won’t reverse the decline in California’s oil production terminals, but it can cause more damage on the way out,” highlighting that it may not solve the issues surrounding refinery closures or gas prices.

Ted Cordoba, vice president of E&B Natural Resources, which operates in Kern County, mentioned earlier this week that California must reverse its declining oil production to maintain refinery operations. He relayed receiving an email from a pipeline company expressing, “Can you send me more at a dangerously low level?”

The bill could also present new challenges for Sable Offshore Corporation, a Texas-based company, depending on the ongoing litigation and required state approvals related to offshore drilling off the Santa Barbara County coast.

The company is currently undertaking repairs to a network of oil pipelines that spilled in 2015 during one of the state’s most severe oil disasters, facing opposition from the California Coastal Commission.

Effective in January, the bill reaffirms the committee’s oversight of pipeline repair projects and mandates “available technology” for pipelines that transport oil from offshore. If operations aren’t resumed by January, Sable may face extended government reviews.

Nevertheless, the company reports facing capital shortages and ongoing setbacks, pressing them to begin selling as soon as possible.

Sable’s representatives did not respond to inquiries on Wednesday.

Mary Nichols, an attorney at the Emmett Institute for the UCLA Climate Change and Environment Act, indicated that the bill is unlikely to influence ongoing projects off Santa Barbara County, which remain mired in litigation but doesn’t provide a straightforward path for other companies looking to exploit federal offshore oil opportunities from the Trump administration.

“It was designed to send a message to others who might consider doing the same,” Nichols, former chair of the California Air Resources Board, noted.

Additionally, lawmakers proposed a temporary change to the Cap and Trade program, an ambitious climate initiative that has generated approximately $31 billion since it began 11 years ago. The new proposal extends the program deadline from 2030 to 2045.

Last updated in 2017, this program allows major polluters, like power plants and oil refineries, to purchase credits for carbon emissions, enabling them to buy and sell unused credits at quarterly auctions.

A lawmaker involved in SB 237 expressed satisfaction with the balance being sought between the state’s fuel requirements and commitment to green energy, acknowledging the legitimate environmental concerns but asserting, “After all, our goal was to tackle the oil supply issue.”

“We don’t all want an import model,” she added.