GOOD MORNING. GOOD MORNING
EVERYONE. I WOULD LIKE TO CALL
TO ORDER THIS HEARING OF THE
ASSEMBLY COMMITTEE ON PETROLEUM
AND GASOLINE SUPPLY. AS PART OF
THE SECOND EXTRAORDINARY SESSION.
WE ARE HERE TODAY FOR AN
INFORMATIONAL HEARING. PICKING
UP ON THE CONVERSATION WHERE WE
LEFT IT YESTERDAY. TODAY WE WILL
DISCUSS SUPPLY CONSTRAINTS. WE
WILL DISCUSS THE
ADMINISTRATION'S PROPOSAL TO
REQUIRE REFINERS TO MAINTAIN
MINIMUM INVENTORIES. WE WILL
ALSO BE DISCUSSING OTHER
POSSIBLE SOLUTIONS AND POLICY
PROPOSALS TO ADDRESS SUPPLY
CONSTRAINTS. BEFORE WE BEGIN, I
HAVE SOME HOUSEKEEPING TO GO
OVER. I WILL MAINTAIN DECORUM
DURING THE HEARING, AS IS
CUSTOMARY CONDUCT THAT DISRUPTS
OUR PROCEEDINGS WILL NOT BE
PERMITTED. ANY INDIVIDUAL WHO IS
DISRUPTIVE MAY BE REMOVED. OUR
HEARING YESTERDAY LAID, I
BELIEVE, A GOOD FOUNDATION AND
UNDERSTANDING OF THE CHALLENGES
BEFORE CALIFORNIA. AT A MACRO
LEVEL, THE GIFT, THE DIFFICULTY
OF TRANSITIONING OUR ECONOMY
FROM A FOSSIL FUEL BASED ECONOMY
TO A CLEAN ENERGY ECONOMY. AND
AT THE MICRO LEVEL, THE
DIFFICULTY OF TRANSITIONING THE
TRANSPORTATION FUELS SECTOR IN
CALIFORNIA, PARTICULARLY GIVEN
THE STATE'S HISTORIC MARKET
STRUCTURE AND INFRASTRUCTURE
LIMITATIONS. TODAY IS ABOUT
GETTING TO SOLUTIONS TO THE
CHALLENGES THAT WE RECOGNIZE AND
UNDERSTANDING THE TRADE OFFS
THAT THOSE SOLUTIONS POSE. WITH
THAT, WE'RE GOING TO GO AHEAD
AND JUMP INTO OUR FIRST PANEL.
WE'VE INVITED THE ADMINISTRATION
TO BEGIN OUR DISCUSSION THIS
MORNING. VICE CHAIR GUNDY IS
BACK WITH US. THANK YOU SO MUCH.
AND DIRECTOR TY MULDER IS ALSO
JOINING TO PROVIDE AN OVERVIEW
OF THE TRANSPORTATION FUELS
ASSESSMENT AS WELL AS THE
DIVISION OF PETROLEUM MARKET
OVERSIGHT. RECENT MARKET UPDATE.
WE'LL THEN TURN TO A PANEL OF
EXPERTS AND EXPERIENCED
TRADESPEOPLE TO EXPLAIN THE
CHALLENGES AND PINCH POINTS IN
OUR EXISTING PETROLEUM SUPPLY
CHAIN. WITH THAT, LET'S GO AHEAD
AND START. VICE CHAIR. THANK YOU.
GOOD MORNING, CHAIR, VICE CHAIR
AND THE MEMBERS OF THE
COMMITTEE. THANK YOU AGAIN FOR
HAVING US TODAY TO GO THROUGH
AND THE REST OF THE DISCUSSION
THAT WAS TEED UP YESTERDAY.
GOING TO THE NEXT SLIDE, PLEASE.
OKAY. AND FOR MEMBERS OF THE
COMMITTEE. WE JUST RECEIVED
THESE SLIDES. SO WE ARE MAKING
COPIES. AND THOSE WILL BE
DISTRIBUTED TO THE MEMBERS
MOMENTARILY. BUT THEY SHOULD BE
ON THE SCREEN. THANK YOU. THANK
YOU SO MUCH. AND SO JUST WANTED
TO TEE OFF FROM THE CONVERSATION
YESTERDAY. THIS MORNING BETWEEN
MYSELF AND DIRECTOR MILDER. WE
HOPE TO BOTH DISCUSS FURTHER THE
FUELS ASSESSMENT THAT THE CSB
PRESENTED EARLIER THIS YEAR, BUT
ALSO DISCUSS ABOUT MARKET ISSUES
WITH THAT. FOR THE RECORD, I'M
CURRENTLY SERVING AS THE VICE
CHAIR OF THE ENERGY COMMISSION.
GOOD MORNING EVERYONE. TY MILDER
FROM DPMO. I APPRECIATE WORK
THAT IS GOING INTO THIS SPECIAL
SESSION AND PREVIOUS WORK TO
PROTECT CONSUMERS. THANK YOU,
DIRECTOR MILDER. SO JUST KIND OF
THINK OF THIS SLIDE THEN.
YESTERDAY WE KIND OF TEED UP THE
BROAD AREAS OF WORK THAT THE CSB
WAS TASKED TO DO UNDER SP ONE
TWO. TODAY'S FOCUS IS GOING TO
BE TO DELVE A LITTLE BIT FURTHER
INTO THE TRANSPORTATION FUELS
ASSESSMENT THAT WE'VE PROVIDED.
AGAIN, TO JUST REITERATE
YESTERDAY'S SENTIMENT. THE FIRST
ASSESSMENT WAS A THOUGHTFUL AND
A ROBUST EXERCISE IN CAPTURING
ALL THE DIFFERENT OPTIONS THAT
WE HAVE TO MITIGATE PRICE SPIKES
IN THE STATE AND RETAINED
RELIABLE AND AFFORDABLE
TRANSITION FROM FOSSIL FUELS,
AND ALSO FOR THE RECORD, I JUST
WANT TO RESUBMIT THAT. THIS WAS
A PUBLICLY FOCUSED WHITEBOARDING
EXERCISE THAT CAPTURED PROS AND
CONS OF VARIOUS OPTIONS THAT
WERE OFFERED TO US BY THE
INDUSTRY, EJ GROUPS, LABOR, ETC.
AND NOTED THAT FURTHER ANALYSIS
HAS TO BE DONE TO REALLY
IMPLEMENT ANY ONE OF THEM. AND
THE ASSESSMENT ALSO INCLUDED
THREE FUNDAMENTAL SECTIONS. ONE
IS AN OVERVIEW OF THE
TRANSPORTATION SECTOR, AND
SECOND IS LOOKING AT THE
PETROLEUM DEMAND. AND SUPPLY.
AND FINALLY WE DISCUSSED OPTIONS.
GIVEN THAT WE'VE DISCUSSED THE
OVERALL ECOSYSTEM YESTERDAY,
WE'RE GOING TO JUST FOCUS ON THE
OTHER TWO ELEMENTS TODAY. NEXT
SLIDE PLEASE. SO AGAIN WHAT YOU
WILL SEE IN CHAPTER ONE OF THE
ASSESSMENT IS A NUMBER OF
DIFFERENT CHARTS THAT WERE
DISCUSSED YESTERDAY. AND ALSO
ADDITIONAL PIECES. SO AGAIN THIS
SHOWS THE OVERALL CRUDE FLOWS
INTO CALIFORNIA. AND WITHIN
CALIFORNIA ALL THE WAY TO THE
PRODUCTION OF CARBON AND OTHER
PRODUCTS. AND WE JUST PUT A LINE
AROUND THE AREAS THAT WE ARE
FOCUSING FOR THIS MORNING, WHICH
WOULD BE REALLY LOOKING AT THE
DEMAND AND SUPPLY OF REFINED
GASOLINE IN CALIFORNIA. NEXT
SLIDE. BECAUSE A NUMBER OF
CONVERSATIONS TODAY ARE GOING TO
BE ANCHORED AROUND ENSURING
LIQUIDITY IN THE MARKET. I JUST
WANT TO COME BACK TO THIS SLIDE
OVER AND OVER TODAY, WHICH IS
JUST LOOKING AT HOW IS CÁC
ANALYZING THE LIQUIDITY OF THE
MARKET? WE ARE FUNDAMENTALLY
LOOKING AT FOUR VARIABLES. WE'RE
LOOKING AT GASOLINE INVENTORIES
WITHIN CALIFORNIA AND BROADER
PADD FIVE. WE'RE LOOKING AT
REFINERY PRODUCTION WITHIN A
GIVEN TIME FRAME. AND WE ALSO
LOOK AT WHAT MARINE IMPORTS ARE
EXPECTED TO COME INTO CALIFORNIA
FROM FROM OUTSIDE CALIFORNIA.
AND OBVIOUSLY THAT HAS TO BE
BALANCED WITH THE DEMAND IN
CALIFORNIA IN ANY GIVEN DAY
MOVING FORWARD. NEXT SLIDE
PLEASE. SO ONE OF THE THINGS I
MENTIONED YESTERDAY WAS AS WE
MOVE FORWARD WITH WITH THE WITH
THE TRANSITION HERE, THE DEMAND
REDUCTION IS GOING TO BE
UNCERTAIN. WHAT WE KNOW OR WHAT
WE OBSERVE IS 2017 WAS OUR PEAK.
AND SINCE THEN WE HAVE BEEN
GOING DOWN IN OUR GASOLINE
DEMAND IN CALIFORNIA. ALSO, AS
MENTIONED YESTERDAY, CSC DOES AN
ANNUAL FORECAST OF GASOLINE
DEMAND, PRIMARILY BASED ON A
SURVEY OF CONSUMER BEHAVIOR AND
CONSUMER PREFERENCES AND
ECONOMETRIC DATA THAT WE GATHER.
BUT AS YOU SEE HERE, THE FUTURE
COULD BE RAPID. IT COULD BE
SLOWER. AND IT'S IMPORTANT FOR
US TO CONSIDER DIFFERENT LEVELS
OF DEMAND DESTRUCTION IN
CALIFORNIA AS WE MOVE FORWARD.
NEXT SLIDE PLEASE. THERE WERE A
NUMBER OF QUESTIONS ON THE
REFINING CAPACITY, AND I WANT TO
OFFER A FEW DATA POINTS FOR US
HERE. IN 1982 THERE WERE 40
OPERATING REFINERIES IN
CALIFORNIA. AND COMBINED CRUDE
OIL PROCESSING OF 2.6 MILLION
BARRELS A DAY. THAT WAS THE
TOTAL AMOUNT OF REFINING
CAPACITY WE HAD IN CALIFORNIA IN
1982. THESE FACILITIES OPERATED
AT AN. THIS IS AN IMPORTANT
POINT TO KIND OF PUT THAT IN
PERSPECTIVE, THOSE 40 FACILITIES
ON AN AVERAGE WERE RUN AT ABOUT
60%. SO AS THE NUMBER OF
REFINERIES THEN CONSOLIDATED OR
REDUCED BY 2016, THE NUMBER OF
OPERATING FUEL PRODUCING
REFINERIES WERE 15, WITH ABOUT A
1.9 MILLION BARRELS A DAY, AND
THE UTILIZATION WENT UP TO 85%.
AND TODAY WE HAVE 13 REFINERIES
IN CALIFORNIA THAT PRODUCE
FUELS. NINE OF THEM PRODUCE,
CARB AND THE OVERALL PRODUCTION
CAPACITY HAS BEEN AROUND THAT 85
MARK AND HIGHER. AND DURING
SUMMER MONTHS, YOU SEE SOME OF
THE REFINERIES RUN RUN AT 100%.
NEXT SLIDE PLEASE. SO I'M JUST
GOING TO WALK THROUGH THE
DIFFERENT ASPECTS WE'VE
DISCUSSED IN THE FUELS
ASSESSMENT. WHAT YOU'RE LOOKING
HERE IS THE WEST COAST
INVENTORIES OVER THE LAST THREE
YEARS. SO THE GREEN LINE THAT
YOU'RE SEEING THERE IS LAST YEAR
IN 2023. RED LINE IS 2022. AND
THIS YEAR WE ARE IN KIND OF THE
BLUE LINE. SO I JUST WANTED TO
OBSERVE TWO TWO KIND OF
IMPORTANT ASPECTS HERE. IT IS A
COMMON PRACTICE BY THE
REFINERIES TO STOCK UP AS MUCH
AS THEY CAN BY JUNE JULY TIME
FRAME. BECAUSE THE PEAK PEAK
DEMAND IN CALIFORNIA COMES AFTER
THAT. AND TYPICALLY THE OUTAGES
IN CALIFORNIA OF THE REFINERIES
ALSO COMES AFTER THAT. SO
TYPICALLY BY JUNE, JULY, YOU SEE
THE MAXIMUM INVENTORIES AND
THOSE INVENTORIES ARE DRAWN DOWN
THROUGH THE SUMMER. BUT THAT
DRAW RATE VARIES FROM YEAR TO
YEAR. SO IF YOU LOOK AT 2022,
THAT WAS A RAPID DECLINE WHERE
THEY STARTED FROM. AND HOW FAR
IT WENT DOWN IN 2023. WE HAD,
YOU KNOW, WORSE THAN THIS YEAR,
BUT BETTER THAN 2022 AND 2024.
WE ARE DOING MUCH BETTER AND THE
DECLINE HAS NOT BEEN AS RAPID.
AND THAT DIRECTLY CORRELATES TO
THE PRICES THAT WE SEE IN THE
MARKET. SO THIS YEAR, THE PRICES
ARE SIGNIFICANTLY LOWER WHEN THE
PRICE KIND OF UP ELEVATION
STARTED BECAUSE OF THE HIGHER
INVENTORIES. AND THEN, YOU KNOW,
WE ARE SEEING IT EVEN GOING UP A
LITTLE SLOWER THAN LAST YEAR
BECAUSE OF THE MAINTENANCE OF
THE INVENTORIES. AGAIN, THIS IS
WHAT THE INDUSTRY DOES ON THEIR
OWN. AND, YOU KNOW, I WOULD JUST
ACKNOWLEDGE HERE A MOMENT THAT
SOME OF THE INDUSTRY HAS BEEN
EXTREMELY COLLABORATIVE WITH US.
AND I WOULD SAY THE POSITIVE
CURVES THAT YOU'RE SEEING HERE
IS THAT COLLABORATIVE WORK THAT
WE'VE BEEN ABLE TO DO. NEXT
SLIDE, PLEASE. SO THE LAST
CHAPTER OF THE FUELS ASSESSMENT
DISCUSSED A VARIETY OF OPTIONS
FOR US TO CONSIDER AS A STATE AS
WE MOVE FORWARD TO MAKE SURE
THAT PRICES ARE ARE BOTH
RELIABLE AND AFFORDABLE, SUPPLY
IS MAINTAINED. SO WE TALKED
ABOUT THEM IN MULTIPLE SECTIONS.
WE TALKED ABOUT DEMAND
STRATEGIES. WE TALKED ABOUT
SUPPLY STRATEGIES. WE TALKED
ABOUT COMPLEX REGULATORY
STRUCTURES TO DO THAT. AND MANY
OTHERS, AND JUST WANT TO PROVIDE
A COUPLE OF OPTIONS HERE. AS WE
AS YOU LOOK IN THE FUELS
ASSESSMENT, WE TRY TO LOOK AT
THEM AT THE COMPLEXITY LEVEL AND
HOW FAST YOU CAN DEPLOY THEM AND
HOW LONG IT MIGHT TAKE TO DEPLOY
A PARTICULAR STRATEGY. AND SOME
OF THE THINGS GET REALLY COMPLEX
FROM A REGULATORY MECHANISM. AND
I'M LOOKING FORWARD TO YOUR
QUESTIONS TO DISCUSS FURTHER
ABOUT THE OPPORTUNITIES OF
DIFFERENT ONES HERE. BUT TO
ELEVATE A COUPLE, OBVIOUSLY, YOU
KNOW, ENSURING THE HIGHEST LEVEL
OF EFFICIENCY WE CAN ACHIEVE IN
TERMS OF INVENTORIES WITHIN THE
CONSTRAINTS WE HAVE AS A STATE,
WOULD OBVIOUSLY HAVE A BENEFIT.
AND WE ALSO DISCUSSED ABOUT
IMPORT STRATEGIES. AND THEN
FINALLY, WE HAD STRATEGIES SUCH
AS POTENTIAL REGULATED UTILITY
MODEL, IF THAT'S WHERE IT COMES
TO. IF A LOT OF GASOLINE
REFINERIES DECIDE TO LEAVE THE
STATE OR EVEN STATE OWNED,
SIMILAR TO WHAT AUSTRALIA IS
DOING, AND EACH ONE OF THEM HAS
PROS AND CONS THAT THE FUELS
ASSESSMENT RAISES BASED ON THE
INPUT FROM ALL THE STAKEHOLDERS.
I HAVE TWO MORE SLIDES BEFORE I
PASS IT TO DIRECTOR MILDER. NEXT
SLIDE PLEASE, SO BEFORE WE GO
INTO THE MARKET AND THE
IMPORTANCE OF DISCUSSING THE
MARKET, IT'S JUST A GOOD LEVEL
SETTER TO THINK ABOUT HOW THE
PRICES MOVE IN TERMS OF PRICES
AT THE PUMP. SO THERE ARE FOUR.
THIS IS ACTUALLY COMING FROM
OPUS. THE INDUSTRY LEADER ON
THIS ON SOME OF THESE ISSUES.
THEY HAVE A REALLY GOOD ONE ON
ONE PAGE. AND THIS IS DIRECTLY
COMING FROM THEIR WEBSITE. SO
IT'S IMPORTANT TO NOTE THE FIRST
THING THAT YOU THINK ABOUT IS
THE NYMEX PRICES. SO THIS IS
CALLED THE NEW YORK MERCANTILE
OR THE FUTURES. AND THIS IS
WHERE THE BULK OF THE GLOBAL
RATE COMING INTO THE INTO UNITED
STATES IS HAPPENING. SO IT HAS A
LARGE VOLUME OF TRADES INTO THE
FUTURE THAT SETS THE PRECEDENT
AND THAT SETS THE ANCHOR POINT
ON WHERE THE PRICES COULD LOOK
LIKE. SO TODAY, IF YOU GO INTO
OPUS REPORTS, YOU WILL HAVE A
FUTURES VALUE FOR TODAY, WHICH
IS SEPTEMBER, OCTOBER AND
NOVEMBER. SO THOSE NYMEX'S
PRICES THEN ACT AS AN ANCHOR TO
FURTHER DISCUSSIONS. SO THEN
COMES INTO THE REGIONAL MARKET
OF THE SPOT, WHICH IS CALIFORNIA
SPECIFIC SPOT MARKET AND WHAT'S
HAPPENING HERE IS BASED ON ANY
SPECIFIC DAY. AND BASED ON THE
TRADES THAT WE TALKED ABOUT
YESTERDAY, IF A TRADE IS PRICED
AT, LET'S SAY, $0.60 OVER THE
NYMEX PRICE, THAT'S HOW THEY'RE
TRADED $0.60, OVER $0.45 OVER IN
THE $0.20 BELOW. SO THAT'S KIND
OF HOW THEY ARE TRADED. ONCE
THAT TRADE HAPPENS. THAT IS
NOTED IN THE OPUS IN A PUBLICLY
FOR OTHER TRADING. AND THAT
MOVES THE OVERALL SPOT MARKET
PRICE BASED ON EVERY DAY TRADES.
SO ONCE THAT SPOT MARKET TRADE
HAPPENS, THE WHOLESALE PRICE
WHICH WHICH YOU COULD KIND OF
THINK ABOUT AS THE RACK PRICE,
THAT'S WHERE ALL THE FUEL IS
GOING. AND KIND OF GETTING OUT
IMMEDIATELY. 1 TO 1 TRANSLATES.
SO THE SPOT MARKET PRICE GOES UP
AND THE WHOLE RACK PRICE GOES UP
IMMEDIATELY. AND THEN YESTERDAY,
I THINK MR. ROBINSON KIND OF
TALKED ABOUT THE RETAIL SIDE OF
IT, THE RETAIL SIDE OF THE
MARKET CAPTURES THE UPWARD SPIKE
ABOUT 3 TO 4 DAYS IN DELAY. IT
TAKES ABOUT 3 TO 4 DAYS ON THE
RETAIL SIDE TO ACTUALLY GET THAT
SPIKE, BUT IT TAKES ABOUT 35
DAYS TO COME DOWN ONCE THE SPIKE
IS GONE. SO THAT'S KIND OF HOW
THE DYNAMICS WORK AND WHAT WE
ARE TRYING TO THINK THROUGH IS
HOW DOES INCREASED LIQUIDITY IN
THE MARKET REDUCE THE SPOT
MARKET PRESSURE ON ULTIMATELY
THE PRICES? NEXT SLIDE PLEASE.
NEXT SLIDE. SO FINALLY I JUST
WANT TO LEAVE. LEAVE YOU HERE
WITH THIS. AND I KNOW WE'RE
GOING TO DISCUSS ABOUT THIS
PARTICULAR METRIC A NUMBER OF
TIMES LATER TODAY, ESPECIALLY IN
THE SECOND SESSION. WHAT THIS IS
NOW TELLING US IS THE RELATION
BETWEEN THAT SPOT MARKET VALUE.
SO WHAT YOU'RE SEEING ON THE Y
AXIS IS THE DIFFERENCE BETWEEN
NIMAX AND CALIFORNIA TRADES. SO
THAT'S KIND OF BASICALLY
SPECIFIC TO CALIFORNIA. SO THAT
NUMBER IS DIRECTLY CORRELATED TO
THE LIQUIDITY WE SEE IN THE
STATE. AND WHEN WE TALK ABOUT
THE LIQUIDITY AGAIN I WANT TO
POINT BACK TO THOSE FOUR
VARIABLES WE'RE TALKING ABOUT.
HOW ARE WE DOING ON PRODUCTION.
HOW MANY REFINERIES ARE OUT ARE
CURRENTLY WORKING. HOW MANY HOW
MUCH INVENTORIES DO WE HAVE? HOW
MANY IMPORTS SHIPS ARE COMING IN
AND WE HAVE, YOU KNOW, WE KNOW
THAT THE SHIP IS COMING. IT'S
BOUND TO CALIFORNIA. WE KNOW HOW
MUCH IS COMING IN AND WHAT IS
THE DEMAND. SO WHEN YOU LOOK AT
THAT AND SAY, AND IF I LOOK TO
TWO WEEKS AHEAD, IF YOU HAVE
ABOUT 15 DAYS WORTH OF SUPPLY,
IT'S NOT A MAGIC NUMBER. THAT'S
HOW IT'S CORRELATED TO. IT SEEMS
TO APPEAR THAT THE INDUSTRY
THINKS THAT THAT'S LIQUID
ENOUGH, THAT THE SPOT MARKET
TRADES ARE DONE AT A LOW VALUE,
AND WHICH IS ABOUT $0.50. SO
NINE X PLUS $0.50 IS WHERE THEY
TRADE. AS SOON AS THAT LIQUIDITY
DROPS, SUDDENLY THE SPIKES
HAPPEN BECAUSE THE SPOT MARKET
TRADES NOW ARE GOING TO HAPPEN
AT A MUCH, MUCH HIGHER PRICE, AS
HIGH AS TWO AND A HALF DOLLARS.
SO THAT THEN IMMEDIATELY GOES
INTO THE RACK. AND THEN
TRANSLATES TO THE PUMP. AND THE
IDEA HERE WOULD BE HOW DO WE
LOOK AT THIS PARTICULAR
OPPORTUNITY AND REDUCE THAT HIGH
PRESSURE ON THE SPOT MARKET
RATES. SO WITH THAT, GIVEN DPMO
HAS BEEN FOCUSING ON THE MARKET,
I WOULD LIKE TO INVITE DIRECTOR
MILDER TO TALK ABOUT
SPECIFICALLY THE MARKET DYNAMICS
AND BUT BEFORE I HAND IT OVER TO
HIM, AS I MENTIONED YESTERDAY,
DPMO AND THE ENERGY COMMISSION
HAVE AN IMPORTANT COLLABORATIVE
RELATIONSHIP, BUT WE TREAT THEM
AS INDEPENDENT. THEY ARE LOOKING
AT MARKET INDEPENDENTLY AND WE
TAKE ANALYSIS FROM THEM AND, YOU
KNOW, OBVIOUSLY AS A COMMISSION,
WE WILL BE VOTING ON A NUMBER OF
DIFFERENT THINGS. AND IT'S
IMPORTANT FOR US TO, YOU KNOW,
USE THE EXPERTISE THAT DPMO HAS
AND CONTINUE TO WORK THROUGH
THAT ANALYSIS OURSELVES. BUT I
AM JUST INCREDIBLY HAPPY TO HAVE
DIRECTOR MILDER AS A COLLEAGUE
PAST HIM. WELL, THANK YOU, VICE
CHAIR, FOR THAT INTRODUCTION.
AND SO APPRECIATIVE OF THE WORK
OF CEC IN REALLY DISPASSIONATELY
PRESENTING THE DATA, WORKING
WITH INDUSTRY, WORKING WITH
STAKEHOLDERS AND BRINGING THE
INFORMATION FORWARD SO
POLICYMAKERS CAN CAN MAKE
DECISIONS. JUST AS A QUICK,
TABLE SETTING AS WE BRING UP THE
SLIDES, I DON'T HAVE TO REMIND
EVERYONE WHAT HAPPENED IN THE
FALL OF 2022. THE PRICE SPIKES,
THE RECORD PROFITS, AND YOU
PROVIDED NEW TOOLS TO SHINE
LIGHT ON WHAT HAS OTHERWISE BEEN
A VERY OPAQUE INDUSTRY. AND THE
DIVISION OF PETROLEUM MARKET
OVERSIGHT IS A TANGIBLE
MANIFESTATION OF THOSE NEW
TOOLS. SO WE'RE HERE TO TRY AND
SURFACE FACTS FOR YOU AND FOR
THE PUBLIC. AS PRICES GO UP. AS
PRICES GO DOWN, I THINK THE
FOCUS OBVIOUSLY IS MORE WHEN
PRICES GO UP. I THINK IF WE'RE
DOING OUR JOB RIGHT TODAY, I'M
HOPING YOU COME AWAY FROM THIS
SESSION WITH SORT OF TWO CORE
QUESTIONS, WITH ANSWERS FOR YOUR
CONSTITUENTS. WHY DO PRICE
SPIKES HAPPEN, RIGHT, AS YOU'RE
SEEING IN 2022? I THINK A LOT OF
PEOPLE WANT TO KNOW WHY DO THE
PRICE SPIKES HAPPEN? AND THEN
WHERE DOES THAT MONEY GO WHEN
PRICE WHEN GAS GOES FROM 450 TO
550 AND FEES $6. WHERE'S THAT
MONEY GOING? AND SO I THINK
THOSE TWO SORT OF CORE QUESTIONS
REALLY ANIMATE THE WORK THAT
DPMO DOES. AS WE TRY AND BRING
THIS DATA TO THE PUBLIC, GOING
TO RESTRICT MYSELF AS WE HAVE TO
BY LAW, TO PUBLICLY AVAILABLE
INFORMATION OR ANONYMIZED
AGGREGATED INFORMATION COMING
FROM INDUSTRY. SO WE'RE GOING TO
HAVE HOPEFULLY A VERY
TRANSPARENT CONVERSATION, BUT
USING DATA THAT EVERYONE CAN
LOOK AT. SO AS WE GO TO OUR OUR
FIRST SLIDE, I WANT TO MENTION.
OH, I'M SORRY I WAS SPEEDING
AHEAD. THIS LOOKS LIKE IT'S THE
FURTHER AHEAD. SO THERE'S TWO
DIFFERENT PRESENTATIONS TODAY
FOR TWO DIFFERENT YEP. SO THE
FIRST DECK IS A SELLER'S MARKET.
THE CHALLENGES OF CONCENTRATION
AND PRICE SPIKES. AND DIRECTOR
MAYBE PULL THE MICROPHONE A
LITTLE CLOSER TO YOU.
ABSOLUTELY. THANK YOU. CHAIR SO
MADAM CHAIR, AS THE AS THE SLIDE
IS COMING UP, I'M GOING TO GO
AHEAD AND JUST PROVIDE SOME OF
THE CONTENT ON THE FIRST SLIDE
BECAUSE IT'S JUST A QUOTE. SO I
THINK A LOT OF PEOPLE IN THIS
ROOM REMEMBER THAT, PRICE SPIKES
HAVE BEEN HAPPENING FOR A WHILE.
SO AS WE THOUGHT ABOUT THE
CALIFORNIA MARKET ACTUALLY WENT
BACK TO 1999, I'M GOING TO READ
YOU A QUOTE FROM THE ATTORNEY
GENERAL OF THE STATE OF
CALIFORNIA IN CALIFORNIA. JUST
SIX COMPANIES ACCOUNT FOR MORE
THAN 90% OF CALIFORNIA'S
REFINING CAPACITY. AND THOSE
SAME SIX COMPANIES CONTROL MORE
THAN 90% OF GASOLINE SOLD IN
CALIFORNIA. OUR CONCERN IS THAT
HIGH GAS PRICES IN CALIFORNIA
ARE THE RESULT OF LOW
COMPETITION IN THE MARKET.
THAT'S 25 YEARS AGO, POINTING TO
SIX REFINERS CONTROLLING 90% OF
THE MARKET. AS WE HOPEFULLY
BRING THE SLIDES UP, THE UPDATED
NUMBER UNFORTUNATELY IS WORSE
THAN THAT. SO IF WE MOVE TO THE
MOVE AHEAD TO THE THIRD SLIDE.
COMMITTEE MEMBERS, YOU DO HAVE
THESE SLIDES NOW IN FRONT OF YOU,
BUT FOR THE BENEFIT OF THE
PUBLIC. WE WANT TO MAKE SURE WE
GET IT ON THE SCREEN AS WELL.
EXCELLENT. THANK YOU SO MUCH. SO
NOW WHO CONTROLS 90% OF THE
MARKET? FOUR COMPANIES CONTROL
90% OF THE MARKET. AND IF YOU
COMPARE THAT TO THE REST OF THE
UNITED STATES MARKET,
CONCENTRATION OF THE TOP FOUR
COMPANIES IS ABOUT 45%. SO OUR
MARKET IS DOUBLE THE
CONCENTRATION. AND ANTITRUST
ECONOMISTS WILL TELL YOU THAT
HAS A COMPOUNDING EFFECT. IT'S
NOT JUST DOUBLE THE
CONCENTRATION, RIGHT. WHEN YOU
HAVE FOUR COMPANIES CONTROLLING
THE MARKET, THERE'S A HUGE
IMPACT ON THEIR PROFIT
INCENTIVES. SO AS WE MOVE TO THE
NEXT SLIDE, WHAT WE'RE GOING TO
TRY AND DO IS CONTEXTUALIZE FOR
ALL OF YOU, NOT JUST THE MOST
RECENT MARKET EVENTS, BUT ALL
THE PRICE SPIKES GOING BACK TO
SB ONE TWO. SO THE NEXT SLIDE,
SLIDE FOUR IS GOING TO SHOW YOU
SOME SOME DATA. I'M GOING TO
WALK US THROUGH IT. SO HERE WE
HAVE TWO PLOTTED SETS OF DATA.
THE TOP IS THE CALIFORNIA RETAIL
PRICE. YOU CAN SEE PRICE SPIKES
IN 2022 2023 AND 2024
HIGHLIGHTED IN GRAY. SO YOU CAN
SEE THESE PEAKS THAT GO UP AND
ONE OF THE SORT OF CONSTANT
CHARACTERISTICS OF THE OIL
REFINING MARKET GLOBALLY AND IN
THE UNITED STATES IS CRUDE OIL
IS THE NUMBER ONE INPUT. SO IF
CRUDE OIL GOES UP, REFINED FUEL
COSTS TEND TO GO UP IN A SIMILAR
MAGNITUDE. IF CRUDE OIL GOES
DOWN, THE SAME THING SHOULD
HAPPEN. BUT WHEN WE START
LOOKING AT OUR CALIFORNIA PRICE
SPIKES IN THE LAST FOUR YEARS,
THAT RELATIONSHIP STARTS TO
WEAKEN AND SOMETIMES EVEN
DISAPPEAR. SO WE SEE SOME VERY
UNUSUAL PATTERNS, AND I WANT TO
POINT TO THAT 2022 PRICE SPIKE.
YOU CAN SEE THAT SECOND GRAY
LINE RETAIL PRICES GOING UP
$1.17. EVEN AS CRUDE OIL PRICES
WERE GOING DOWN $0.61. SO THE
QUESTION IS WHY IS THERE THIS
DIFFERENCE BETWEEN THE
CALIFORNIA MARKET AND CRUDE OIL?
WELL, LET'S COMPARE THAT IN
CALIFORNIA TO THE REST OF THE
UNITED STATES VERSUS AT THE SAME
TIME PERIOD. AND THE IDEA HERE
IS TO SHOW YOU HOW MARKET
CONCENTRATION CHANGES PRICING
COMPARED TO A LARGER MARKET THAT
DOESN'T HAVE THOSE SAME
CONSTRAINTS. SO AS WE GO TO THE
NEXT SLIDE, YOU'RE GOING TO SEE
ANOTHER LINE APPEAR. WHICH IS
THE LINE FOR THE REST OF THE
UNITED STATES. WE CAN GO BACK
ONE SLIDE. THANK YOU. SO MUCH.
SO IF WE LOOK AT THAT SAME 2022
PRICE SPIKE. SO IT'S THE SECOND
GRAY AREA ON THE LEFT OF THE
CHART. YOU'LL SEE NATIONAL
PRICES DURING OUR PRICE SPIKE.
WERE GOING DOWN AS CRUDE OIL
PRICES WERE GOING DOWN. AND SO
THAT PHENOMENON THE CLOSE
CORRELATION BETWEEN THE COST OF
OIL AND THE COST OF GASOLINE, IS
PRESENT THROUGHOUT THIS TIME
PERIOD. IN THE REST OF THE
UNITED STATES, BUT NOT IN
CALIFORNIA. AND THAT REALLY
ILLUSTRATES WITH THE DATA, NOT
MY OPINION, BUT THE DATA SHOWS
THAT CALIFORNIA REFINERIES ARE
HAVING DIFFERENT TYPES OF PRICE
SPIKES. AND AS WE'LL DISCUSS
PROFIT SPIKES, THEN IS HAPPENING
IN THE REST OF THE COUNTRY. SO
THE QUESTION IS, WHY ARE WE
BUCKING THE NATIONAL TRENDS? AS
WE GO TO THE NEXT SLIDE, I WANT
TO POINT TO SOME OF BMO'S EARLY
WORK ON THESE ISSUES. START.
DIRECTOR, CAN YOU PULL THAT MIC
A LITTLE CLOSER TO YOU? I NEED
TO PULL MYSELF CLOSER TO THE
MIC. YES. THANK YOU, THANK YOU.
SO THE DIVISION OF PETROLEUM
MARKET OVERSIGHT HAS PUT OUT
THREE PUBLIC LETTERS. AND THE
IDEA IS TO INFORM THE PUBLIC,
BUT ALSO POLICYMAKERS AND TO
MAKE SURE THAT INDUSTRY
PARTICIPANTS KNOW THAT WE'RE
CLOSELY MONITORING THE MARKET
AND THE TRADING ACTIVITY. SO IN
EACH OF OUR THREE PUBLIC
LETTERS, WE'VE FLAGGED THREE
CONSISTENT PROBLEMS. FIRST, LOW
INVENTORY LEVELS DURING BUSY
DRIVING PERIODS. SECOND,
INADEQUATE RESUPPLY DURING
MAINTENANCE. AND THIRD, LACK OF
LIQUIDITY ON THE SPOT MARKET. SO
THE QUESTION IS, WHAT'S DRIVING
THESE PRICE SPIKES? WE'VE
IDENTIFIED THESE THREE
COMPONENTS. AND AGAIN, THESE
WOULD BE UNIQUE TO CALIFORNIA
AND OUR CONCENTRATED MARKET. AND
DIFFERENT THAN THE REST OF THE
UNITED STATES. SO HEARD
YESTERDAY A GOOD AMOUNT OF
DISCUSSION ABOUT HOW SPOT MARKET
PRICES CHANGE AND HOW THE MARKET
REACTS TO IT. SO WE TRY TO PUT
TOGETHER A SLIDE TO EXPLAIN THE
ANATOMY OF A PRICE SPIKE. SO AS
WE GO TO OUR NEXT SLIDE TO TRY
AND WALK YOU THROUGH HOW
MAINTENANCE EVENTS AND SUPPLY
LEAD TO A SPOT MARKET PRICE
SPIKE.
SO AS WE START AT THE LEFT, THE
TRIGGERING EVENT FOR THE
CALIFORNIA PRICE SPIKES WE'VE
SEEN THAT HAVE BEEN DIFFERENT
THAN THE NATION. IS THERE SOME
TYPE OF MAINTENANCE EVENT, A
REFINER OR MULTIPLE REFINERIES
HAVE TO CUT PRODUCTION TO DO
MAINTENANCE. SO THAT MEANS
PRODUCTION GOES DOWN. THEN YOU
SEE INVENTORIES REDUCE SUPPLY.
INVENTORIES START TO FALL
BECAUSE THE EXISTING PRODUCTION
BASE DOES NOT MEET DEMAND.
YOU'VE GOT A FEW NUMBER OF
REFINERS ONE, TWO, MAYBE EVEN
MORE GO DOWN. SO THEN THE
INVENTORY LEVELS START TO DRAW
DOWN. AND THAT'S ALL HAPPENING
IN PUBLICLY REPORTED DATA. SO
THEN AS THOSE INVENTORY NUMBERS
GO DOWN AND AS THERE'S LESS
PRODUCTION PRICES GO UP ON THE
SPOT MARKET, THERE'S A LACK OF
LIQUIDITY. YOU'LL SEE VERY FEW
TRADES OR EVEN POTENTIALLY NO
TRADES. AND IN THAT ENVIRONMENT,
1 OR 2 PURCHASES CAN SEND PRICES
SOARING. SO ON VERY LITTLE
LIQUIDITY PRICES GO UP AND THEY
GO UP FOR THESE SPECIFIC
CONTRACTS. SO 1 OR 2 TRADES A
DAY. WE'RE TALKING AS THE VICE
CHAIR EXPLAINED YESTERDAY ABOUT
10,000 OR 25,000 BARRELS OF
GASOLINE. SO WHY DOES THAT
IMPACT THE WHOLE THE WHOLE REST
OF THE STATE? WELL, THE
WHOLESALE PRICES BULK RACK,
DEALER, TANK, WAGON, THOSE ALL
SPIKE UP ON TOP OF THE SPOT
MARKET PRICE. EVEN THE
UNAFFECTED REFINERS, THE ONES
WHO ARE NOT HAVING MAINTENANCE
ISSUES, THEY ALL SELL AT THIS
NEW HIGHER PRICE SET BY THE SPOT
MARKET. THEIR COSTS HAVE NOT
CHANGED. THAT'S WHY YOU SEE
PROFIT SPIKES WHEN THE SPOT
MARKET SPIKES THE WAY THAT IT
DOES. AND THEN FINALLY THAT
PASSES ON TO RETAIL, AS YOU'VE
HEARD IN 3 OR 4 DAYS, RETAIL
PRICES SHOOT UP. THAT'S WHERE
CONSUMERS PAY. AND THEN REFINERS
AND THE RETAILERS PROFIT. AND
WE'RE GOING TO WALK YOU THROUGH
HOW THE REFINERS AND RETAILERS
PROFIT FROM THE PRICE SPIKES. AS
WE GO TO THE NEXT SLIDE, WE'RE
GOING TO TALK ABOUT THE SUMMER
2023 PRICE SPIKE. AND THIS HAS
BEEN WORK THAT THE DIVISION HAS
PUT OUT. AND CREDIT TO OUR
ECONOMICS TEAM. THESE ARE PUBLIC
PRESENTATIONS THAT ARE ON THE
CDC WEBSITE AND MOVE THROUGH
THEM QUITE BRIEFLY HERE. BUT
THEY'RE IN MORE DETAIL AND
AVAILABLE TO YOU AND TO THE
PUBLIC. SO WHAT WE SAW WAS A
PRICE SPIKE THAT LASTED 105
DAYS, 75 DAYS OF PRICES GOING
UP. AND THEN 35 DAYS FOR THE
PRICES TO COME BACK DOWN. THAT'S
THE FEATHER FLOATING BACK DOWN.
SO WHAT WE WANT TO DO IS SHOW
YOU WHERE THAT MONEY GOES. SO IN
THE NEXT SLIDE WE'RE GOING TO
LOOK AT THE TWO SORT OF LEVELS
OF THE MARKET WHERE THE PROFITS
GO. THERE'S THE REFINING MARGIN
WHICH IS THE PROFIT FROM
PROCESSING THE CRUDE AND SELLING
IT AT VARIOUS WHOLESALE
CHANNELS. AND THEN THERE'S THE
RETAIL PART OF THE MARKET. SO IN
ORANGE YOU'LL SEE THE REFINERY
MARGIN IS GOING UP HIGHER AND
HIGHER THROUGH SEPTEMBER AS THE
PRICES GO UP. AND THEN IN
OCTOBER AS THE PRICES START TO
COME DOWN, THE RETAIL PROFIT
JUMPS AS WELL. AND HERE IT'S NOT
FOR SOME OF OUR VERTICALLY
INTEGRATED REFINERS. IT'S NOT
EITHER OR. IT'S BOTH. THEY GET
THE PROFIT ON THE REFINING
MARGIN AS THE PRICES GO UP. AND
THEN ON THE RETAIL MARGIN AS THE
PRICES COME BACK DOWN. THE
PROBLEM IS CONSUMERS GET HURT IN
BOTH OF THOSE DIRECTIONS AS WE
GO TO THE NEXT SLIDE, WE'RE
GOING TO SHARE AN EXHIBIT. THIS
IS A SERIES OF SCENARIOS
BUILDING IN ASSUMPTIONS. SO WHAT
IF THERE HADN'T BEEN A PRICE
SPIKE? HOW MANY MILLIONS OF
GALLONS OF GASOLINE WERE SOLD AT
THE HIGHER PRICES? COULD WE
THEORETICALLY HAVE AVOIDED A
QUARTER OF THAT HARM OR HALF OF
THAT HARM OR ALL OF THAT HARM?
SO IN THE VARIOUS SCENARIOS,
THAT IS BETWEEN 500 AND $25
MILLION IN CONSUMER SAVINGS, OR
OVER $2.19 BILLION IN CONSUMER
SAVINGS, AGAIN, THAT'S THE
DIFFERENCE WHEN A GALLON OF
GASOLINE GOES UP $0.50 OR A
DOLLAR AND WE'RE SELLING TENS OF
MILLIONS OF GALLONS EVERY DAY
FOR 105 DAYS, THOSE NUMBERS GET
BIG VERY QUICKLY. AS I CONCLUDE
THESE REMARKS, I WANT TO TALK
ABOUT WHAT'S BEEN HAPPENING IN
THE MARKET RECENTLY. WE PUT OUT
AN UPDATE ON FRIDAY OF LAST WEEK
ABOUT RETAIL PRICES AND SPOT
MARKET ACTIVITY, PARTICULARLY IN
NORTHERN CALIFORNIA. SO AS WE GO
TO THE NEXT SLIDE. WHAT I WANT
TO SORT OF FOCUS YOU ON IS ON
THE LEFT SIDE OF THE SLIDE AT
THE SORT OF BEGINNING OF THE
PRICE SPIKE, THE DIFFERENCE
BETWEEN CALIFORNIA AND THE REST
OF THE UNITED STATES WAS NOT
THAT WIDE, AND PARTICULARLY
NORTHERN CALIFORNIA. BUT AS
THESE PUBLICLY REPORTED,
REFINERY MAINTENANCE EVENTS HAVE
GONE ON, AND AS THE PUBLIC
INVENTORY DATA HAS COME DOWN,
THE PRICES HAVE SHOT UP. SO
TODAY WE STAND AT SORRY, NOT AS
OF TODAY, BUT WE UPDATE UPDATED
THESE LAST NIGHT. I THINK AS OF
THE 17TH, THE SPREAD BETWEEN
NORTHERN CALIFORNIA AND THE REST
OF THE UNITED STATES WAS $1.96.
SO YOU CAN SEE HOW QUICKLY THESE
PRICES GO UP AND THIS PRICE
SPIKE, THANKFULLY, HAS NOT BEEN
AS SEVERE AS PRICE SPIKES IN
YEARS PAST. BUT THE SAME
MAINTENANCE ISSUES ARE DRIVING
THEM. SO AS WE CONCLUDE, I WANT
TO SHOW YOU AND THE PUBLIC WHERE
THE MONEY GOES. THE ENERGY
COMMISSION HAS A GASOLINE PRICES
DASHBOARD. SO YOU CAN SEE WEEK
TO WEEK OR IN THIS CASE WE'RE
DOING A FOUR WEEK COMPARISON.
WHAT HAS CHANGED IN THOSE PRICES
FROM THE BOTTOM UP? THE TAXES
AND FEES. THEY HAVE BASICALLY
NOT CHANGED. MAYBE ONE PENNY IN
THE LAST FOUR WEEKS. THE COST OF
CRUDE OIL HAS ACTUALLY GONE DOWN
$0.10. BUT THE REFINING MARGIN
DURING THESE MAINTENANCE EVENTS
HAS GONE UP $0.34. I WANT TO SAY
AGAIN, THIS IS IN AGGREGATE
BASED ON THE CDC'S SORT OF
PUBLIC FACING DASHBOARD. THESE
ARE NOT THE REFINERS PRIVATE
NUMBERS, BUT THESE ARE
DIRECTIONALLY ACCURATE FROM OUR
PERSPECTIVE. THE TOTAL PRICE HAS
GONE UP ABOUT $0.20 PER GALLON
IN THIS IN THIS FOUR WEEK PERIOD
BEING TRACKED BY THE CDC. SO WE
CAN SEE THAT THE REFINING
MARGINS HAVE GONE FROM $0.56 A
GALLON TO $0.90 A GALLON IN THAT
FOUR WEEK PERIOD. AND I'LL END
WITH A FINAL SLIDE. THE VICE
CHAIR ENDED WITH THE DAYS OF
SUPPLY METRIC, WHICH IS REALLY
CRITICAL TO UNDERSTANDING WHEN
PRICES SPIKE AND WHY THEY SPIKE.
HEARD A LOT OF QUESTIONS
YESTERDAY ABOUT STORAGE CAPACITY
FROM THE MEMBERS OF THE
COMMITTEE. HOW MUCH STORAGE
CAPACITY IS THERE AND HOW CAN WE
SORT OF THINK ABOUT STORAGE?
THIS CHART SHOWS JUST THE
INVENTORIES HELD BY THE REFINERS
IN CALIFORNIA FROM THE END OF
THE COVID 19 PANDEMIC THROUGH
TODAY. IT'S A LITTLE BIT BUSY,
BUT YOU CAN SEE VERY CLEARLY AT
THE AT THE PANDEMIC, WHEN DEMAND
WAS LOW AND TANKS WERE GETTING
REALLY FULL, IT WAS ALMOST 15
MILLION BARRELS. YOU CAN ALSO
SEE IN THE TROUGHS THAT SOME OF
WHICH THE GRAY HIGHLIGHTING ARE
WHERE THERE WERE PRICE SPIKES.
YOU CAN SEE THE INVENTORIES
FALLING BELOW 11 MILLION
BARRELS. SO A BIG SWING AND EVEN
SEASONALLY, EVEN IF YOU LOOK AT
ONE YEAR, A SWING BETWEEN 13
MILLION AND 11 MILLION BARRELS.
AND THAT'S JUST THE REFINER
STORAGE. SO I KNOW THESE ARE
ISSUES THAT WE'RE GOING TO DIG
INTO THIS AFTERNOON, BUT I WANT
TO END THERE AND LOOK FORWARD TO
ANY QUESTIONS. ALL RIGHT. THANK
YOU. AND BEFORE WE BRING UP OUR
ADDITIONAL WITNESSES WE WILL
OPEN IT UP TO QUESTIONS FROM
MEMBERS, AS WITH YESTERDAY,
WE'VE GOT LOTS OF MEMBERS, WHICH
IS GREAT. LOTS OF PANELISTS AND
I KNOW LOTS OF QUESTIONS. SO WE
ARE GOING TO BE LIMITING THE
AMOUNT OF TIME THAT EACH MEMBER
IS ABLE TO ASK QUESTIONS. SO I
APOLOGIZE IN ADVANCE IF I NEED
TO, TO CUT YOU OFF. ALL RIGHT.
WITH THAT, QUESTIONS FOR THE
ADMINISTRATION. MR. LARA. THANK
YOU, MADAM CHAIR. AND GOOD TO
SEE EVERYBODY. AND GOOD MORNING.
WELCOME BACK. NEXT FEW QUESTIONS
I AM GOING TO HAVE IS GOING TO
BE FROM THE SEC'S COMMISSION
REPORT, AND I WILL TRY TO
REFERENCE THE PAGE NUMBER AS
WELL, SO WE CAN KIND OF ALL STAY
ON THE SAME PAGE HERE, BUT ON
PAGE 58 IT STATES THE POLICIES
THAT KEEP AVERAGE PRICES LOW MAY
RESULT IN MORE DRIVING AND HENCE
MORE POLLUTION. THIS SPECIAL
SESSION IS FOCUSED ON PRICE
SPIKES, NOT NECESSARILY EVERYDAY
HIGHER GAS PRICES CAUSED BY
STATES POLICIES. SO I'M CURIOUS
WHAT IS THE STATE'S POLICY
CURRENTLY AS WE SPEAK? IS IT TO
REDUCE THE COST OF GASOLINE, OR
IS IT TO TRY TO KEEP THAT
ARTIFICIALLY HIGHER? AND THANK
YOU, ASSEMBLY MEMBER. I THINK
THE, THE CHAIR YESTERDAY PUT IT
PRETTY WELL TOWARDS HER CLOSING
COMMENTS. I THINK THE BROAD
STATE POLICY, IF I MAY
SUMMARIZE, WOULD BE TO OPTIMIZE
BETWEEN ALL THOSE THINGS THAT WE
WANT TO DO, REDUCE POLLUTION AND
INCREASE AIR QUALITY BENEFITS,
REDUCE PRICES AND HAVE AN
AFFORDABLE TRANSITION. SO I
THINK WE ARE GRAPPLING WITH THAT
SITUATION OF HOW DO WE OPTIMIZE
ACROSS ALL OF THEM. THANK YOU.
AND THEN ON PAGE FIVE, IT STATES
AS WELL THAT STORAGE FACILITIES
ARE OWNED BY VARIOUS ENTITIES.
THE STORAGE FACILITIES. RIGHT,
CAN YOU PLEASE EXPLAIN ALL THE
PLAYERS IN THE FUEL MARKET AND
WHO ELSE BRINGS FUEL IN OTHER
THAN AND STORES OTHER THAN THE
REFINERIES? YES, ABSOLUTELY. SO
MAJORITY OF CALIFORNIA'S STORAGE,
YOU COULD YOU COULD KIND OF
SUMMARIZE THIS INTO TWO BUCKETS.
I HAVE A SLIDE FOR THIS
AFTERNOON, BUT AT THE TOP YOU
HAVE THE FENCE LINE WITHIN THE
REFINERY SO THAT YOU HAVE ABOUT
14 DAYS WORTH OF TOTALITY OF
REFINED AND BLENDING STOCKS THAT
YOU COULD STORE. ON THE TOP OF
THAT, YOU HAVE COMMERCIAL LIKE
TRANSMONTAIGNE WOULD BE A GOOD
EXAMPLE WHERE SOME OF THE
REFINERS ACTUALLY LEASE SPACE TO
PUT SOME OF THEIR FUEL IN, AND
ON THE TOP OF THAT, YOU HAVE A
KINDER MORGAN SYSTEM WHERE WHERE
I WOULDN'T IMAGINE THAT'S LIKE
MORE OF A STORAGE, BUT IT'S LIKE
A FLOW THROUGH. SO IT HAS A
LITTLE BIT OF SLACK, BUT NOT TOO
MUCH. SO YOU'RE SAYING SO TAKE
CHEVRON FOR INSTANCE. RIGHT. WHO
DOESN'T HAVE A LOT OF STORAGE
CAPABILITIES RIGHT NOW. THEY
WOULD LEASE STORAGE FROM 76 OR.
SO ARE YOU GETTING TO KIND OF
LIKE HOW DO WE MAINTAIN MINIMUM
INVENTORIES. IS THAT WHAT YOU'RE
TRYING TO I'M TRYING TO ASK LIKE
IF THERE ARE FACILITIES THAT DO
NOT HAVE THE ABILITY TO STORE
THEIR FUELS, THAT THEY PRODUCE,
WE EXPECT THEM TO LEASE WITH
ANOTHER COMPETITOR. NO, THEY
ACTUALLY DO IT WITH A COMMERCIAL
ENTITY TODAY, LIKE A
TRANSMONTAIGNE, FOR EXAMPLE, OR
OLYMPUS. THEY CURRENTLY DO THAT.
ALL RIGHT, AND THEN ALSO ON PAGE
ONE, YOU KNOW, OBVIOUSLY
CALIFORNIA IS WE'VE HEARD A
NUMBER OF DIFFERENT TIMES IS
KIND OF A FUEL ISLAND AND ENERGY
ISLAND IN A LOT OF DIFFERENT
WAYS, CAN YOU KIND OF WALK US
THROUGH SOME OF THE STATE
POLICIES THAT HAVE LED TO THAT,
AND WHY IT'S SO CHALLENGING? AND
WHY WE ARE SO DIFFERENT THAN THE
OTHER STATES IN THE COUNTRY?
YES, I THINK I WOULD JUST KIND
OF NOTE, BASED ON WHAT THE
INDUSTRY EXPERTS KIND OF
MENTIONED YESTERDAY, CALIFORNIA
IS SITUATED WITH, IN A, IN A
SITUATION WHERE WE HAVE OUR
UNIQUE BLEND. RIGHT. SO THAT'S
SOMETHING THAT HAS BEEN PASSED
TO PROTECT US AGAINST SMOG. AND
SO THAT'S A DIRECT CORRELATION
WITH THE HEALTH IMPACTS. THAT'S
SOMETHING WE DO, IN TERMS OF THE
STRUCTURES AROUND, THE REFINING
IN CALIFORNIA, YOU KNOW, WHETHER
WE ARE EXTRACTING CRUDE OIL FROM
CALIFORNIA OR NOT. THESE ARE A
MULTITUDE OF LAYERS OF POLICY
THAT THE LEGISLATURE HAS PASSED
THAT WE WORK WITHIN THE CONFINES
OF NØ. AND I CAN CERTAINLY
APPRECIATE THAT. AND I JUST GOT
TWO QUICK QUESTIONS, AND I ASK
THESE QUESTIONS REALLY TO KIND
OF SET UP THESE LAST TWO,
BECAUSE AS I REPRESENT THE
CENTRAL VALLEY, AND IT HAS BEEN
MY EXPERIENCE SINCE THE TIME
THAT I'VE BEEN ELECTED,
EVERYTHING THAT WE HAVE DONE
FROM A STATE POLICY PERSPECTIVE
HAS DONE VERY LITTLE TO ACTUALLY
REDUCE THE COST OF FUEL, HAS
ACTUALLY DONE QUITE THE
OPPOSITE, HAS INCREASED THE COST
OF FUEL, BOTH ON THE CONSUMERS,
INCREASE THE COST ON REFINERIES
TO DO IT. AND OBVIOUSLY, YOU
KNOW, HOW WE EVEN GET THE CRUDE,
WE'RE NOT EVEN USING THE MOST
INEXPENSIVE CRUDE. WE'RE BUYING
IT FROM THE MOST EXPENSIVE
PLACES. SO ON PAGE 22 OF THAT,
THE REPORT AGAIN, IT SAYS GIVING
THAT MANY ICE VEHICLES WILL
REMAIN ON THE ROAD AND MANY OF
THE OWNERS WILL BE FROM LESS
AFFLUENT REGIONS OF THE STATE.
AND THE EQUALITY CHALLENGE
ARISES WHEN YOU THINK OF EV
DEPLOYMENT, IS THIS TRANSITION
FOR LOW INCOME FAMILIES GOING TO
MAKE THE COST OF LIVING MORE
EXPENSIVE? SO THANK YOU FOR THAT
QUESTION. I THINK THAT'S A
SPECIFIC THING WE TRY TO ADDRESS
IN THE IN THE WORKSHOPS. WHEN WE
DID THE TRANSPORTATION FUELS
ASSESSMENT AS A MR, AS MISS
CONNIE CHAO YESTERDAY TALKED
ABOUT THE ENVIRONMENTAL JUSTICE
GROUPS WERE WITH US DURING THAT
FUELS ASSESSMENT. YOU'RE
ABSOLUTELY RIGHT. I THINK
WHATEVER WE DO, THOSE IMPACTS
AND BENEFITS HAVE TO BE EQUALLY
DISTRIBUTED. AND I DO NOT
BELIEVE, YOU KNOW, WHEN WE TALK
ABOUT THE BENEFITS, GOING TO A
SPECIFIC AREA, WHETHER IT'S EV
DEPLOYMENT OR SUCH, YOU KNOW, WE
HAVE BEEN ASKED BY THE
LEGISLATURE CONTINUOUSLY TO LOOK
AT HOW THE BENEFITS ARE ACTUALLY
TRANSLATING BY GEOGRAPHIC AREA,
AND THAT'S AN EFFORT WE'LL
CONTINUE TO DO. CAN YOU GIVE US
LIKE ONE EXAMPLE OF SOMETHING
THAT YOU'VE THOUGHT OF, LIKE A
SOLUTION? YES, SO THE BIG ONE
FOR US AS AN ENERGY COMMISSION,
MUCH OF OUR WORK IS AROUND DATA
GATHERING, ANALYSIS AND
DEPLOYMENT OF FUNDING, STATE
FUNDING. AND IN TERMS OF THE
DEPLOYMENT OF THE STATE FUNDING
WE CURRENTLY HAVE WITHIN THE
MAJORITY OF OUR PROGRAMS, NEARLY
50% OF ALL OF OUR INVESTMENTS GO
TOWARDS IMPACTED COMMUNITIES,
INCLUDING THE COMMUNITIES THAT
YOU MENTIONED. I'D BE VERY
CURIOUS WHERE THAT FUNDING IS
GOING, BECAUSE FROM A JUST A
PRACTICAL STANDPOINT, WE'RE NOT
NECESSARILY SEEING IT AT THE
GROUND LEVEL, JUST THROWING THAT
OUT THERE. AND I THINK ONE OF
THE AND THIS IS MY LAST QUESTION
AND THANK YOU, CHAIR. I JUST AT
THE END OF THE DAY, AND IT'S
REALLY NOT A QUESTION. IT'S MORE
OF A STATEMENT LIKE, I THINK
EVERY SINGLE ONE OF US ON THIS
DAIS AND MEMBERS IN THIS ROOM
HAVE THE DESIRE RIGHT, TO HAVE
THE CLEANEST ENVIRONMENT THAT WE
CAN AT THE LOWEST CHEAP PRICE
POSSIBLE. BUT SOMETIMES THOSE
ISSUES ARE NOT. YOU KNOW, THEY
DON'T REALLY COINCIDE VERY WELL
TOGETHER. RIGHT. AND I DO
CONTINUE TO BE INCREDIBLY
FRUSTRATED AS WE MOVE FORWARD
WITH THIS. YOU KNOW, I HEAR A
LOT OF CONVERSATIONS ABOUT DATA
GATHERING, I DON'T KNOW WHERE
THAT DATA GOES. WE JUST ALWAYS
ARE GATHERING DATA. AND WHILE
WE'RE GATHERING DATA, WE FUND
THESE PROGRAMS TO GATHER DATA,
WHICH RAISES THE COST. BUT WE'D
NEVER DO ANYTHING WITH THAT
DATA. AND I THINK AS WE MOVE
FORWARD FOR THE REST OF THE DAY,
WE'RE GOING TO CONTINUE TO HAVE
THOSE CONVERSATIONS THAT THERE'S
INFORMATION THAT HAS BEEN
COLLECTED THAT WE'RE DOING
ABSOLUTELY NOTHING WITH. AND MY
GUESS IS PROBABLY BECAUSE WE
DON'T ACTUALLY LIKE THE ANSWER
SOMETIMES. SO I APPRECIATE YOUR
TIME. THANK YOU. THANK YOU, VICE
CHAIR PATTERSON, THANK YOU.
CHAIR, I'M GOING TO FOLLOW UP A
LITTLE BIT, WITH RESPECT TO WHAT
OUR OTHER REPUBLICAN MEMBER
ASKED. WHEN WE LOOK AT THE
ANALYSIS, THE STATEMENT IS
PRETTY CLEAR THAT THE EFFORT
HERE TO STORE AND REQUIRE
STORAGE, QUOTE, COULD INCREASE
AVERAGE PRICES FOR REFINERS TO
MAINTAIN THAT ADDITIONAL STORAGE.
AND THE DISCUSSION YESTERDAY
EXPLAINED THAT NOT EVERY TANK IS
THE SAME. NOT EVERY REFINER HAS
STORAGE IN THE FINISHED GASOLINE
TANKS ARE CONSISTENTLY BEING
FILLED AND EMPTIED. MY QUESTION
IS IF A REFINER DOES HAVE, SAY,
X NUMBERS OF DAYS OF STORAGE.
COULD THEY BE FORCED UNDER THE
BILL? WE'LL BE LOOKING AT BUILD
MORE STORAGE. AND IF SO, CAN YOU
HELP US UNDERSTAND THE COST OF
THAT STORAGE BUILD TO HOLD THE
15 DAYS WORTH OF GASOLINE AND
HOW LONG WOULD THAT CONSTRUCTION
TAKE? YEAH. THANK YOU, VICE
CHAIR, FOR THE QUESTION, SO LET
ME JUST KIND OF TACKLE THAT IN A
COUPLE OF, YOU KNOW, BUCKETS OF
THOUGHT HERE. I THINK THE
QUESTION THAT YOU ASKED AROUND
WOULD WE NEED MORE STORAGE TO BE
BUILT? I THINK THE IMPLICIT
UNDERSTANDING OF THE BILL, AND I
WOULD SAY EXPLICIT, IS TO
MAXIMIZE THE UTILIZATION OF
EXISTING STORAGE SPACE IN
CALIFORNIA. AND SECOND, WHEN WE
TALK ABOUT THE OVERALL STORAGE
THAT YOU SEE, AND I THINK IT
GOES TO ASSEMBLYMEMBER'S KIND OF
QUESTION TO DIFFERENT REFINERS
HAVE DIFFERENT LEVELS OF STORAGE
SPACE AVAILABLE AND DIFFERENT
KINDS OF PLANNING. SO WHAT WE
WOULD BE LOOKING AT IS THE
OPPORTUNITY ON A REFINERY BY
REFINERY BASIS TO INCREASE THE
LIQUIDITY. AND I WANT TO GO BACK
TO THE POINT THAT I TRIED TO
MAKE EARLIER, WHICH IS THE SPOT
MARKET, YOU KNOW, IMPACT AND THE
PRICE IMPACT BASED ON THE
LIQUIDITY IS UNDENIABLE. THE
QUESTION IS, HOW DO WE MAXIMIZE
PRE-PLANNING AND ACTIVE PLANNING
TO REDUCE THAT PRICE VOLATILITY?
THAT HAPPENS UNDER AN
EXTRAORDINARY SITUATION LIKE
WHAT WE MIGHT BE SEEING RIGHT
NOW. SO AND THAT THAT INVOLVES
HAVING A COLLABORATIVE, YOU
KNOW, WORK WITH THE INDUSTRY TO
THINK THROUGH. HOW CAN THEY
MAXIMIZE THEIR PLANNING IN TERMS
OF INVENTORIES? AGAIN, AS I SAID
YESTERDAY, NOT EVERY MIGHT NOT
EVERYBODY MIGHT HAVE THAT SPACE.
SOME OF THEM SOME OF THEM MIGHT
HAVE A LOT OF SPACE. AND HOW DO
YOU UTILIZE THAT? IN THE CÁC
POLICY ANALYSIS, YOU DISCUSS
HAVING THE STATE BUILD MORE
STORAGE CAPACITY. BUT THAT
ANALYSIS ALSO POINTS OUT THAT
SUCH AN EFFORT WOULD LIKELY LEAD
TO STRANDED COSTS. IF THE CEC
BELIEVES THAT THE REQUIREMENT
WOULD STICK THE STATE WITH
STRANDED COSTS, WHY WOULD YOU
FORCE STRANDED COSTS ON THOSE
REFINERIES? ANY BUSINESS WOULD
CLOSE IF THEY BELIEVED COST
WOULD BE STRANDED. YEAH. IN
OTHER WORDS, YOU'RE GOING TO BE
FORCED TO BUILD A WHOLE BUNCH OF
EXISTING COSTLY STORAGE, AND YET,
LOOK, I MEAN, I WITH ALL DUE
RESPECT, I REALLY THINK THAT THE
QUESTION BEFORE US HERE IS, WHY
AREN'T WE PAYING ATTENTION?
QUITE FRANKLY, TO HIGH SCHOOL
LEVEL ECONOMICS? IF YOU FORCE.
BUY STORAGE TO ESSENTIALLY HOLD
OFF SUPPLY FROM THE MARKET. I
LEARNED THAT AS A SENIOR IN HIGH
SCHOOL, YOU DO THAT WITH ANY
COMMODITY. COSTS ARE GOING TO GO
UP. SO THE PREMISE HERE, AND I
REALLY THINK THAT MEMBERS NEED
TO THINK SERIOUSLY ABOUT, THIS
WHOLE QUESTION THAT IS THE
SOLUTION. TO THE TO THE PRICE.
TO CREATE A CIRCUMSTANCE OF
SHORTAGE. BECAUSE I THINK THAT
THAT'S THAT'S A REALITY. AND I
WILL SAY, I CERTAINLY WANT THE
VICE CHAIR TO RESPOND. WE ARE
GOING TO DIVE INTO A LOT OF
DETAIL AROUND THE PROPOSAL. AND
WANT TO HAVE A CONVERSATION
ABOUT PROS, CONS AND INTENDED
CONSEQUENCES. WE'RE GOING TO
HAVE AN OPPORTUNITY TO ASK THOSE
QUESTIONS NOT JUST OF THE
ADMINISTRATION, BUT OF OTHER
EXPERT WITNESSES. SO PERHAPS
JUST GIVE US, YOU KNOW, A
SUMMARY VERSION AND THEN LET'S
HOLD THE DETAILED LINE OF
QUESTIONING UNTIL WE'RE ABLE TO
HAVE A FULL PANEL. ABSOLUTELY,
THANK YOU CHAIR. THANK YOU. VICE
CHAIR, FOR THAT, FOR THAT
EXTENDED QUESTION ON THERE, IN
TERMS OF WHAT THE WHAT THE
PROPOSAL IS LOOKING AT, WHICH
WE'LL GO INTO THIS AFTERNOON,
IT'S ABOUT THE OPPORTUNITY FOR
CEC TO CONDUCT A RULEMAKING. AND
TO YOUR POINTS ARE EXACTLY AS
YOU MENTIONED, THERE ARE A
NUMBER OF RISKS WITH ANY PUBLIC
POLICY. AND OUR JOB, IF THE
LEGISLATURE LEGISLATURE WERE TO
GIVE US THAT AUTHORITY, WOULD BE
TO LOOK AT BOTH BENEFITS AND
RISKS AND MAKE SURE THAT THE
DESIGN OF ANY SUCH POLICY WILL
MITIGATE AND REDUCE ANY SUCH
RISKS THAT YOU MENTIONED. AND
THAT'S SOMETHING WE'LL BE
LOOKING AT. AND ONE OF THE
POINTS YESTERDAY THAT WAS
BROUGHT UP FROM THE DÍAS IS WHAT
ABOUT LOCAL COMMUNITIES AND THE
IMPACTS ON THAT? I THINK
ASSEMBLY MEMBER JACKSON BROUGHT
THAT YESTERDAY. THOSE ARE THE
KINDS OF THINGS WILL BE
ABSOLUTELY A PART OF THE
RULEMAKING PROCESS, WHICH WILL
BE ROBUST, THOROUGH AND WE WILL
BE COLLABORATING AND
COORDINATING WITH YOU ON THE
FINDINGS OF THE RULEMAKING ALONG
THE WAY. IF YOUR RULEMAKING AND
IF YOU'RE DIVING IN, COULD YOU
CONCEIVE OF A SCENARIO IN IN
WHICH THE HIGH COST OF THE
STORAGE AND THE REMOVAL OF THAT
GASOLINE FROM THE MARKETPLACE,
IF IT DID CREATE A SPIKE? WOULD
WOULD YOU THEN NOT PROCEED WITH
THE RULEMAKING? IS THERE AT SOME
PLACE WHERE THE RUBBER MEETS THE
ROAD ON SUPPLY AND DEMAND IN THE
MARKETPLACE WHERE YOU'RE GIVEN
THE AUTHORITY? BUT DO YOU HAVE
THE OPTION OF NOT USING THAT
AUTHORITY IF YOU FIND UNINTENDED
CONSEQUENCES? THE SHORT ANSWER
WOULD BE YES. THE SHORT ANSWER
WOULD BE IF THE RULEMAKING COMES
TO US AND JUST AS YOU'RE DOING
HERE, WE WOULD WANT TO HAVE A
ROBUST PROCESS ENGAGING ALL
STAKEHOLDERS TO UNDERSTAND THOSE
RISKS. AND IF THE RISKS OUTWEIGH
THE BENEFITS, I DON'T THINK WE
WOULD DO THAT. BUT OUR CURRENT
THINKING AND PRELIMINARY
FINDINGS ARE THE BENEFITS. AS
DIRECTOR MILDER MENTIONED, AND
THE $2 BILLION POTENTIAL
CONSUMER BENEFITS IS SUCH AN
UPSIDE. AND IT'S A CLEAR
THRESHOLD FOR US TO THINK
THROUGH WHAT IS THE OPPORTUNITY
HERE? AND WE BELIEVE BASED ON
THE DATA, THAT THERE IS
OPPORTUNITY HERE AND IF I MAY,
DPMO JUST ONBOARDED THREE PHD
ECONOMISTS THAT WE HAVE ON OUR
ECONOMICS BRANCH. AND SO THE
VICE CHAIR MENTIONED SOME
ECONOMIC PRINCIPLES. I WANTED TO
SHARE A COUPLE. ONE IS, THIS
ADDITIONAL SUPPLY, THIS
ADDITIONAL BUFFER WOULD BE
AVAILABLE WHEN PRICES GO UP TO
HELP STABILIZE THE MARKET. AND
THE WAY TO THINK ABOUT THIS IS
ADDITIONAL SUPPLY. IMAGINE A
SUMMER SCENARIO WHERE WE DON'T
HAVE ENOUGH SUPPLY, BUT WE'VE
REQUIRED NOW AN ADDITIONAL
AMOUNT OF BUFFER ON TOP OF THAT.
THAT'S NEW ADDITIONAL SUPPLY
THAT'S NOT BEING WITHHELD FROM
THE MARKET. THAT'S NEW SUPPLY
THAT'S READILY ACCESSIBLE TO THE
MARKET. AND THE PROBLEM WITH
THIS CONCENTRATED MARKET, WITH
THE FOUR FIRMS IS THEY DON'T
CURRENTLY HAVE THE INCENTIVE TO
KEEP INVENTORIES HIGH ENOUGH TO
PROTECT AGAINST PRICE SPIKES.
AND I CAN SAY THAT THE PROOF IS
BEFORE US IN THE PRICE SPIKES.
WE'VE BEEN EXPERIENCING. AND SO
THERE HAS TO BE A MECHANISM TO
ENCOURAGE THAT MORE RESPONSIBLE
LEVEL OF STORAGE TO PREVENT THE
PRICE SPIKES. YEAH. AND CHAIR,
IF I MAY, JUST TO KIND OF CLOSE
OFF THAT THING, I ALSO WANT US
TO CONSIDER THAT THE DESIGN OF
ANY SUCH POLICY MECHANISM WILL
TAKE A LOT OF DIFFERENT SHAPES.
SO I THINK THE EASIEST ONE FOR
US TO REALLY CAN DRILL DOWN. YOU
KNOW, WE'RE TALKING ABOUT BOTH
MINIMUM INVENTORIES AND
RESUPPLY. AND I THINK THE
RESUPPLY IS VERY EASY TO
UNDERSTAND FROM A POLICY
MECHANISM. IF I KNOW THAT I AM
GOING TO BE SHUTTING DOWN THIS
SUMMER, AND WE KNOW THAT DELTA
120 DAYS BEFORE FOUR MONTHS
AHEAD, THAT FALLS WITHIN THE
WINDOW OF BEING ABLE TO ORDER A
SHIP AND MAKE SURE THAT YOUR
TANKS ARE FULL OR AT LEAST
REPLENISHED ON THE WAY. SO IF I
AM DEPLETING MY TANKS WITHOUT
ANY RESUPPLY, THEN THAT WOULD BE
A PROBLEM. SO THAT ADDITIONAL
RESUPPLY THAT IS COMING IN, WE
ARE NOT GOING TO TELL DON'T
SELL. WE'RE GOING TO TELL. BRING
IN RESUPPLY. THAT'S A TANGIBLE
WAY OF THINKING ABOUT IT. WELL,
AGAIN, THE REALITY THE REALITY
IS IF YOU'RE GOING TO BE USING
THE TANKERS, YOU'RE GOING TO BE
USING IMPORTED OIL FROM OTHER
PLACES THAT IS PRODUCED MUCH
MORE DIRTY THAN CALIFORNIA
CREATES. YOU'RE GOING TO END UP,
WITH REAL QUESTIONS ABOUT THE
LENGTH OF THE TIME THAT THAT
SUPPLY GETS ON. THE TANKER GETS
TO CALIFORNIA, GETS INTO THE
REFINERIES, ALL OF THAT. AND SO
FOR ME, FROM CENTRAL CALIFORNIA,
THE PROBLEM BECOMES WE HAVE A
LOT OF OIL PRODUCERS IN REGIONS
THAT MANY OF US REPRESENT IN
CENTRAL CALIFORNIA, AND WE ARE
HEARING FROM OUR REFINERS THAT
THEY FEEL A WHOLE LOT OF
PRESSURE THAT THEY FEEL
UNNECESSARILY ATTACKED FOR
ESSENTIALLY, MARKET BASED
DECISION MAKING SUPPLY DEMAND,
THE CRUDE BEING ABLE TO, TO
PRODUCE IT AND ALL OF THAT. SO
AGAIN, I JUST THINK CAUTION HAS
TO BE THE RULE HERE, BECAUSE
WE'RE ENTERING INTO AN AREA THAT
YOU KNOW, IF THE CEC GETS IT
WRONG, I MEAN, WE IN YOUR OWN
ANALYSIS, YOU'RE SEEING THE
POTENTIAL OF SPIKES. YOU'RE
SEEING THE POTENTIAL OF COST
GETTING TO MARKET EQUILIBRIUM.
ON PAGE 60 OF YOUR OWN REPORT,
YOU THINK THAT THAT LIKELY
EMERGES AT A HIGHER PRICE LEVEL.
SO WHEN I READ YOUR OWN REPORT,
I SEE SEVERAL AREAS THAT I CAN
LOOK AT AND SAY THE VERY PLAN
THAT YOU WANT US TO PASS
INCREASES COST ALONG THE WAY.
AND THE QUESTION THEN BECOMES,
I'LL DEFER TO THE CHAIR, WOULD
YOU? I THINK WE'RE GOING TO
WE'RE GOING TO PAUSE THERE. AND
I KNOW THERE'S A NUMBER OF OTHER
MEMBERS WITH QUESTIONS. I'M JUST
GOING TO SAY, THAT IF YOU HAVE
QUESTIONS ABOUT THE GOVERNOR'S
PROPOSAL, IF YOU HAVE QUESTIONS
ABOUT THE MINIMUM INVENTORY
REQUIREMENT, PLEASE SAVE THOSE
FOR THE NEXT CONVERSATION. IF NO
ONE HAS OTHER QUESTIONS, THAT'S
FINE. I ACTUALLY DO, BUT I JUST
I REALLY WANT US TO BE ABLE TO,
MOVE THROUGH SOME OF THE OTHER
PIECES OF THE FUELS ASSESSMENT,
DIG INTO THAT, AND THEN WE WILL
BE HEARING ABOUT THE PROPOSAL
AND HAVE AN OPPORTUNITY TO ASK
DETAILED QUESTIONS ABOUT THAT,
IN OUR SUBSEQUENT PANEL WITH
THAT. OKAY. MR. BENNETT, THANK
YOU, MADAM CHAIR. I WILL
CERTAINLY BE BRIEFER THAN THE
TWO PEOPLE IN FRONT OF US. I
HAVE A SERIES OF QUESTIONS. I'M
NOT SURE THEY'LL ALL FIT INTO
YOUR CATEGORY, BUT I WILL BE
VERY, VERY BRIEF. FIRST, I JUST
WANT TO CONFIRM WE KEEP ASKING
THE QUESTION OVER AND OVER
AGAIN. IT DOESN'T SEEM LIKE IT'S
SINKING IN. WE'RE NOT ASKING
ABOUT THE 15 DAY SUPPLY RIGHT
NOW. THAT'S NOT WE CAN ASK ABOUT
THOSE QUESTIONS LATER. THEN I
WANT TO BE ASSURED THAT I'LL
HAVE THE TIME TO DO THAT. THANK
YOU. RIGHT, GROWING MARKET
CONCENTRATION. THE QUESTION HERE
BEING PRESENTED IS THAT GROWING
MARKET CONCENTRATION IS CREATING
PRICING POWER. AND I WANT TO
EMPHASIZE THAT NOBODY UP HERE
SAYS, OH, THE OIL COMPANIES ARE
EVIL BECAUSE THEY EXERCISE
PRICING POWER. THEY'RE DOING
EXACTLY WHAT A COMPANY DOES.
THEY EXERCISE PRICING POWER, BUT
WHERE IT'S CRITICAL TO THE
PUBLIC, LIKE LOW INCOME PEOPLE
IN SAN BERNARDINO, WE NEED TO
HAVE THE PUBLIC'S INTEREST ALSO
IN THE DECISION MAKING PROCESS
ABOUT INVENTORY. IS THAT WHAT IS
THAT THE POINT YOU WERE MAKING?
ABSOLUTELY. AND IF THAT'S THE
CASE, THEN FOR THE PUBLIC TO BE
INVOLVED, THE QUESTION IS,
SHOULD THE REPRESENTATIVES OF
THE PEOPLE OF CALIFORNIA SIT
BACK AND LET THIS TRANSITION TO
A DECLINING, YOU KNOW, DEMAND
FOR GASOLINE, ETC, SHOULD THAT
SHOULD WE JUST TRUST THE
COMPANIES TO TAKE INTO
CONSIDERATION ACTIONS THAT COULD
DECREASE THE NUMBER OF PRICE
SPIKES OR SHOULD WE
INTELLIGENTLY GET INVOLVED TO
PROTECT THE PUBLIC, AND SO I
JUST HAVE THESE QUICK QUESTIONS.
THE IN 2000, THE ATTORNEY
GENERAL LOCKYER POINTED OUT WE
HAD THIS PRICING POWER EFFECT
THAT WAS SIX YEARS BEFORE AB 32
WENT INTO EFFECT. SO IT IS IT,
IN YOUR JUDGMENT THAT THAT'S
FURTHER EVIDENCE THAT THIS IS A
PRICING POWER ISSUE BASED ON
CONCENTRATION? YES. THANK YOU,
AND IS IT TRUE THAT CALIFORNIA
PROBABLY HAS A MORE CONCENTRATED
INDUSTRY, A REFINING INDUSTRY,
THAN IN MOST OTHER STATES? YEAH,
THE AVERAGE IN THE US IS ABOUT
45%, AND IT'S FOR THE TOP FOUR
COMPANIES OF MARKET CONTROL AND
CALIFORNIA'S 90%. ALL RIGHT. SO
90% IN CALIFORNIA, 45% IN EVERY
PLACE ELSE, WHICH WOULD INCREASE
PRICING POWER IN CALIFORNIA. YES
THANK YOU. AND, WHEN YOU SAY IN
YOUR SLIDE THAT THEY DO NOT
COVER THEIR PLANNED MAINTENANCE
REPLACEMENT, YOU'RE BASICALLY
SAYING, WHAT, WHAT MR. GUNDA
JUST WAS SAYING IS THAT IN
ANTICIPATION OF A PLANNED
CUTBACK, WE'RE NOT GETTING THE
COMPANIES THEMSELVES DON'T HAVE
THE SAME INCENTIVE THAT PERHAPS
THE PUBLIC WOULD TO MAKE SURE
THAT THE INVENTORIES ARE BUILT
UP AND MAINTAINED, HAVING THE
SHIP COME TO REPLACE THAT, ETC,
IS THAT CORRECT? IT IS. AND I
WANT TO REALLY CREDIT SB ONE
TWO. THAT'S NEW INFORMATION.
REFINERS DIDN'T HAVE TO SUBMIT
FORMS TO SAY, HEY, HERE'S HOW
MUCH PRODUCTION WE'RE GOING TO
LOSE. HERE'S HOW MUCH WE'RE
PLANNING TO REPLACE. WE NOW SEE
THAT AND CAN TALK ABOUT IT IN AN
AGGREGATED ANONYMOUS WAY. BUT
NOW THE FIRMS HAVE TO HAVE TO
EXPLAIN WHAT'S HAPPENING AND
THAT'S WHAT HELPS US SEE THE
PICTURE SO CLEARLY. SO WE NOW
FINALLY, BECAUSE OF THE ACTION
THAT THIS LEGISLATURE TOOK IN
2023, WE HAVE THE INFORMATION TO
SEE. THEY ARE NOT PLANNING FOR
ENOUGH REPLACEMENT FOR THEIR
PLANNED SHUTDOWNS. CORRECT. THE
VALUABLE PIECE OF INFORMATION
AND THEN SLIDE SEVEN THAT YOU
HAVE HERE. IF YOU WOULDN'T MIND
PUTTING IT BACK UP. THE
IMPORTANT PART OF SLIDE SEVEN IS
SOMETHING THAT MY COLLEAGUE FROM
NORTHERN CALIFORNIA POINTED OUT
THAT WHEN THE WHEN THE WHEN ONE
COMPANY'S COST OR WHATEVER
CAUSES A PROBLEM, EVERYBODY IS
ABLE TO RAISE PRICE. RIGHT. AND
IS THAT'S THIS WHOLESALE PRICE
SPIKE HERE. THIS THE FOURTH
CHART IS THAT THE RESULT OF
PRICING POWER? IN OTHER WORDS,
IF THERE WASN'T AS MUCH PRICING
POWER, EVERYBODY WOULDN'T BE
ABLE TO RAISE THEIR PRICE. IS
THAT CORRECT? YEAH. AND IF I
MAY, FOR 30S, WHEN YOU HAVE MORE
PLAYERS WHO ARE TRYING TO TAKE
MARKET SHARE FROM EACH OTHER,
ONE PERSON HAS A PROBLEM. THE
OTHERS KEEP SELLING AT LOW
PRICES TO GRAB THEIR CUSTOMERS.
IF FOUR COMPANIES KNOW THAT
THERE'S NO OTHER OPTIONS, THEN
WHEN THE PRICES GO UP FOR ONE OF
THEM, THEY CAN ALL RAISE PRICES
BECAUSE THEY'RE NOT STEALING
EACH OTHER'S CUSTOMERS BECAUSE
THEY KNOW THEY HAVE SO MUCH
CONTROL OF THE MARKET. TWO FINAL
QUICK QUESTIONS VOLUNTARY
REPORTING TO O.P.S. RIGHT WE'VE
I WAS CHALLENGED ABOUT THIS LAST
NIGHT. INDUSTRY REPRESENTATIVES.
RIGHT NOW WE HAVE VOLUNTARY
REPORTING TO O.P.S. AND
THEREFORE THAT OPENS UP THE
POSSIBILITY OF MANIPULATION OF
THE AP OR AT LEAST LESS
ACCURATE. PRICING SIGNALS BEING
SENT FROM O.P.S, WHICH THEN
FLOWS THROUGH YOUR CHART HERE,
CORRECT? YES. BUT I WOULD ADD
THE LEGISLATION REQUIRES
MANDATORY REPORTING TO THE CEC.
THAT'S NOT YET PUBLIC, BUT WE AT
DPMO GET TO GET THE REPORTS. SO
WE CAN COMPARE WHAT'S BEING
REPORTED TO OPUS WITH WHAT'S
BEING REPORTED TO THE CEC. SO WE
NOW HAVE AN OVERSIGHT AGENCY,
BUT THAT DIDN'T EXIST BEFORE.
BUT THE PROBLEM WITH THAT IS
THAT O.P.S IS THE ONE THAT SETS
THE SPOT PRICE. SO IF THEY DON'T
GET EVERYTHING, EVEN THOUGH THE
STATE GETS IT, GETS REPORTED TO
THE STATE, THE SPOT PRICE MAY
STILL GO UP BECAUSE THEY DIDN'T
GET THAT INFORMATION CORRECT.
AND THAT'S THAT'S SOMETHING THAT
THAT SHOULD BE FIXED. AND THEN,
THE YOU KNOW, WE TALKED ABOUT UP
LIKE A ROCKET AND DOWN LIKE A
FEATHER JUST TO PUT MY HAT ON,
PLAYING BOTH SIDES OF THIS IN
SLIDE 875 DAYS UP, 35 DAYS DOWN
DOESN'T DOESN'T MATCH THAT AS
MUCH AS WE'VE SAID BEFORE. NOW
LOTS OF YOUR OTHER DATA DOES.
BUT I THINK THAT THAT'S
SOMETHING THAT WE MAY WANT TO
HAVE EXPLAINED LATER AS AS WE
MOVE FORWARD. ALL RIGHT. BUT
JUST IF YOU GOT A QUICK ANSWER,
GREAT. YEAH. IF NOT QUICK ANSWER
IS THAT THOSE PRICE INCREASES
WENT UP OVER A SEQUENCE OF DAYS
IN SLOW MOTION. AND THE SPOT
MARKET PRICES WERE BEING
REFLECTED IN RETAIL VERY QUICKLY.
BUT THAT INCREASE WAS GOING UP
AS THE MAINTENANCE WAS
HAPPENING. AND THEN WHEN IT SHOT
UP, IT SHOT UP QUICKLY. THANK
THANK YOU VERY MUCH. AND JUST
BECAUSE THE ASSERTIONS HAVE BEEN
MADE, SO MANY TIMES, YOU YOU
DON'T HAVE TO BUILD MORE STORAGE
TANKS TO MEET THE CONCEPT THAT
YOU HAVE THERE. THANK YOU VERY
MUCH. ALL RIGHT. THANK YOU,
ASSEMBLY MEMBER PELLERIN. THANK
YOU SO MUCH, AND PUTTING ASIDE
THE UKRAINE INVASION IN 2022, IT
SEEMS LIKE ALL THE RECENT
GASOLINE RETAIL PRICE SPIKES
OCCURRED WHEN THERE WAS
MAINTENANCE AT REFINERIES IN
CALIFORNIA. AND I UNDERSTAND
EMERGENCY MAINTENANCE ISSUES,
BUT THEY HAVE TO GO DOWN. BUT IS
THERE A COORDINATED SCHEDULE OF
MAINTENANCE FOR THE REFINERIES?
SO THEY'RE ALL NOT DOWN AT THE
SAME TIME, NO. SO LET ME JUST
EXPLAIN IN THE IN ALL THESE
ANSWERS, IT'S HARD TO SAY YES OR
NO BECAUSE OF THE SUBTLETY AND
THE NUANCE OF THIS. ASSEMBLY
MEMBER. BUT THE, THE INDIVIDUAL
REFINERIES CANNOT COORDINATE
THEIR, THEIR MAINTENANCE, IT
WOULD BE ILLEGAL FOR THEM TO
KNOW EACH OTHER'S MAINTENANCE
SCHEDULE. SO. SO THE ANSWER
WOULD BE NO, THEY CANNOT
COORDINATE. BUT WHAT HAPPENS IN
KIND OF THE PRACTICAL NATURE OF
THIS IS SOME OF THE MAINTENANCE
THAT THEY DO RELY ON, EXTREMELY
SPECIALIZED EQUIPMENT, AND THAT
SPECIALIZED EQUIPMENT CAN ONLY
BE AVAILABLE ONCE AT A TIME.
RIGHT? SO MOST OF THEM TEND TO
STAGGER IT BASED ON THE MARKET
AVAILABILITY OF BOTH PERSONNEL
RESOURCES AND EQUIPMENT, THE
SPECIALIST EQUIPMENT. BUT I
THINK WHAT HAPPENS IS WHEN YOU
HAVE 1 OR 2 PLANNED OUTAGES THAT
ARE SLIGHTLY DIFFERENT AND THEY
COULD DO IT, THEY MIGHT OVERLAP
AND WE SEE THAT IN THE DATA.
WHAT HAPPENS ON THE TOP OF THAT
IS THE UNPLANNED OUTAGES. SO
WHEN THEY COMPOUND IN THE MIDDLE
OF THE SUMMER WITH PLANNED
OUTAGES, YOU REALLY ARE IN A BAD
SITUATION IN TERMS OF
PRODUCTION. DOES THAT ANSWER
YOUR QUESTION? I'M CURIOUS. IT'S
ILLEGAL Y TO COORDINATE, IT'S
CAN YOU. YEAH. SO IS IT. OKAY.
FIRST I WOULD, I WOULD FLAG, THE
REFINERS HAVE TO REPORT 120 DAYS
IN ADVANCE TO CEC, BUT GENERALLY
SPEAKING, THAT'S JUST A
NOTIFICATION REQUIREMENT. SO
THEY'RE PLANNING IT THEMSELVES.
AND IT'S IMPORTANT TO NOTE THAT
THESE THREE PRICE SPIKES IN THE
LATE SUMMER, EARLY FALL, WHEN
INVENTORIES ARE LOW, THERE HAS
BEEN PLANNED MAINTENANCE EACH
AND EVERY TIME. SO THE REFINERS
ARE MAKING THEIR OWN PLANS WHEN
TO SHUT DOWN. AND THEY'RE MAKING
THEIR OWN PLANS ABOUT HOW MUCH
TO RESUPPLY. AND THAT'S ENTIRELY
A DECISION THAT THEY GET TO
MAKE. THERE'S NO AUTHORITY
CURRENTLY TO CHANGE THAT. AND
THEN COORDINATED AN AN EXPLICIT
AGREEMENT TO COORDINATE TIMING
OF OUTPUT COULD BE A CRIMINAL
CONSPIRACY UNDER THE ANTITRUST
LAWS. SO THEY CAN'T AGREE WITH
EACH OTHER TO DO IT. AT THE SAME
TIME, THERE'S A LOT OF INDUSTRY
KNOWLEDGE ABOUT WHEN REFINERIES
ARE GOING DOWN BECAUSE THERE'S
PREPARATIONS THEY HAVE TO TAKE.
THEY MAY BUY FUEL FROM EACH
OTHER. THERE'S SOME, YOU KNOW,
THERMAL IMAGING YOU CAN DO OF A
REFINER TO SEE IF IT'S REDUCING
PRODUCTION, THINGS LIKE THAT. SO
THEY CANNOT EXPLICITLY
COORDINATE. ONE OF THE PROBLEMS
ABOUT HAVING FOUR FIRMS IS IT
MAKES IT EASIER TO WATCH
EVERYONE ELSE AND TO KNOW WHAT'S
HAPPENING. THANK YOU, ASSEMBLY
MEMBER WOOD. THANK YOU. THANK
YOU, MADAM CHAIR, MR. BENNETT
COVERED A FAIR AMOUNT OF WHAT I
WANTED TO ASK, BUT I DO HAVE A
COUPLE OF QUESTIONS RELATED TO
THE SPOT MARKET. ROUGHLY WHAT I
MEAN, I KNOW THAT VARIES, BUT ON
ANY GIVEN DAY, WHAT KIND OF A
RANGE IS THE SPOT MARKET OF THE
OVERALL MARKET? YEAH, I THINK
THAT A GOOD BALLPARK, ASSEMBLY
MEMBER TO THINK ABOUT IS, YOU
KNOW, WE USE ABOUT 800 MILLION
BARRELS A DAY, ROUGHLY. AND SOME
DAYS, YOU KNOW, IF YOU'RE JUST
LOOKING AT THE OPUS REPORTING
SOME DAY IT COULD BE AS LITTLE
AS JUST A 10,000, AND SOME DAYS
YOU KNOW, IT COULD BE ABOUT
100,000. BUT TYPICALLY IF YOU
LOOK AT THE AVERAGE, IT'S AROUND
25, 30,000. SO THAT, THAT, THAT
REALLY IN MY MIND IS THE TAIL
WAGGING THE DOG, IT'S, IT'S A
FRACTION OF THAT TINY PORTION
CAN DICTATE AT THE OTHER END,
RETAIL PRICES. THAT'S HUGELY,
HUGELY, HUGELY INFLUENTIAL. SO I
JUST GOT A CORRECTION. IF I USE
THE WORD MILLION, IT'S 800,000.
SORRY, 800,000 BARRELS A DAY.
YEAH. THAT WAS ALL RELATIVE.
YEAH OKAY. THANK YOU 1,000,000
BILLION WHATEVER. YEAH SO IT'S A
PERCENT. THANK YOU. ZERO BETWEEN
FRIENDS. SO IN THE SPOT MARKET,
THESE ARE ARE TRADERS. THEY'RE
NOT. THEY DON'T ACTUALLY TOUCH
THE COMMODITY. THEY DON'T TAKE
CONTROL OF THE COMMODITY. IS IT
A IS IT MORE LIKE A PAPER TRADE,
LIKE THE GUYS YOU SEE IN THE
TRADERS ON WALL STREET AND STUFF
LIKE THAT, THROWING PAPER AROUND
AND ALL THAT? IT'S, IT'S REALLY
BOTH. SO YOU MAY HAVE A REFINER
OR ANOTHER MARKET PARTICIPANT
BUYING TO TAKE DELIVERY, AND YOU
MAY HAVE SOMEONE SPECULATING OR
DOING AN ARBITRAGE OPPORTUNITY
TO MAKE MONEY TRADING IN THE
MARKET. SO YOU REALLY HAVE BOTH.
OKAY, OKAY. THANK YOU. AND I
KNOW, I KNOW MR. FLORA ASKED
ABOUT DATA AND WHAT WE'RE DOING
THERE. I'M GOING TO GUESS, NOT
REALLY GUESS BECAUSE I THINK I
KNOW SOME OF THE ANSWER HERE.
THAT INDIVIDUAL DATA POINTS
CAN'T BE RELEASED FOR LEGAL
REASONS, BUT AGGREGATE DATA
COULD BE RELEASED, CORRECT? YES
WE CURRENTLY POST MUCH OF THE
INFORMATION THAT WE ARE SHARING
TODAY WITH THE NUMBERS BEHIND
THEM PUBLICLY, SO ANYTHING
BEYOND AGGREGATED INFORMATION
WOULD BE PROBLEMATIC. THAT'S
CORRECT. WELL, IT JUST I JUST
KEEP COMING BACK TO THE FACT
THAT, YOU KNOW, ONE REFINERS
MISFORTUNE OR HAVING TO GO
OFFLINE LEADS TO OTHER REFINERS
FORTUNES. AND BY EXTENSION,
CONSUMER PRICE VOLATILITY AND,
AND HUGE DISADVANTAGES FOR THE
CONSUMER AT THE OTHER END OF THE
MARKET. AND I JUST KEEP GOING
BACK TO THE SPOT MARKET AS BEING
THE TRIGGER HERE. AND I FEEL
LIKE WE NEED TO GET OUR ARMS
AROUND THAT BECAUSE IT FEELS
I'LL BE HONEST WITH YOU, I'LL
USE A MEDICAL THING HERE. IT
FEELS A LITTLE BIT LIKE THE
PBMS, AND PHARMA AND THE PBMS
CONTROLLING WHAT THE CONSUMER
PAYS FOR MEDICATIONS. ON THE
OTHER END, WE CAN DEFINITELY
CIRCLE BACK WITH YOU ON JUST ONE
OF THE THINGS THAT YOU SAID WHEN
A REFINERY GOES ON AN OUTAGE AND
THEY HAVE A LOT OF CONTRACTUAL
OBLIGATIONS AND THOSE
CONTRACTUAL OBLIGATIONS,
SOMETIMES IF THEY'RE NOT PLANNED
AHEAD, FOR EXAMPLE, THE 2015
WHEN WE HAD THE TORRENTS EVENT,
WHICH LASTED FOR A VERY LONG
TIME, THEY HAVE TO NOW GO AND
BUY A LOT OF TIMES ON THE SPOT
MARKET. AND TO YOUR POINT, YOU
KNOW, IF A REFINERY IS NOT WELL
PLANNED AND IN THE SITUATION,
THEY COULD LOSE BILLIONS OF
DOLLARS. AND YOU'RE ABSOLUTELY
RIGHT. AND THAT'S SOMETHING THAT
THE PMAC NOTED IN THEIR
DISCUSSIONS. THE IMPORTANCE OF
PLANNING TO PROTECT. ALSO, THE
REFINERS. IF I CAN MAKE TWO
POINTS ON THAT, ONE IS IT'S
IMPORTANT TO KNOW THAT WHEN
THERE IS A PRICE, WHEN THERE IS
SHORTAGE IN THE MARKET, SOMEONE
HAS TO BUY AT THE HIGHER PRICE,
RIGHT? SO THERE'S SOMEONE WHO'S
BUYING AND PAYING A HIGHER PRICE.
BUT FOR MOST OF THE CONTRACTS,
I'M GOING TO SPEAK ONLY AT A
VERY HIGH LEVEL OF GENERALITY.
THE, THE, THE WHOLESALE AND THE
RETAIL CONTRACTS THAT THEY HAVE
ARE BASED ON THE SPOT MARKET
PRICE PLUS. SO EVEN IF YOU'RE A
REFINER PAYING A HIGHER PRICE,
YOU ALREADY HAVE LOCKED IN SALES
CONTRACTS THAT ALLOW YOU TO PASS
THAT PRICE ALONG. SO EVEN THE
REFINER THAT'S BUYING AT A
HIGHER PRICE WITH THIS LINKAGE
TO THE SPOT MARKET PRICES IS
EFFECTIVELY, YOU KNOW,
GUARANTEED NOT TO LOSE A LOT OF
MONEY AS LONG AS THEY SELL IT IN
THESE CONTRACTS THAT ARE LINKED
TO SPOT. AND I THINK FOR STAY
TUNED FOR THIS AFTERNOON THAT
CONCERN ABOUT THESE 1 OR 2 SPOT
MARKET TRADES ONLY HAPPEN IN
CERTAIN CONDITIONS. AND IT
HAPPENS WHEN THERE'S NOT ENOUGH
SUPPLY AND THERE'S MAINTENANCE
OUTSIDE OF THOSE CONDITIONS. WE
DON'T SEE THESE THESE UNUSUAL
SPOT MARKET SPIKES. THANK YOU.
AND JUST ONE FINAL POINT. AND
GOING BACK TO SOMETHING MR.
FLORES SAID ABOUT, CERTAINLY
CHALLENGES IN OTHER COMMUNITIES.
THAT FEEL THIS
DISPROPORTIONATELY SO, MY
DISTRICT I DON'T HAVE EJ
COMMUNITIES, SO TO SPEAK, AS, AS
SOME CONCENTRATED URBAN AREAS
DO. YET IN MY COMMUNITIES, A LOT
OF THEM, BECAUSE ALL THE ALL THE
FUEL IS TRUCKED IN, WE SEE THESE
PRICE SPIKES EVEN GREATER, YOU
KNOW, $7 A GALLON SOMETIMES EVEN
HIGHER IN SOME AREAS BECAUSE OF
THE ADDITIONAL COSTS TO BRING
BRING FUEL IN, YOU ADD THAT AS
YOU LOOK IN THE FUTURE, AS WE
TRY TO GET MORE EV ADOPTION,
I'VE GOT A LOT OF I HAVE LIKE
AGRICULTURE INTERESTS AND OTHER
INTERESTS THAT THAT MAY ONLY USE
A VEHICLE ONCE OR TWICE A YEAR
FOR A SHORT PERIOD OF TIME. THE
COST TO REPLACE THOSE VEHICLES
ARE ENORMOUS. AND YET, WHERE THE
AIR RESOURCES BOARD IS PUSHING
REGULATIONS ON TO SOME OF THESE
FOLKS THAT FOR, YOU KNOW, YOU
KNOW, LITERALLY SMALL FARMS AND
SMALL AGRICULTURAL INDUSTRIES
THAT ARE GOING TO BE REALLY,
REALLY CHALLENGING, AND THAT IS
GOING TO LEAD TO INCREASED COSTS
FOR CONSUMERS AND OTHER
COMMODITIES THAT THAT THAT ARE
PROBLEM PROBLEMATIC. AND SO AS
WE START THINKING ABOUT, YOU
KNOW, WHAT THE, YOU KNOW, THERE
ARE SOME GUYS, SOME FOLKS THAT
ARE REALLY AND WE DON'T HAVE WE
DON'T HAVE THE INFRASTRUCTURE.
YOU WON'T COME AND VISIT MY
DISTRICT. YOU KNOW, YOU'RE NOT
GOING TO HAVE THAT KIND OF
CHARGING INFRASTRUCTURE AND, AND
CAPITAL TO BE ABLE TO, TO, TO
HANDLE ALL THESE THINGS. SO, SO
THE GLIDE PATH FOR THESE
COMMUNITIES WOULD BE HELPFUL.
AND BECAUSE WE ARE NOT
CONSIDERED EJ COMMUNITIES, WE
AND THROUGH THE ENVIRO SCAN, WE
CAN'T SOME OF THESE COMMUNITIES
AND BUSINESS ENTITIES CAN'T GET
ACCESS TO SOME OF THE RESOURCES
THAT OTHERS DO. SO ANOTHER PIECE
OF THE PUZZLE IS WE START
LOOKING AT THAT, YOU KNOW,
DECLINE IN THE IN, IN, ICE
VEHICLES, SO TO SPEAK, JUST
DON'T FREEZE OUT OUR SMALLER
BUSINESSES, SO TO SPEAK. THANK
YOU, ASSEMBLY MEMBER BURR. SO
THANK YOU VERY MUCH. YOU KNOW,
I, YOU KNOW, LOOKING AT SORT OF
HIGH SCHOOL AND COLLEGE
ECONOMICS, ONE OF THE THINGS
THAT, YOU KNOW, IS A TRUISM IS
THAT IF YOU'RE WORRIED ABOUT
PRICE SPIKES DUE TO YOU KNOW,
YOU KNOW, LACK OF EQUILIBRIUM
BETWEEN SUPPLY AND DEMAND,
ACTUALLY DOING WHAT YOU CAN TO
PROVIDE ADDITIONAL INVENTORIES
IS ONE OF THE WAYS YOU ADDRESS
THAT. AND I KNOW THAT'S THE
FOCUS OF WHAT YOU'RE DOING TODAY,
AND WHAT THE GOVERNOR'S
PROPOSAL. AND SO I THINK THAT'S,
YOU KNOW, THAT'S THE, THE
PURPOSE OF WHAT WE'RE HERE TO
THINK ABOUT. THAT SAID, I THINK
THE DEVIL ARE IN THE DETAILS.
AND I THINK THE KEY QUESTION FOR
ME REVOLVES AROUND, I THINK WHAT
YOU STATED AS YOUR OBJECTIVE,
WHICH IS TO MAXIMIZE EXISTING
STORAGE SPACE AND NOT ACTUALLY,
HAVE A PROPOSAL THAT WOULD
REQUIRE NEW STORAGE. AND I THINK
THE THING THAT I AM GRAPPLING
WITH AND IT'S SORT OF I KEEP
LOOKING AGAIN AT THIS TANKAGE
101 SLIDE THAT WAS PRODUCED
YESTERDAY. AND THE QUESTION, YOU
KNOW, THERE'S TWO DIFFERENT
PICTURES THAT ARE BEING PAINTED,
ONE WHERE YOU HAVE SOME DATA
THAT SORT OF SHOWS THAT YOU
THINK THERE'S CAPACITY FOR
ADDITIONAL INVENTORY WITHOUT
DOING MUCH, WITHOUT DOING VERY
MUCH. AND THEN I THINK THE STORY
THAT, SOME OF THE REFINERS AND
SOME OF THE LABOR UNIONS ARE
PRESENTING, WHICH IS YOU'VE GOT
ASSEMBLY MEMBER, WE ARE GOING TO
HAVE SOME OF THOSE FOLKS ON
JOINING THE PANEL MOMENTARILY.
SO CAN WE PAUSE QUESTIONS ABOUT
INVENTORY REQUIREMENTS UNTIL
YOU'RE ABLE TO ASK THAT QUESTION
OF THOSE FOLKS? I'M HAPPY TO DO
THAT. OKAY. I'M HAPPY TO DO
THAT. THANK YOU. THANKS ASSEMBLY
MEMBER GIBSON. I SHOULD BE
WHIPPING THAT THING OUT THERE.
OKAY, OKAY. WELL, I'M GONNA TRY
TO MAKE SURE I STAY WITHIN THE
GUIDELINES BEFORE I GET. OKAY
MADAM CHAIR, MR. DIRECTOR, I
HAVE A QUESTION FOR YOU, HAS HOW
HAS THE VOLATILITY OF THE
GASOLINE PRICES IMPACT MOM AND
POP? GAS STATIONS IN THE STATE
OF CALIFORNIA? I'M JUST
WONDERING HOW MANY HAVE CLOSED,
IF YOU HAVE A BALLPARK FIGURE
WITHIN THE YEAR, THAT'S THE
FIRST QUESTION. AND THEN FOR OUR
VICE CHAIR, I WAS PONDERING THIS
MORNING. I WAS ON CALL AROUND
3:00 IN THE MORNING, BUT I
DIDN'T HAVE YOUR PHONE NUMBER.
BUT IT WAS A QUESTION THAT IT'S
A COMMON THEME THAT THE BILL
PROVIDES FOR A COLLABORATION TO
GO OUT AND INVESTIGATE HOW MUCH
SPACE PEOPLE HAVE. IF YOU FIND
OUT, IN FACT, THAT THEY'RE DON'T
HAVE THE SPACE OR CAPACITY, THEN
WHAT? SO LET ME GO TO THE
DIRECTOR FIRST TO ANSWER THAT
QUESTION, AND THEN YOU. AND THEN
I HAVE ONE FOLLOW UP QUESTION.
OKAY. I'M JUST LOOKING AT THE
CHAIR. GO RIGHT AHEAD. THANK
YOU. ASSEMBLY MEMBER, YOU'RE ON
TRACK. YOU'RE ON TRACK. GOOD
JOB. GIBSON, AND I'VE
APPRECIATED PREVIOUS DISCUSSIONS
AND TALKING ABOUT DIFFERENT
SHIPPING ISSUES AS WELL, THE
GOOD NEWS, I THINK ON THE RETAIL
LEVEL IS ALSO BAD NEWS FOR
CONSUMERS. RETAIL GASOLINE. AND
THIS IS A REFLECTION POTENTIALLY
OF MARKET POWER. RETAIL GAS
STATIONS HAVE BEEN PROFITING
QUITE HANDSOMELY. AND THE RETAIL
MARGINS HAVE BEEN GOING UP. AND
I WOULD REFER TO COLLEAGUES AT
CDTFA WHO PUT OUT A REPORT, AND
ONE OF THE THINGS THEY'VE SEEN
IS ACTUALLY PRIVATE EQUITY
INVESTING IN GASOLINE STATION
OWNERSHIP IN CALIFORNIA, BECAUSE
PRICES HAVE HAVE GONE UP IN THE
RETAIL MARGINS HAVE GONE UP. YOU
SEE SOME GREAT STORIES IN THE
PRESS ABOUT THESE GENERIC GAS
STATION OWNERS, UNBRANDED
GENERIC STATION OWNERS WHO ARE
OFFERING LOW PRICES ON GASBUDDY
AND THE LIKE. AND THEY'RE
GETTING IN THE NEWS BECAUSE
THEY'RE SAYING, HEY, THESE
PRICES DON'T HAVE TO BE SO HIGH.
WHEN WE COMPETE. IT CAN BE 3.99,
NOT 450. YET JUST TO KIND OF ADD
TO THERE, WE HAVE EVIDENCE THAT
DURING PRICE SPIKES, CONSUMERS
TEND TO GO TO GENERIC LOW PRICE
GAS STATIONS. MORE GIVING THEM
THE OPPORTUNITY FOR VOLUME
SALES. BUT WE COULD EXPAND ON
THAT FURTHER, ON THE SPECIFIC,
YOU KNOW, PART OF THE
RULEMAKING, THE FUNDAMENTAL
PREMISE OF ANY RULEMAKING, SIR,
WOULD BE THAT THE BENEFITS
SIGNIFICANTLY OUTWEIGH ANY
RISKS. AND THE RISKS ARE
MITIGATED. AND IF THE RISKS
OUTWEIGH THE BENEFITS AND IF THE
RISKS CANNOT BE MITIGATED, YOU
KNOW, WE WOULDN'T GO FORWARD
WITH ANY SUCH RULE. SO I THINK
THAT IS KIND OF WHAT YOU ARE
GIVING US, IS A THRESHOLD LEVEL,
ABILITY TO HAVE DEEPER
CONVERSATIONS. YOU KNOW, WE HAVE
ENOUGH INFORMATION TODAY TO
SUGGEST THAT THERE IS
EFFICIENCIES TO GAIN IN
PLANNING. WE HAVE THAT EVIDENCE
AS WE PRESENTED OVER AND OVER,
SPECIFICALLY TO ANY SINGLE
REFINER. THEY MIGHT NOT. AND
MAYBE YOU MIGHT BE HEARING FROM
A SPECIFIC REFINER WHO ARE DOING
A REALLY GOOD PLANNING. BUT WE
ARE TALKING ABOUT INDUSTRY AS A
WHOLE. AND THIS RULEMAKING WILL
GO TO REFINERY BY REFINERY LEVEL
PLANNING. OKAY. MY LAST FINAL
QUESTION. THE FEDERAL
GOVERNMENT, CORRECT MY WRONG.
IT'S MY UNDERSTANDING THAT THE
FEDERAL GOVERNMENT ACTUALLY
STOCKPILE, PETROLEUM AS WELL,
THEY CAN RELEASE IT AT ANY
MOMENT JUST TO CALM THE MARKET,
AND I KNOW IN THE REPORT IT ALSO
STATED THAT IT WAS A
RECOMMENDATION THAT CALIFORNIA
SIMILAR DO THE SAME THING.
RIGHT. HOW FEASIBLE IS THAT? SO
ASSEMBLY MEMBER, I THINK YOU'RE
REFERRING TO THE STRATEGIC
PETROLEUM RESERVE, WHICH IS
CRUDE OIL. SO IT'S STORED TO BE
REFINED. IT'S NOT REFINED
GASOLINE. AND MANY REPORTS THAT
HAVE BEEN MADE, I THINK, EVEN TO
THE ASSEMBLY, HAVE HAVE
EVALUATED HAVING A STATE ACTOR
DO THIS. AND THERE'S A COUPLE OF
ISSUES WITH THAT. THESE TANKS
THAT WE'RE TALKING ABOUT NOT
WANTING TO BUILD THE STATE WOULD
NEED TO BUILD THEM. WE'D ALSO
HAVE SORT OF A STATE ACTOR IN
THE MARKET FROM DPMO
PERSPECTIVE. WE WANT A
WELL-FUNCTIONING MARKET, BUT
WITH REGULATIONS THAT
INCENTIVIZE THE RIGHT CONDUCT.
AND SO HAVING A STATE ACTOR
MAKES IT MORE EXPENSIVE THEN YOU
HAVE DECISIONS ABOUT, YOU KNOW,
BUYING AND SELLING. AND THEN
ALSO GASOLINE DOES EVENTUALLY GO
STALE. I THINK YOU HEARD VERY
CLEARLY FROM MEMBERS OF THE
INDUSTRY WHEN INDUSTRY IS DOING
IT, THEY DO FIRST IN, FIRST OUT.
SO THEY'RE CONSTANTLY CYCLING
THROUGH THEIR SUPPLIES AND
THERE'S NO STALENESS ISSUE
BECAUSE THAT'S, YOU KNOW, SIX,
12 MONTHS DIFFERENT ESTIMATES IN
THE INDUSTRY. SO THAT'S NOT AN
ISSUE. BUT IMAGINE IF YOU'RE
BUYING FOR THE STATE OF
CALIFORNIA, YOU BUILD THE TANKS,
YOU BUY IT AND THEN YOU HAVE TO
DECIDE WHEN YOU'RE GOING TO USE
IT AND IT GOES OFF. SO I THINK
THERE ARE SOME ISSUES AROUND,
HAVING AN INDUSTRY LED SOLUTION,
WORKING WITH INDUSTRY AND
EXISTING RESOURCES, AND THAT'S
THE DIRECTION A LOT OF OTHER
COUNTRIES HAVE GONE. AND WE'LL
TALK ABOUT THAT MORE IN THE IN
THE SECOND SESSION. OKAY. ONE
MORE QUESTION FOR THE VICE
CHAIR. WHAT'S YOUR THOUGHTS
AROUND AT BIRTH REGULATIONS,
WHAT IS THE INDUSTRY, HAVE TOLD
YOU REGARDING ANY CONCERNS THAT
THEY THAT HAVE COME UP AROUND AT
BIRTH. SO THANK YOU FOR THAT
QUESTION, WITH THE CHAIR'S
PERMISSION, WE HAVE CARB
REPRESENTATIVES HERE, THEY WOULD
BE BETTER EQUIPPED TO ANSWER
THAT QUESTION. IF YOU'RE OKAY
WITH THAT. I'M OKAY WITH THAT.
BUT I JUST THOUGHT YOU MAY HAVE
AN OPINION IN TERMS OF WHAT
YOU'VE HEARD IN TERMS OF IT.
THAT'S ALL I CAN WAIT. YEAH. DID
YOU WANT TO HAVE SOMEONE FROM
CARB COME RESPOND? YEAH YEAH
THAT'S FINE. I DON'T WANT TO
MESS WITH YOUR AGENDA. SO THE
QUESTION IS REGARDING THE AT
BIRTH REGULATIONS AND WHAT IS
WHAT HAS THE INDUSTRY TOLD YOU
ABOUT CONCERNS ABOUT THE
REGULATIONS, ARE YOU CONCERNED
ABOUT THE IMPACT THAT IT WILL
HAVE ON THE SUPPLY CHAIN IN
CALIFORNIA? BECAUSE WE KNOW THAT
SOME STATES, YOU KNOW, THERE'S
SOME STRIKES GOING ON OUTSIDE OF
CALIFORNIA, AND SOME OF THAT IS
COMING TO CALIFORNIA. AND SO
WITH THE REGULATION AT BIRTH
BEING IMPOSED, THE IMPACT IT
COULD HAVE ON THE SUPPLY CHAIN.
SO IF YOU CAN JUST ELABORATE
BRIEFLY, THANK YOU. AND THANK
YOU FOR GIVING ME THE
OPPORTUNITY TO RESPOND. I KNOW
THIS QUESTION CAME UP YESTERDAY,
SO THANKS AGAIN FOR ASKING IT
TODAY, THE A LITTLE BIT OF
BACKGROUND, THE BIRTH REGULATION
HAS BEEN IN IMPLEMENTATION SINCE
2014. AND SO WE'VE HAD OVER
20,000 VISITS THAT HAVE BEEN
CONTROLLED. THERE ARE 20
TERMINALS THAT HAVE SHORE POWER.
THERE ARE TWO CAPTURE AND
CONTROL SYSTEMS OUT THERE. SO
THE REGULATION HAS BEEN
SUCCESSFUL. WHAT WE DID IN
STARTING IN 2017 IS WE ADDED
ADDITIONAL VESSEL TYPES, AND
THAT WAS SO THAT WE COULD GET
ADDITIONAL REDUCTIONS, FOR THOSE
FRONTLINE COMMUNITIES AROUND THE
PORTS THAT ARE HIGHLY IMPACTED
BY THE EMISSIONS, I SOMETIMES
KIND OF SURPRISING, BUT THOSE
EMISSIONS CAN TRAVEL FAR INLAND
UP TO LIKE 20 MILES. AND
IMPACTS, YOU KNOW, 3.7 MILLION
CALIFORNIANS ARE IMPACTED BY
ADDITIONAL CANCER RISK FROM
THOSE EMISSIONS. AND SO IN 2017,
WE STARTED WORKING WITH THE NEW
VESSEL TYPES, TANKERS AND AUTO
CARRIERS, WHICH I MIGHT CALL RO
ROSE. TO INCLUDE THEM IN THE
REGULATION TO GET EMISSION,
ADDITIONAL EMISSIONS REDUCTIONS
TO PROTECT OUR COMMUNITIES AND
ALSO HELP US MEET OUR
REQUIREMENTS FOR FEDERAL AIR
QUALITY STANDARDS. AND SO
THEY'VE HAD A LONG LEAD TIME.
WE'VE STARTED WORKING WITH THEM
IN 2017 WITH THESE TWO NEW
VESSEL TYPES. AND THOSE TWO NEW
VESSEL TYPES HAVE IMPLEMENTATION
DATES IN SOUTHERN CALIFORNIA IN
2025 AND IN NORTHERN CALIFORNIA
IN 2027. SO THOSE ARE COMING UP.
SO THERE'S AN IMMEDIATE
IMPLEMENTATION DATE COMING UP IN
IN IN 2025. THIS IS A SOMEWHAT
TECHNOLOGY FORCING REGULATION.
THIS TECHNOLOGY EXISTS. SHORE
POWER EXISTS TO CAPTURE AND
CONTROL SYSTEMS EXIST. SHORE
POWER IS AT A TANKER TERMINAL TÊ
121 AND HAS BEEN THERE SINCE
2009. OPERATING SUCCESSFULLY.
THE ISSUE IS ADAPTING THE
CAPTURE AND CONTROL SYSTEMS FOR
TANKERS, AND THAT IS WHERE I
THINK A LOT OF THIS DISCUSSION
HAS, BEEN BEEN FOCUSED ON. THERE
ARE A NUMBER OF COMPANIES, TWO
COMPANIES HAVE ALREADY DESIGNED
AND BUILT THOSE SYSTEMS AND ARE
IN THE FINAL STAGES OF DOING ALL
THE SAFETY ANALYSIS, ALL THE
PERFORMANCE DEMONSTRATION, ALL
THE ALL THE SAFETY PERFORMANCE
EVALUATIONS NEEDED TO GET THEM
INTO THE MARKET. OUR REGULATION
HAS SAFEGUARDS THAT IF THAT
TECHNOLOGY IS NOT AVAILABLE COME
2025, JANUARY 1ST, THERE IS A
PROVISION AND OTHER SAFEGUARDS
THAT ALLOW COMPANIES THAT HAVE
MADE A COMMITMENT TO TECHNOLOGY
TO PAY A REMEDIATION FUND INTO
THE REMEDIATION FUND. THAT
REMEDIATION FUND THEN GETS PUT
BACK INTO THE COMMUNITIES TO GET
REDUCTIONS. SO THE REDUCTIONS
ARE ACHIEVED EVEN IF THEY'RE NOT
ACHIEVED AT THE VESSEL. AND SO,
A LONG RULEMAKING PROCESS, 2017
TO WHEN WE TOOK THIS REGULATION
TO THE BOARD IN, IN 2020 AND IT
WAS APPROVED, AND SO THAT THOSE
ARE THE ISSUES THAT WE'RE
HEARING OUR READINESS ASSESSMENT
INDICATES THAT THE TERMINALS
THAT HAVE COMPLIANCE OPTIONS IN
2025, USING THIS COMBINATION OF
THE CAPTURE AND CONTROL SYSTEMS
AND THE REMEDIATION FUND, HAVE
VIABLE COMPLIANCE OPTIONS. SO
WHAT? THANK YOU. WHAT I JUST
HEARD IS THAT IF THEY DON'T MEET
THE JANUARY 1ST, 2025, THEY WILL
BE PENALIZED AND THE MONEY IS
GOING TO GO TO A FUND, UNTIL
SUCH TIME THAT THEY ARE OR DO IN
FACT MEET STANDARDS. IT'S NOT A
PENALTY. IT'S A IT'S A
COMPLIANCE FUND. AND THAT
COMPLIANCE FUND GOES INTO
PROGRAMS INTO THE COMMUNITY THAT
REDUCE THOSE EMISSIONS
REDUCTIONS. SO THE EMISSIONS
REDUCTIONS GET FELT BY THE
COMMUNITY MEMBERS THAT ARE
IMPACTED BY THE EMISSIONS
REDUCTIONS. BUT IT IS A FEE, I'M
SORRY. IT'S A FEE. IT'S A
REMEDIATION FEE. AT THE SAME
TIME THAT THEY'RE TRYING TO MEET
AND BUILD AND PAY FOR AND TO
MEET STANDARDS, AND THEY DON'T
MEET THE JANUARY 1ST, 2025,
THEY'LL BE, I KEEP SAYING, TO
PENALIZE A PENALTY BECAUSE
THAT'S WHAT IT SEEMS LIKE. YOU
SAY A FEE. I SAY TOMATO, TOMATO.
SAME THING, BUT THAT'S WHAT I'M
HEARING. THEY'VE HAD SINCE 2017
TO PUT EMISSIONS REDUCTIONS
EQUIPMENT IN PLACE. THEY'VE HAD
A LONG LEAD TIME TO DO THAT. AND
SO THE FACT THAT THEY'RE NOT IN
PLACE, THERE MIGHT BE A PERIOD
OF TIME WHERE THEY'RE PAYING
INTO THE REMEDIATION FUND WHILE
THEY'RE GETTING THAT EQUIPMENT
PUT IN PLACE. THANK YOU. THANK
YOU. ASSEMBLY MEMBER, ASSEMBLY
MEMBER PEPIN. THANK YOU, MADAM
CHAIR, WELL, IT'S MILDER OR.
YEAH, MILDER, CORRECT. THANK
YOU. OKAY, GOOD. WELL, MR.
MILDER, YOU CERTAINLY BEING ME,
BEING FROM NORTHERN CALIFORNIA,
YOU CERTAINLY GOT MY ATTENTION
THIS MORNING, YOU KNOW, I COME
FROM THE LAND OF THE HAVES AND
THE HAVE NOTS. MOST OF THE HAVES
HAVE EVS. MOST OF THE HAVE NOTS
DO NOT. SO MY QUESTION IS THIS.
AND I THANK YOU FOR ADDING THIS
LAST SLIDE AS IT RELATES TO WE
COULD SEE IN 2020 WHEN WE WERE
AT THE HEIGHT OF THE PANDEMIC,
WE WERE UP TO ABOUT THAT, 15,000
NUMBER. AND SO MY QUESTION IS
THIS. AND YOU MAY OR MAY NOT
KNOW THE ANSWER, AND THAT'S
OKAY. BUT IS IT THAT WE'RE NOT
UP TO THAT 15 AT ALL TIMES TO
PREPARE AS ASSEMBLY MEMBER
BENNETT HAS SAID, IS IT BECAUSE
THEY WERE FINE JUST ACCORDING TO
THE CONTRACTS THAT THEY HAVE AT
THAT MOMENT IN TIME? OR IS THERE
SOME OTHER REASON AS TO WHY
WE'RE NOT REFINING ALL THE WAY
UP TO BE, QUOTE UNQUOTE,
PREPARED FOR THE TIMES WHEN
WE'RE CHANGING OVER OR WE HAVE
REFINERY UPGRADES OR, GOD
FORBID, AN UNPLANNED UPGRADE OR
REPAIR. SO IF YOU CAN ANSWER
THAT, THAT'S FINE. BUT JUST IF
DO YOU HAVE ANY IDEA? I THINK AS
AS THE VICE CHAIR HAS INDICATED,
EACH REFINERY HAS THEIR
PRODUCTION PLAN, THEIR STORAGE
PLAN, THEY HAVE SLIGHTLY
DIFFERENT CONFIGURATIONS OF
THEIR REFINERIES AND THEIR
STORAGE AND THERE'S NO ONE
ENTITY SAYING, HERE'S HOW WE'RE
GOING TO PROTECT AGAINST PRICE
SPIKES AND KEEP THESE LEVELS UP
HEADING INTO THE SORT OF THE
DANGEROUS MONTHS. AND SO IT'S A
LITTLE BIT OF AN ATOMIZED
DECISION BY EACH REFINER THAT
THEN GETS AGGREGATED HERE. SO I
DON'T HAVE A SIMPLE ANSWER,
ALTHOUGH I JUST REALLY WANT TO
UNDERSCORE THE POINT. YOU HEAR
IT FROM SO MANY OF THE ASSEMBLY
MEMBERS IN THIS HEARING. AND
YESTERDAY, THOSE GAS PRICES HURT
AND THEY HURT THE LOW INCOME
COMMUNITIES THE MOST. AND
EVERYONE'S DISTRICT HAS FOLKS
WHO FACE DIFFICULT CHALLENGES
ABOUT, CAN I FILL MY TANK UP ALL
THE WAY OR HALFWAY, YOU KNOW,
USING GASBUDDY TO LOOK FOR THE
CHEAPER GENERIC GAS STATIONS,
THINGS LIKE THAT? THESE ARE
CRITICAL ISSUES. I THINK, TO
CONFRONT AT DIFFERENT LEVELS.
THANK YOU SO MUCH. SO NOW I'VE
GOT A FOLLOW UP QUESTION, AND WE
HAVE TALKED ABOUT POTENTIAL
LEGISLATION THAT WOULD GIVE THE
CEC THE OPPORTUNITY TO REGULATE.
AND MR. VICE CHAIR, YOU SEEM
LIKE A VERY RATIONAL PERSON, AND
I THANK YOU FOR THE YEOMAN'S
EFFORT THAT YOU'VE PUT INTO ALL
OF THIS. BUT MY QUESTION IS THIS
IF YOU SERVE WITH OTHER PEOPLE
WHO I DON'T KNOW, ARE THERE SOME
POTENTIAL GUARDRAILS THAT YOU
COULD SEE US DOING LEGISLATIVELY
BEFORE WE TURN THE REINS OVER TO
YOU? CARTE BLANCHE, OR INSTEAD
OF, I SHOULD SAY, TURNING THE
REINS OVER TO YOU, CARTE BLANCHE
TO SAY, YEAH, YOU'RE GOING TO
TAKE INTO ACCOUNT THAT IT MAY BE
AS AS ASSEMBLY MEMBER JACKSON
POINTED OUT YESTERDAY, THE
SPIKES AT THE END OF THE YEAR
MAY BE LESS THAN THE COST OF
MANDATING THIS CERTAIN RESERVE,
OR WHATEVER IT MIGHT BE. AND
THAT MIGHT BE SOMETHING MORE
RATIONAL. I DON'T KNOW. BUT I'M
WONDERING BEFORE WE LET YOU GO,
ARE THERE GUARDRAILS THAT WE
PERHAPS SHOULD BE CONSIDERING IN
THE LEGISLATION THAT AUTHORIZES
THE CEC TO MAYBE ENACT SOME
REGULATIONS DOWN THE ROAD? YEAH,
THANK YOU. ASSEMBLY MEMBER
PIPPIN, AND I THINK THE CURRENT
LEGISLATION I KNOW WE'RE GOING
TO DIVE INTO IT MORE THIS
AFTERNOON, TOO, BUT I THINK
YOU'VE PUT IN PRETTY BROAD,
GUARDRAILS ALREADY IN TERMS OF,
YOU KNOW, MAKING SURE THAT THE
BENEFITS OUTWEIGH THE ANY TYPES
OF RISKS. I THINK, YOU KNOW, TO
THE EXTENT THAT, YOU KNOW, THERE
ARE SOME CONVERSATIONS AROUND
LOCAL BENEFITS THAT HAPPENED IN
A LOCAL COMMUNITY, IMPACTS, I
THINK THAT IS ON THE NATURAL
SOMETHING THAT AN AGENCY WOULD
DO, GIVEN THE OVERARCHING
GUIDELINES THAT WE HAVE. BUT I
THINK I WOULD, YOU KNOW, DEFER
TO, YOU KNOW, TO THE EXTENT THAT
YOU FEEL THAT AN AGENCY NEEDS
THOSE GUARDRAILS. WE ABSOLUTELY
WELCOME THAT PARTNERSHIP AND
GUARDRAILS ANY DAY, BECAUSE I
THINK, JUST AS YOU, YOU KNOW, IN
OUR BEST FORM AND HOPEFULLY WE
ARE IN OUR BEST FORM EVERY
SINGLE DAY, WE WANT TO DO THIS
RIGHT. WE DON'T TAKE THIS
LIGHTLY. I THINK I THINK THE
GOAL THAT WE'VE ALL KIND OF
ARTICULATED IS TO REDUCE THOSE
PRICE SPIKES. AND I THINK THAT
REDUCING THOSE PRICE SPIKES WILL
BE OUR MAIN FOCUS. BUT TAKING
INTO ACCOUNT ALL THOSE DIFFERENT
VARIABLES AND WE WILL DO THE
BEST, AS WE ALWAYS DO. BUT I
KNOW I THINK WE WOULD WELCOME
THAT THE LEGISLATION LEGISLATURE
TO BOTH PARTNER AND, YOU KNOW,
SET THE SET THE GUARDRAILS AS
YOU SEE FIT. THANK YOU. THANK
YOU. ASSEMBLY MEMBER RUBIO.
THANK YOU. A COUPLE COMMENTS.
FIRST OF ALL, IN THE SPIRIT OF
TRANSPARENCY AND TRUST, I WOULD
REALLY APPRECIATE IT IF WE DON'T
GET STUCK WITH SEMANTICS. WHEN
MY COLLEAGUE ASKED, IS IT A
PENALTY? IT IS A PENALTY. AND,
YOU KNOW, GOING BACK AND FORTH
WITH THE DIFFERENCE OF
VOCABULARY DOESN'T HELP FOR ME
ANYWAY. THE TRUST THAT WE'RE
TRYING TO BUILD HERE TO YOU
KNOW, FIGURE THIS OUT, AB
ACTUALLY SB ONE AND TWO WERE
SPECIFICALLY ABOUT PENALTIES,
AND I THINK THE POLICY IN FRONT
OF US IS ABOUT PENALIZING. SO,
THE SEMANTICS SHOULDN'T GET IN
THE WAY. JUST FOR FUTURE, I
REALLY WOULD APPRECIATE THAT,
BUT THE QUESTION AND I THINK THE
CONVERSATION THAT WE'RE HAVING
ABOUT ALTERNATIVES AND
GUARDRAILS, I KNOW I'M NOT AS
SMART AS MY COLLEAGUE FROM SANTA
BARBARA. HOWEVER, I REALLY WOULD
LIKE TO TALK ABOUT, THIS IN
PARTICULAR, BUT OTHER, METHODS
TO LOWER GAS PRICES OR,
ALTERNATIVES. AND ALSO IN THAT
CONVERSATION. AND I KNOW WE'LL
GET INTO IT LATER. WOULD BE,
HAVE WE PASSED POLICIES THAT
HAVE ACTUALLY, HELP IMPACT THIS
PROBLEM? AND IF SO, IS THERE
SOMETHING THAT OTHER THAN THIS
OR IN COMBINATION WITH THIS,
THAT WE CAN CHANGE, SO THAT WE
CAN ALLEVIATE SOME OF THE
CHALLENGES THAT WE'VE CREATED
BECAUSE, YOU KNOW, WE'VE BEEN
TALKING ABOUT, 24 REFINERIES 20
YEARS AGO, AND WE HAVE 11 TODAY.
WELL, PART OF THAT MAY BE THE
CONSOLIDATION, BUT THE
CONSOLIDATION, IN MY OPINION,
HAS BEEN BECAUSE OF SOME OF THE
POLICIES THAT WE'VE WE'VE
PASSED, WE WERE TALKING ABOUT
MOM AND POP, YOU KNOW, GAS,
RETAILERS, YOU ALSO SAID THAT WE
HAVE FEWER OF THEM. WHAT ARE
THOSE REASONS, DID WE CREATE
SOME OF THOSE? AND I THINK IF WE
CAN, DO ALL OF THE HAVE ALL OF
THOSE CONVERSATIONS AT ONCE AND
NOT JUST FOCUS ON ONE, BECAUSE I
THINK THIS PROBLEM IS NOT JUST
ONE ISSUE. I THINK IT IS A
COMBINATION OF ISSUES. AND I
THINK GOING FORWARD, I WOULD
LIKE, I KNOW WE'LL HAVE A
CONVERSATION ABOUT THAT, BUT I
THINK THAT NEEDS TO BE INCLUDED
SO THAT WE HAVE A BIG PICTURE
ABOUT, YES, WE CAN DO THIS. AND
3 OR 4 OTHER THINGS, OR MAYBE
NONE. JUST DEPENDING ON ON WHAT
THE CONVERSATION IS. THANK YOU.
DID YOU DID YOU WANT TO RESPOND
OKAY. ALL RIGHT, ASSEMBLY MEMBER
LEE. THANK YOU, MADAM CHAIR,
JUST BUILD OFF SOME OF THE
COMMENTS FROM A SIMILAR PATTERN,
YOU KNOW, WE ALL, REPRESENT
NORTHERN CALIFORNIA. SO ON THE
DIRECTOR ON YOUR SLIDES ON SLIDE
11, WHEN YOU POINTED OUT
SPECIFICALLY THAT RETAIL PRICES
ARE ON A SHARP UPWARD TREND IN
NORTHERN CALIFORNIA, OF COURSE,
IT CAUGHT OUR NORTHERN
CALIFORNIA ATTENTION, BECAUSE
OUR REALITY IS WHAT WE'RE LIVING
THROUGH AT THIS MOMENT. SMALL
POINT IS, OF COURSE, I REALLY DO
APPRECIATE ALL THE DATA WE HAVE
ALLOWED FROM THE FIRST SPECIAL
SESSION BILL TO ALLOW YOU TO
ACTUALLY LOOK AT ALL THESE
THINGS. AND I THINK THAT'S
BEARING FRUIT, AS IS SEEING WHAT
IS ACTUALLY HAPPENING WITH THE
REAL TRENDS. SO SINCE SEPTEMBER,
THIS IS CLEARLY EVEN SHOWING
RIGHT NOW IS THAT THE PRICE OF
CRUDE AND THE RETAIL PRICE IS
QUITE DIVORCED RIGHT NOW IN
CALIFORNIA, WHILE PRICE OF CRUDE
IS DECLINING, THE RETAIL PRICE
OF US OF THE REST OF THE
NATION'S GAS IS GOING DOWN. BUT
OF COURSE, IT'S GOING UP IN
CALIFORNIA, MUCH MORE SO IN
NORTHERN CALIFORNIA THAN EVEN
SOUTHERN CALIFORNIA. IS THERE
ANY, DATA POINTS THAT YOU HAVE
BEEN ABLE TO COLLECT THAT
SUGGEST WHY THERE'S EVEN A
DIFFERENCE IN BEHAVIOR AND
PRICING BETWEEN TWO DIFFERENT
PARTS OF THE SAME STATE? YES.
THERE'S TWO REFINING HUBS IN
CALIFORNIA, LARGELY SOUTHERN
CALIFORNIA AND NORTHERN
CALIFORNIA, AND THERE'S ACTUALLY
TWO DIFFERENT SPOT MARKET
TRADING DESTINATION LOCATIONS,
ONE FOR NORTHERN CALIFORNIA AND
ONE FOR SOUTHERN CALIFORNIA. SO
WE'VE BEEN SEEING, THANKFULLY,
SOME OF THIS HAS HAS ABATED. BUT
A WEEK AGO AND THROUGH LAST WEEK,
PRICE SPIKES THAT WERE MORE
CENTERED ON THE NORTHERN
CALIFORNIA SPOT MARKET. AND THIS
IS ALL PUBLIC PUBLICLY REPORTED
THERE WERE SOME REFINERY
MAINTENANCE ISSUES REPORTED IN
NORTHERN CALIFORNIA, SO THE
ISSUE WAS BEING FELT MORE
ACUTELY IN NORTHERN CALIFORNIA
AND ON THE SPOT MARKET. YEAH.
JUST SO TO REITERATE, EVEN
BETWEEN THE DIFFERENT SPOT
MARKETS, BETWEEN THE DIFFERENT
REFINERY ACTIVITY YOU'RE SEEING,
THE DIFFERENCE IN BEHAVIOR HAS
CONTRIBUTED TO THE DIFFERENCE IN
PRICE AT LEAST. YEAH, THERE IS
SOME CAPACITY TO MOVE PRODUCT
BETWEEN NORTHERN AND SOUTHERN
CALIFORNIA VIA BARGE, AND SO,
YOU KNOW, THE PRICE IS OFTEN
MOVE IN SIMILAR DIRECTIONS, BUT
THERE ARE TIMES WHEN THERE ARE
MORE LOCALIZED EVENTS IN ONE
AREA OR THE OTHER THAT WILL
DRIVE A PRICE SPIKE HIGHER. NOW,
I'LL ALSO SAY THE CALIFORNIA
AVERAGE WAS GOING UP AS WELL IN
SOUTHERN CALIFORNIA WAS GOING UP
AS WELL, JUST NOT AS MUCH.
RIGHT? I DON'T KNOW IF YOU HAVE
THE ANALYSIS FOR THIS TOO, BUT,
YOU KNOW, GOING BACK TO THE
PRICE SPIKES OF THE LAST YEARS
AGO, DID YOU SEE ANY
DIFFERENTIATION OF BEHAVIOR LIKE
THIS HAPPENED BETWEEN THE
REGIONS BACK IN 2022 OR IN 2022?
I THINK WE'D HAVE TO GO BACK AND
CHECK THE DATA TO BE VERY
CAREFUL. I THINK LARGELY
SPEAKING, THERE WERE STATEWIDE
PHENOMENON, THERE'S ALWAYS SOME
DIFFERENCE BETWEEN THE TWO
PRICES, AND SOMETIMES IT'S MORE
LOCALIZED IN ONE AREA OR THE
OTHER. BUT I THINK GENERALLY
THOSE WERE PRICE IMPACTS THAT
WERE FELT THROUGHOUT CALIFORNIA.
YEAH. IF THE DATA IS AVAILABLE
TO SHARE LATER ON, I WOULD
APPRECIATE TO SEE THAT AS WELL.
THANK YOU. YEAH. I MEAN, WE'LL
DEFINITELY SHARE MORE
INFORMATION, BUT JUST A QUICK
KIND OF LEVEL SET INFORMATION
FOR YOU. AND THE NORTHERN
CALIFORNIA MARKET IS ABOUT A
THIRD IN THE SOUTHERN CALIFORNIA
IS ABOUT TWO THIRDS, SO AND THEN
THE IN TERMS OF THE REFINERIES,
WE HAVE, THREE IN THE NORTH AND
FIVE IN THE, AND THEN ONE, YOU
HAVE KERN IN THE MIDDLE, BUT WE
USUALLY COUNT IT AS NORTH. SO,
IF YOU'RE LOOKING AT, YOU KNOW,
THE KIND OF ONE THIRD, TWO THIRD
DISTRIBUTION, DEPENDING ON HOW
YOU, WHERE THE OUTAGES ARE, YOU
WILL HAVE MORE IMPACT IN ONE
PLACE OR THE OTHER. THANK YOU
VERY MUCH. I THINK THAT'S
SOMETHING FOR US TO CONSIDER.
OUR CONVERSATION ABOUT THE
POLICY TO PROTECT THE HOLISTIC
NATURE OF THE STATE, TOO. SO
THANK YOU VERY MUCH. THANK YOU.
ASSEMBLY MEMBER MURATSUCHI.
THANK YOU VERY MUCH, MADAM
CHAIR. I KNOW YOU ARE ANXIOUS TO
MOVE ON WITH THE AGENDA AND TO
HELP FACILITATE THE TRANSITION
TO THE REST OF THE PANEL, I JUST
WANTED TO, TO EMPHASIZE AND TO
ASK ALL OF THE SPEAKERS THAT ARE
GOING TO BE COMING UP, YOU KNOW,
I WANTED TO HIGHLIGHT THE FACT
THAT I, I. SURPRISE, SURPRISE,
REPRESENT THREE OF THE FIVE
REFINERIES IN MY ASSEMBLY
DISTRICT, THE CHEVRON AND EL
SEGUNDO, THE PBF AND TORRANCE
AND THE PHILLIPS 66. IN
WILMINGTON. AND AS WE GO FORWARD,
I'M ASKING THIS COMMITTEE AS
WELL AS THE, THE, THE AUDIENCE
TO NOT ONLY, YOU KNOW, ADDRESS
THE SUPPLY ISSUES, THE IMPACTS
ON CONSUMERS, BUT ALSO THE
IMPACTS ON FRONTLINE
COMMUNITIES. WHEN THE TORRANCE
REFINERY EXPLOSION HAPPENED IN
2015, I LIVED JUST A FEW MILES
FROM THE REFINERY, I KNOW THAT
THAT CREATED A HUGE UPROAR IN
TERMS OF REFINERY SAFETY. I KNOW
THAT THERE ARE ISSUES WITH THIS,
THE PROPOSAL THAT WE'RE GOING TO
BE DISCUSSING IN THE AFTERNOON
IN TERMS OF THE MAINTENANCE
SCHEDULE TRIGGERING THESE
INVENTORY CHECKS. AND SO I WANT
TO MAKE SURE THAT NOT ONLY ARE
WE ADDRESSING SUPPLY ISSUES,
CONSUMER ISSUES, BUT ALSO
REFINERY SAFETY ISSUES. THANK
YOU. THANK YOU. ASSEMBLY MEMBER
ALVAREZ, DO YOU HAVE A QUESTION?
THANK YOU, MADAM CHAIR. AND
THANK YOU TO THE PANELIST, I
JUST WANT TO, ACKNOWLEDGE THE, I
WILL BE FOCUSING SPECIFICALLY ON
THE ITEM, WHICH WAS, DOCKETED
FOR TODAY AND THIS IS RELATED TO
THE TRANSPORTATION FUELS
ASSESSMENT. MY LINE OF QUESTION
IS SPECIFICALLY TO THAT, AND I
WANT TO THANK IN ADVANCE THOSE
WHO HAVE PROVIDED SOME BRIEFINGS
ALREADY. AND, AND I APPRECIATE
THE WORK THAT'S GONE INTO INTO
THE REPORT AS WELL. I THINK IT'S
A REALLY WELL, THOUGHT OUT
REPORT WITH A LOT OF IMPORTANT
INFORMATION, MY LINE OF QUESTION
IS REALLY ABOUT EXCLUSIVELY TO
THE WORK THAT HAS BEEN DONE THAT
THE REPORT SAYS NEEDS TO BE DONE
SPECIFICALLY ON ON PAGE SIX, THE
VERY BEGINNING AS IT RELATES TO
STORAGE, THE REPORT STATES, I'M
QUOTING IT IS UNCLEAR HOW
OPERATORS WOULD ADJUST TO
REQUIREMENTS OR INCENTIVES AND
ADDITIONAL PUBLIC DISCUSSION AND
ANALYSIS OF THESE TYPES OF
APPROACHES IS WARRANTED, IS WHAT
THE QUOTE SAYS. SO THE QUESTION
THEN HAS TO BE ASKED WHAT HAS
BEEN DONE, WHAT KIND OF PUBLIC
DISCUSSION AND WHAT ANALYSIS DO
YOU HAVE TO DATE? BECAUSE THE
ASSESSMENT DOES NOT PROVIDE ANY
ANALYSIS PER SE AND, ONLY
MENTIONS SOMETHING ABOUT
WORKSHOPS, BUT I'M NOT SURE THAT
IT'S RELATED TO THIS SPECIFIC
CONCERN THAT YOU RAISE. YEAH,
THANK YOU. ASSEMBLY MEMBER,
SINCE THE ASSESSMENT HAS BEEN
COMPLETED, AGAIN, IF YOU, TO
KEEP THE INFORMATION FACTUAL,
YOU KNOW, WE HAD COMMENTS AFTER
WE PUT IN THE DRAFT PROPOSAL OUT,
EVEN FROM THE INDUSTRY THAT THE
OPTIONS AROUND MINIMUM INVENTORY
AND RESUPPLY ARE INTRIGUING AND
SHOULD BE FURTHER DISCUSSED, SO
WE HEARD THAT, YOU KNOW, WE
HEARD FROM DPMO IN THEIR MEMO.
SO I'M SPEAKING FOR THE ENERGY
COMMISSION, THE OPPORTUNITY WITH
THE RESUPPLY AND THE
INVENTORIES. SO BECAUSE OF THAT,
WE TOOK IN TWO WORKSHOPS. SINCE
THEN, A SPECIFIC TO THAT ISSUE.
AND BOTH DPMO AND CSC STAFF AND
OTHERS HAVE PRESENTED AT THOSE
WORKSHOPS. AND ONE OF THE THINGS
WE STARTED REALLY LOOKING AT IS
THE UPSIDE, THE SIGNIFICANT
UPSIDE IN THINKING ABOUT, AGAIN,
ACTIVE PLANNING TO ENSURE THAT
WE HAVE LIQUIDITY. SO AS WE LOOK
AT THAT AS THE PROBLEM, NOT
NECESSARILY. I THINK THE WORD
RESUPPLY AND THE MINIMUM
INVENTORY HAS BEEN, I THINK USED
IN WAYS THAT THAT KIND OF
CREATES A MISUNDERSTANDING, LIKE
OUR HOPE IS TO REALLY IMPROVE
THE LIQUIDITY. LET ME JUST ASK
MORE SPECIFICALLY, SO YOU SAID
THERE WAS WORKSHOPS ON PAGE 88
OF THE REPORT. I DO NOTE THAT
YOU SAID THERE WERE WORKSHOPS
AND HEARINGS, AND IT SOUNDS LIKE
SOMETHING WAS DISCUSSED
SPECIFICALLY TO YOUR CONCERNS
RAISED IN THE REPORT, THOUGH.
DID THE DISCUSSION INCLUDE
ANALYSIS? A FULL ANALYSIS OF THE
IMPLICATIONS OF THIS? NO. SO I
THINK YOU KNOW, WE HAVE MODERATE
DISCUSSIONS. AND AGAIN, BEING IN
THE SPIRIT OF TRANSPARENCY,
WE'VE HAD, YOU KNOW, PRELIMINARY
CONVERSATIONS. AND I THINK AS WE
MENTIONED THIS MORNING, IT'S THE
THRESHOLD QUESTION OF DO WE SEE
SIGNIFICANT OPPORTUNITY. AND YOU
KNOW, THE LANGUAGE WOULD BE
PERMISSIVE FOR US TO CONTINUE
THOSE DISCUSSIONS. SURE. WE SAW
THAT ALSO IN THE SECTION ABOUT
IMPORTS, YOU, QUOTE AT THE END
OF PAGE SIX, THAT THIS, THIS
POTENTIAL SCENARIO OF IMPORTS
MERITS ADDITIONAL ANALYSIS. HAS
THERE BEEN ANALYSIS DONE ON
THAT? YES, SO WE DON'T HAVE THAT
PUBLICLY YET, BUT WE WILL PUT
THEM PUBLICLY, SO WE HAVE TWO
INDUSTRY CONSULTANTS, ICF AND
STILLWATER, WHO WAS HELPING US
WITH MUCH OF THIS ANALYSIS,
INCLUDING A COUPLE OF
ECONOMISTS. SO WE WILL PUT MORE
ANALYSIS OUT ON THAT SPECIFIC
ISSUE, AND AS YOU NOTE, SO THIS
IS THIS IS A COMPLICATED, YOU
KNOW, DYNAMIC. AND I THINK THE
IMPORTANCE THAT I JUST WANT TO,
HOPEFULLY GIVE YOU CONFIDENCE IN
THE WORK WE DO, WE TOOK EVERY
SINGLE COMMENT WE GOT FROM THE
INDUSTRY, FROM THE LABOR, AND
FAITHFULLY REPRESENTED IN THAT
REPORT. AND IT WAS A
WHITEBOARDING EXERCISE THAT
ALLOWED FOR ROBUST
PARTICIPATION. AND I THINK WE
CONTINUE TO DIG DOWN THOSE
RISKS. AND AS WE DIG DOWN THOSE
RISKS, WE SEE SIGNIFICANT UPSIDE
HERE, WHICH WE NEED TO FURTHER
ANALYSIS. SO THOSE ARE TWO I
KNOW YOU HAVE YOU KNOW, SEVERAL
OTHER OPTIONS THAT YOU'VE
PRESENTED. WE'LL DISCUSS THOSE
LATER. BUT IN THIS REPORT YOU
HAVE THOSE TWO. AND SO JUST SO I
UNDERSTAND ON THE ISSUE OF
STORAGE, YOU HAVE NOT DONE AN
ANALYSIS YET ON WHAT YOU PROPOSE
HERE. ON THE ISSUE OF IMPORTS.
YOU'VE BEGUN AN ANALYSIS. BUT
THAT'S NOT COMPLETE YET. YES.
SO, ON THE ON THE BASICALLY
STORAGE I THINK WHAT WE'VE SHOWN
IN THE TWO WORKSHOPS IS AS AN
AGGREGATE, WE HAVE PLENTY OF
SPACE TO WORK WITH ANY SPECIFIC
REFINER MIGHT NOT, BUT IN THE
AGGREGATE, WE HAVE OPPORTUNITY.
AND YOU BELIEVE THAT'S ALL THE
ANALYSIS YOU NEED TO MAKE THAT
DETERMINATION? NO, WE WOULD NEED
FURTHER AND THAT'S WHAT THE
RULEMAKING WOULD BE FOR. AND SO
WHAT WOULD BE THE TIME FRAME AND
WHEN WOULD YOU CONDUCT THAT
ANALYSIS THAT HASN'T BEEN
CONDUCTED. SO WE'LL CONTINUE TO
WORK ON THIS REGARDLESS OF THIS
LEGISLATION. YOU KNOW. BUT WE
WOULD NOT BE ABLE TO ACT ON THAT
WITHOUT LEGISLATION. WHEN WOULD
THAT HAPPEN, SO WE'LL CONTINUE
TO WORK. SO, I MEAN, IT'S
PRIORITIZING WITHIN THE
RESOURCES WE HAVE, I WOULD
IMAGINE OVER THE NEXT, YOU KNOW,
THIS TRANSPORTATION FUELS
ASSESSMENT IS EVERY THREE YEAR
REPORT, THERE WILL BE A LOT OF
UPDATES IN THE NEXT REPORT, BUT
ON AN ONGOING BASIS, AS MORE
INFORMATION IS AVAILABLE, WE'LL
PUT IT OUT. SO YOU'RE PLANNING
TO DO YOUR DUE DILIGENCE, WHICH
I THINK YOU HAVE DONE TO NOW,
BUT DO YOUR DUE DILIGENCE ON THE
STORAGE ISSUE AT SOME POINT
ANYWAY, REGARDLESS OF WHAT THE
LEGISLATURE DOES, WE WILL
CONTINUE TO INVESTIGATE THAT.
YES. AND I KNOW THERE'S MANY
MEMBERS WHO HAVE QUESTIONS ABOUT
STORAGE TRADE OFFS. WHEN I
UNDERSTAND THAT I THINK BOTH
FROM YOUR PERSPECTIVE AS WELL AS
FROM THE PERSPECTIVE OF OTHER
MARKET PARTICIPANTS. SO, WE WILL
BE DOING THAT MOMENTARILY. YEAH.
SO I'M DONE WITH MY QUESTIONS.
IT WAS ALL ABOUT THE REPORT AND
THE ANALYSIS THAT HAVEN'T BEEN
DONE, I THINK, YOU KNOW, THE
QUESTIONS AND ANSWERS SPEAK FOR
THEMSELVES IN TERMS OF THE WORK
THAT NEEDS TO BE DONE AHEAD
BEFORE WE MAKE A DECISION. WE
HAVE TO REALLY THINK THIS
THROUGH. THANK YOU. THANK YOU.
ALL RIGHT. AND THEN BEFORE WE
JUMP INTO OUR NEXT OR OUR
CONTINUATION OF THIS PANEL AND
OUR NEXT PANEL, I DO HAVE A
COUPLE OF QUESTIONS, ABOUT THE
MARKET OVERALL. SO I WANT TO
TAKE A LITTLE BIT OF A STEP
BACK, MY FIRST QUESTION IS, YOU
HAVE SHARED WITH US THREE
SCENARIOS FOR GASOLINE
CONSUMPTION AND DEMAND OVER THE
NEXT 20 YEARS. THERE'S A RAPID
SCENARIO, FAST SCENARIO, SLOW
SCENARIO. WHICH OF THESE ARE WE
ACTUALLY USING FOR PLANNING
PURPOSES TODAY? WHAT ARE WE
CONSIDERING? THE BASE CASE. SO
THE BASE CASE WOULD BE OUR, I
THINK IN THIS IT WOULD BE THE
ORANGE LINE WOULD BE OUR, SORRY.
I'M SORRY THE GREEN LINE. SORRY
I'M JUST LOOKING AT THE
INFORMATION HERE. THE GREEN LINE
IS THE FORECAST. THE FORECAST
LINE IS FORECAST. OKAY AND THE
OTHER TWO ARE THE SCENARIOS THAT
WERE PULLED FROM THE OVERALL
ECONOMY WIDE PLANNING. SO AS AS
WITH MOST PLANNING, WE DO
SCENARIO ANALYSIS TO ENSURE THAT
WE'RE PLANNING FOR THE ENTIRETY
OF THE BAND. OKAY SO BASED ON
OUR CURRENT FORECASTS AND THE
PLANS THAT WE ARE UTILIZING,
ACCORDING TO THIS, THE IF WE
CONSIDER TODAY'S CONSUMPTION TO
BE 100% IN 2035, WE WILL HAVE
GONE TO 85%, APPROXIMATELY
BALLPARK. AND BY 2045, WE WILL
HAVE GONE TO 50%. OKAY SO OUR
CONSUMPTION IS NOT GOING TO ZERO
IN THE NEXT TEN YEARS. OUR
CONSUMPTION IS NOT GOING TO ZERO
IN THE NEXT 20 YEARS, OUR
CONSUMPTION BY YEAR FORECAST IS
GOING TO 85% IN THE NEXT TEN
YEARS, I THINK THAT AS WE'VE
GONE THROUGH, BOTH YOUR AND I
WOULD AGREE. VERY EXCELLENT
REPORTS. APPRECIATE ALL THE WORK
THAT, YOU ALL HAVE DONE WITH THE
DATA THAT YOU HAVE UTILIZED AS A
RESULT OF SBX ONE TWO, BUT IT
DOES STRIKE ME THAT WE'VE KIND
OF PROVEN TO FUNDAMENTAL LAWS OF
ECONOMICS. SO I THINK MANY OF US
HAVE TALKED ABOUT OUR EXPERIENCE
IN HIGH SCHOOL ECONOMICS. I
THINK MR. BENNETT AND I WERE
BOTH ECONOMICS MAJORS MANY MOONS
AGO, SO YOU'VE BASICALLY PROVEN,
I MEAN, THIS THIS CHART PROVES
LIKE THE FUNDAMENTAL LAW OF
SUPPLY AND DEMAND, RIGHT? LIKE
THAT'S LITERALLY WHAT THIS CHART
IS, AND YOU'VE ALSO PROVEN THAT
MARKET CONCENTRATION LEADS TO
EXTRAORDINARY MARKET POWER, ALL
OF WHICH IS TO SAY, IT STRIKES
ME THAT TAKING A BIG STEP BACK,
KNOWING THAT WE ARE GOING TO BE
AT 85% CONSUMPTION IN THE NEXT
TEN YEARS, I FEEL LIKE WE ARE
EXTRAORDINARILY VULNERABLE AND
WE RISK WORSENING MARKET POWER
DYNAMICS. IF A REFINER CLOSES.
SO I GUESS WHAT IS THE STATE'S
PLAN FOR WHEN THE NEXT REFINERY
CLOSES? AND ARE YOU HAVING THOSE
CONVERSATIONS RIGHT NOW. YEAH, I
WOULD ALSO INVITE, BOTH MY
COLLEAGUES FROM CARB AND DPMO TO
STEP IN IF THEY HAVE ANYTHING.
BUT, SO I THINK 30,000 FOOT
LEVEL, YOU'VE LAID OUT THE RISK
AS CLEARLY AS THE TRANSPORTATION
FUEL ASSESSMENT DOES. I THINK
MOVING FORWARD, THERE IS A LOT
OF UNCERTAINTY BAND AND WHAT YOU
REQUIRED US THROUGH THE
LEGISLATION OF SB ONE TWO,
NOTING THAT IS WHAT IS OUR
TRANSITION PLAN. AND SO WE ARE
WORKING ON THAT IN TERMS OF
THINKING THROUGH WHAT THE
DIFFERENT OPTIONS COULD BE. IF
YOU LOOK AT SOMEBODY LIKE
AUSTRALIA, WHAT AUSTRALIA DID IS
THROUGH COVID, A NUMBER OF THEIR
REFINERIES CLOSED DOWN AND SO
AUSTRALIA AS A COUNTRY, FOR
NATIONAL SECURITY REASONS,
DECIDED TO HAVE THE STATE C
OAN LAST REFINERY. THAT'S WHAT
THEY DID. AND THAT'S WHY YOU
HAVE THAT IN OUR, OPTIONS TABLE.
IS BECAUSE EVERY DIFFERENT
MARKET WILL HAVE A MULTITUDE OF
OPTIONS TO HAVE. SO ALL THE
OPTIONS IN THE ASSESSMENTS THAT
WE PROVIDED ARE LOOKING AT BOTH
RELIABLE AND AFFORDABLE SUPPLY
AND HOW WE DESIGN THOSE
POLICIES. WILL, WILL, WILL BE
WHERE THE RUBBER MEETS THE ROAD,
AS MANY OF THE MEMBERS NOTED.
AND I WOULD ADD A SLIGHTLY MORE
HOPEFUL NOTE IN TERMS OF
REFINERY CLOSURES, 2022 AFTER
THE PANDEMIC, CALIFORNIA WAS
STILL THE FOURTH LARGEST MARKET
IN THE WORLD FOR GASOLINE AFTER
THE UNITED STATES, CHINA AND
BRAZIL. SO EVEN 85% OF A VERY
LARGE NUMBER IS STILL A VERY
LARGE NUMBER. IT'S ALSO THE MOST
PROFITABLE REFINING REGION IN
THE UNITED STATES. SO LARGE
VOLUMES AND LARGE PROFITS AND
WE'VE SEEN TWO REFINERIES
CONVERT TO RENEWABLE DIESEL. AND
THAT'S AMAZING THAT I THINK IT'S
ABOUT HALF OF THE STATE'S DIESEL
IS NOW RENEWABLE DIESEL. AND SO
THERE IS SOME MARKET REACTION TO
LOOKING FOR OTHER PRODUCTS AS
THAT DEMAND CHANGES. AND THERE'S
GOING TO BE, AS YOU SAY, A LOT
OF DEMAND FOR QUITE A LONG TIME.
SO THE QUESTION IS WHAT ARE
SMART POLICIES ANTICIPATING
THAT. AND AS WE TALKED THIS
AFTERNOON, THE FEWER REFINERIES
YOU HAVE, THE MORE IMPORTANT IT
IS TO HAVE A BUFFER. BECAUSE IF
ONE REFINERY GOES DOWN, THAT'S A
LARGER CHUNK OF THE REMAINING
PIE. AND SO HAVING A BUFFER IS
ONE OF THE KEY STRATEGIES TO
DEAL WITH EVENTUALITIES WHERE WE
HAVE FEWER REFINERS. AND LET ME
JUST ASK A FOLLOW UP QUESTION TO
MR. ALVAREZ'S RELATED TO
IMPORTS. I WAS SOMEWHAT
SURPRISED. JUST IN THE EXECUTIVE
SUMMARY OF THIS REPORT. SO PAGE
SIX, IT SAYS A STRATEGY TO
BOLSTER THE STATE'S IMPORTS OF
GASOLINE WILL BE IMPERATIVE TO
AVOID POTENTIALLY SYSTEMIC
UNDERSUPPLY PROBLEMS. THEN YOU
ALSO PARAGRAPH LATER ACKNOWLEDGE
THAT MARINE IMPORTS GENERALLY
TEND TO HAVE HIGHER PRICES
COMPARED TO IN-STATE REFINING
FOR A NUMBER OF REASONS. AND I
GUESS I'M HAVING A HARD TIME
WRAPPING MY HEAD AROUND WHY
WOULD WE WANT TO HAVE AN IMPORT
STRATEGY FRONT AND CENTER WHEN
THAT IS ACTUALLY MORE EXPENSIVE
AND ACTUALLY PROBABLY MORE, YOU
KNOW, BIG PICTURE HARMFUL FOR
THE ENVIRONMENT? RIGHT, I THINK
IT'S, JUST KIND OF NOTING THAT
THE CONTEXT OF THE ASSESSMENT
WAS ALL THOSE DIFFERENT OPTIONS.
RIGHT? SO WE'RE THINKING ABOUT
THE MULTITUDE OF OPTIONS WE HAVE
IN TERMS OF IMPORTS CURRENTLY,
THE WAY THE IMPORT MARKET WORKS
IS IT'S REACTIVE. THERE IS SOME,
ACTIVE PLANNING BY THE INDUSTRY
TO BRING IN BLENDING COMPONENTS
AND SUCH. BUT A LARGE VOLUME OF
WHAT WE SEE COMING INTO THE,
INTO THE MARKET IS LARGELY
REACTIVE TO A SPIKE. SO I THINK
IT KIND OF POINTS TO THEN
THROUGH WORKING WITH THE
INDUSTRY COLLABORATIVELY, WHAT
COULD WE DO TO ACTIVELY BRING IN
THE IMPORTS? THE REASON WHY WE
KIND OF THEN NOTE THE IMPORTANCE
OF THE OTHER SIDE IS, AGAIN,
THIS IS THE REASON WHY WE NEED
RULEMAKING TO THOROUGHLY GET
THROUGH THIS, WHICH IS IF YOU
START BRINGING IN IMPORTS, WHAT
WOULD THE MARKET PLAYERS DO?
INDEPENDENT MARKET PLAYERS DO?
WOULD THEY BRING IN IMPORTS OR
NOT? SO THOSE ARE THE KIND OF
QUESTIONS WE HAVE. BOTH OUR
CONSULTANTS AND ECONOMISTS
WORKING. AND WE'RE GOING TO PUT
THAT OUT, VERY SOON. AND WE'LL
BE DOING THAT REGARDLESS OF AND
I KNOW I AND ALL OF MY OTHER
COLLEAGUES ARE VERY MUCH LOOKING
FORWARD TO DIVING INTO, I THINK,
BOTH THE PROPOSAL BEFORE US AS
WELL AS CONSIDERING
ALTERNATIVES. AND I'LL JUST SAY,
I GUESS AS A LITTLE PREVIEW, I
REALLY WANT TO MAKE SURE THAT AS
WE'RE HAVING THESE CONVERSATIONS
THAT WE'RE NOT LIKE MISSING THE
FOREST FOR THE TREES, IS ALL
I'LL SAY BECAUSE I THINK WE'VE
GOT TO TAKE THAT STEP BACK AND
LOOK AT THE FULL PICTURE. OKAY.
SO WITH THAT, WE'RE AT 1154. I
THINK WHAT WE'RE GOING TO DO IS
JUST TAKE WE'RE GOING TO MIX UP
THE AGENDA A LITTLE BIT. WE'RE
GOING TO PAUSE FOR A MOMENT. SO
WE'RE GOING TO TAKE A TEN MINUTE
BREAK AND REGROUP AT 1205. ALL
RIGHT. THANKS EVERYBODY.
FOR YOUR. ARAMBULA WHAT A GREAT
WAY TO CLOSE OUT THIS
CONVERSATION. AND ORPHALI.
I THINK I HEARD AGAIN. YES I
KNOW THAT. OKAY YEAH. OH, GREAT.
THERE'S A LOT OF A LOT OF
LAWCENTER. HØI. OH OKAY. WE HAVE
A.
Þ. YEAH. RIGHT NOW, I WOULD JUST
IMAGINE FOR A COUPLE GUARDRAILS.
ON THE PROJECT THAT WE CAME UP
WITH.
ALL RIGHT. THANK YOU EVERYONE,
WE ARE READY TO RESUME OUR
HEARING, OUR NEXT PANEL IS
FOCUSED ON PINCH POINTS IN THE
SUPPLY CHAIN. AND I GUESS JUST
BY BY WAY OF SETTING SOME
CONTEXT AND PUTTING A FRAME
AROUND THIS PART OF THE
CONVERSATION, I THINK ONE THING
THAT WE HAVE HEARD LOUD AND
CLEAR THROUGHOUT THE COURSE OF
OUR HEARINGS AND IN, IN THE
PREPARATORY DOCUMENTS THAT WE
READ AS WE CAME INTO THESE
HEARINGS, I THINK ONE THING THAT
WE'VE HEARD LOUD AND CLEAR IS
THAT CALIFORNIA IS UNIQUELY AND
TERRIBLY VULNERABLE TO SUPPLY
DISRUPTIONS. AND SO ONE OF THE
THINGS THAT WE DID WANT TO
INCLUDE AS PART OF THIS
CONVERSATION IS A BIT OF A DIVE
INTO UNDERSTANDING SOME OF THOSE
VULNERABILITIES, UNDERSTANDING
SOME OF THE PINCH POINTS THAT
EXIST IN TODAY'S MARKET, AND
THEN LOOKING AHEAD OVER THE
COURSE OF THE NEXT FIVE YEARS TO
HELP US UNDERSTAND WHAT OTHER
RISKS AND VULNERABILITIES WE
NEED TO BE MINDFUL OF AS WE PLAN
FOR THIS TRANSITION, WE ARE
GOING TO MIX UP, NOT MIX UP.
WE'RE GOING TO CONDENSE THE
AGENDA A LITTLE BIT. I KNOW
THERE IS, A LOT OF EAGERNESS TO
DIVE INTO QUESTIONS AROUND THE
SPECIFICS OF THE
ADMINISTRATION'S PROPOSAL
RELATED TO MINIMUM INVENTORY
REQUIREMENTS. SO WHAT WE ARE
GOING TO DO IS HAVE OUR
PRESENTERS, FOR THIS NEXT PANEL,
PINCH POINTS IN THE SUPPLY CHAIN
SHARE THEIR PRESENTATIONS. WE
WILL THEN INVITE THE
ADMINISTRATION BACK TO THE DAIS
TO PRESENT THE DETAILS OF THEIR
PROPOSAL. I'LL INVITE ALL
PANELISTS TO REMAIN ON THE DAIS.
WE'RE THEN YOU CAN RESPOND TO
QUESTIONS EITHER ABOUT THE
SPECIFICS OF YOUR PRESENTATION
OR AS ASKED BY MEMBERS, TO SHARE
YOUR PERSPECTIVE ON THE
ADMINISTRATION'S PROPOSAL. SO,
OKAY, THAT'S THAT'S THE GAME
PLAN. WE WILL THEN PAUSE FOR A
15 MINUTE BREAK AND MOVE INTO
ADDITIONAL PROPOSALS TO ADDRESS
SUPPLY. AS OUR FINAL PANEL FOR
THE DAY. ALL RIGHT. WITH THAT,
LET'S JUMP INTO THIS
CONVERSATION. I BELIEVE WE ARE.
LET ME I'LL INTRODUCE OUR
PANELISTS. WE ARE JOINED BY MARK
NICODERM. I MIGHT HAVE BUTCHERED
THAT FROM THE WESTERN STATES
PETROLEUM ASSOCIATION BY NORMAN
ROGERS FROM UNITED STEELWORKERS
LOCAL 675, WHO IS JOINING US
REMOTELY BY MIKE PATTERSON,
WHO'S JOINING US FROM THE
INTERNATIONAL ASSOCIATION OF
HEAT AND FROST INSULATORS, LOCAL
FIVE BY JAMIE COURT. THE
PRESIDENT OF CONSUMER WATCHDOG
BY ALESSANDRO MAGNASCO FROM THE
CALIFORNIA FUELS AND CONVENIENCE
ALLIANCE. AND BY SEVERIN
BORENSTEIN, WHO IS JOINING US
FROM THE UNIVERSITY OF
CALIFORNIA AT BERKELEY. ALSO
REMOTELY, ALL RIGHT. I BELIEVE
WE ARE BEGINNING, WITH, DOCTOR
ADAM, THE FLOOR IS YOURS. SO
THANK YOU, CHAIR PETRIE-NORRIS
AND MEMBERS OF THE COMMITTEE, I
WANT TO THANK YOU FOR THE
OPPORTUNITY TO COME AND SPEAK TO
YOU ABOUT, AS YOU KNOW, A VERY,
VERY SERIOUS MATTER. AND THAT IS
CALIFORNIA'S FUEL SUPPLY CHAIN.
I AM DOCTOR MARK ADAM. I'M THE
SENIOR DIRECTOR FOR SCIENCE AND
TECHNOLOGY AT THE åTERN STATES
PETROLEUM ASSOCIATION. I'M ALSO
THE FORMER DIRECTOR OF THE
CALIFORNIA DEPARTMENT OF
CONSERVATION, WHICH HAS, I
THINK, ALL OF YOU KNOW,
OVERSEES, AMONG OTHER THINGS,
THE PERMITTING AND REGULATION OF
OIL AND GAS PRODUCTION IN THE
STATE OF CALIFORNIA. I WAS
APPOINTED THERE BY GOVERNOR
JERRY BROWN IN 2012, AND ENDURED
ABOUT 12 OR 44 YEARS. THERE FELT
LIKE 40 YEARS. BUT FOR YEARS,
I'M HERE TODAY TO TALK ABOUT THE
MAJOR STUDY AND THE FINDINGS AT
A VERY HIGH LEVEL WITH YOU THAT
WE COMMISSIONED. BEFORE I DO
THAT, THOUGH, HAVING LISTENED
YESTERDAY AND THIS MORNING TO AN
EXCELLENT DISCUSSION, I WANT TO
MAKE ONE OBSERVATION AND OFFER
FOUR TAKEAWAYS. IF YOU HEAR
NOTHING ELSE FROM ME TODAY, AND
THAT IS THE OBSERVATION AND WITH
TOTAL RESPECT TO THE COMMITTEE
AND TO OUR COLLEAGUES AT THE
ENERGY COMMISSION, I BELIEVE
THAT THE FOCUS ON STORAGE IS A
DISTRACTION. AND I'LL HAVE MORE
TO SAY ABOUT THAT IN JUST A
MINUTE, BUT I BELIEVE IT'S A
DISTRACTION. I ALSO WANT TO
SHARE WITH YOU THE TAKEAWAYS,
JUST AS THE CHAIR WAS JUST
SAYING, THE FUEL SUPPLY SYSTEM
IN CALIFORNIA IS ON THE VERGE OF
BEING SERIOUSLY BROKEN. AND I
WILL SHARE WITH YOU WHY I THINK
THAT NONE OF THE SOLUTIONS THAT
HAVE BEEN DISCUSSED SO FAR, AT
LEAST AT THE LEVEL THEY'VE BEEN
DISCUSSED, REDUCE COSTS OR
REDUCE MARKET VOLATILITY. I'M
NOT SAYING THEY'RE NOT
AVAILABLE. I'M SIMPLY SAYING
NONE YET. MY THIRD TAKEAWAY IS
PLEASE ASK MORE OF THE RIGHT
QUESTIONS. THIS HEARING HAS BEEN
REWARDING TO LISTEN TO BECAUSE
MANY OF THOSE QUESTIONS ARE
SURFACING. BE RELENTLESS PLEASE.
AND FINALLY, THERE ARE NO
SHORTCUTS. THERE ARE NO
SHORTCUTS HERE. THIS IS A VERY
COMPLEX ISSUE IN A VERY COMPLEX
INDUSTRY THAT UNDERLIES 10% OF
THE GDP OF THE STATE. SO THOSE
ARE MY TAKEAWAYS. AND THEN I CAN
GO INTO THE MORE NERDY PARTS, IF
YOU DON'T MIND, WITH MY SLIDE
PRESENTATION, YOU HAVE THE SLIDE
PRESENTATION, I BELIEVE, IN
FRONT OF YOU. I'M GOING TO SKIP
FORWARD A FAIR AMOUNT. I DON'T
NEED TO DWELL ON IT. AND IN THE
INTEREST OF TIME, I WANT TO
FOCUS ON THE REAL HIGHLIGHTS.
EXCUSE ME, YOU HAVE THE PLACEMAT
IN FRONT OF YOU. I BELIEVE YOU
HAVE THE LAMINATED COPY AS WELL.
WE USE THIS PLACEMAT AS AN
EDUCATIONAL TOOL BECAUSE IT SAYS
ON ONE PAGE THE COMPLEXITY OF
THE TRANSPORTATION ENERGY SUPPLY
CHAIN. WE HAVE TENDED TO FOCUS,
ESPECIALLY AS A FORMER
REGULATOR. I APPRECIATE WHAT IT
IS TO FOCUS ON PIECES OF IT
BECAUSE THAT'S OUR AUTHORITY AND
OUR OBLIGATION. BUT THE INDUSTRY
LOOKS ACROSS THIS ENTIRE
LANDSCAPE CONSTANTLY, AND I
WOULD URGE YOU TO DO SO AS WELL
AS DECISION MAKERS IN THE PUBLIC
INTEREST. I WON'T DWELL ON THE
BACKGROUND AND METHODOLOGY, BUT
I DO WANT TO POINT OUT WE
COMMISSIONED A STUDY ABOUT A
YEAR AGO, TURNER MASON IS THE
MAIN CONTRACTOR AND SKIP YORK,
FROM WHOM YOU HEARD YESTERDAY,
WAS THE PRINCIPAL INVESTIGATOR.
THE LARGER STUDY IS ABOUT 109
VERY DETAILED SLIDES. I'M GOING
TO GIVE YOU FOUR OF THE MAJOR
FINDINGS HERE. AND WE'RE GOING
TO FOCUS ON PRODUCTION PIPELINES,
PORTS AND ULTIMATELY THE EFFECT
ON REFINERIES. ON PAGE FOUR, I
APOLOGIZE IF WE DIDN'T GET THE
PAGE NUMBERS IN THERE ON PAGE
FOUR WITH THE RED BOXES. IT'S
THE PORTION OF THE SORRY IF I'M
CONFUSING THE POWERPOINT PEOPLE
HERE. IT'S THE IT'S THE PORTION
OF THE PLACEMAT THAT WE FIND THE
GREATEST PINCH POINTS, THE
GREATEST VULNERABILITIES, AND
OUR GREATEST CONCERNS AS AN
INDUSTRY. WHAT I SAID EARLIER IN
MY OPENING OBSERVATION WERE TOO
NARROWLY FOCUSED ON STORAGE. I
MEAN, LOOK TO THE LEFT, LOOK TO
THE LEFT ON THAT PLACEMAT.
YOU'LL SEE CRUDE PRODUCTION,
WHICH IS IN SERIOUS DECLINE.
I'LL TALK ABOUT THAT IN A
SECOND. YOU'LL SEE PORTS THAT
ARE COMPLICATED. LET ME MOVE TO
PRODUCTION. OUR FINDINGS ARE
THAT PRODUCTION CURRENTLY IS
DECLINING IN THE STATE OF
CALIFORNIA. THIS IS DOMESTIC
CRUDE PRODUCTION AT A RATE OF
ANNUALIZED RATE OF 15%. THAT IS
TWICE THE RATE OF WHAT WAS
ANTICIPATED IN THE FUELS
ASSESSMENT FROM THE ENERGY
COMMISSION, AND TEN TIMES THE
RATE OF WHAT WAS PROJECTED IN
THE SCOPING PLAN IN 2022. AND
THAT DECLINE IN PRODUCTION IS
NOT BECAUSE WE DON'T HAVE THE
RESERVES, IT'S BECAUSE WE CANNOT
GET PERMITS. OPERATORS CANNOT
ACCESS THE RESOURCE. CALIFORNIA,
JUST GEOGRAPHICALLY SITS ON 1.5
BILLION BARRELS OF PROVEN
RESERVES NOW, I'M NOT AN
ADVOCATE FOR GOING AFTER EVERY
BARREL. I'M SIMPLY SAYING THE
RESERVE IS THERE. THE PERMITS
ARE NOT. WHEN THE SETBACK LAW SP
1137 IS FULLY IMPLEMENTED, OUR
CALCULATIONS AND OUR EARLIER
STUDIES ON THE IMPACT SHOWED
THAT WE LOSE ABOUT 20% OF
PRODUCTION IN THE STATE OF
CALIFORNIA PRETTY QUICKLY.
THAT'S ON THE PRODUCTION SIDE.
THERE'S A KNOCK ON EFFECT HERE
THAT I WANT YOU TO BE AWARE OF.
I THINK EVERYBODY KNOWS. AND IF
YOU COULD GO TO THE SLIDE WITH
THE MAP, IT'S TWO SLIDES FORWARD
THAT SHOWS WHERE THE PRODUCTION
IS IN SAN JOAQUIN COUNTY,
CENTRAL COAST AND LA BASIN, AND
WHERE IT HAS TO GO TO BE REFINED.
THAT'S A MAJOR PIPELINE SYSTEM.
IT'S MULTIPLE PIPELINES. AND
TURNER MASON'S ANALYSIS FOUND
THAT IN CALIFORNIA'S CRUDE
PIPELINE SYSTEM, MOVING FROM
WHERE IT'S PRODUCED TO WHERE
IT'S REFINED ON AVERAGE HAS A
MINIMUM THROUGHPUT OF 30%. IF IT
FALLS BELOW 30%, THE PIPELINE
COMPANIES MAY MAKE A
DETERMINATION THAT FOR SAFETY
AND ECONOMIC REASONS, THEY CAN
NO LONGER RUN THAT PIPELINE.
WHEN A PIPELINE GOES DOWN OF
THAT MAGNITUDE, WE ASSUME IT
STAYS DOWN. IT CAN'T COME BACK
UP, NOT VERY EASILY. SO ON THIS
SLIDE THAT I'M OFFERING WITH THE
MAP IS ALSO A TABLE. AND WE
PROVIDE SOME FLAGS, JUST SOME
SUMMARY FLAGS ON THE RIGHT SIDE
OF THE TABLE. THE NORTHERN BOUND
PIPELINES FROM SAN JOAQUIN
VALLEY ARE RUNNING CURRENTLY.
THIS IS 2023 DATA AT A RATE OF
ABOUT 30%. IT'S RIGHT ON THE
BORDER OF SHUTDOWN. WE'RE NOT
PREDICTING WE'RE NOT THE CEOS.
WE'RE NOT THE OPERATORS. I'M
SIMPLY SAYING 30% IS A PRETTY,
PRETTY NARROW MARGIN. AND THEN
44 AND 40% GOING TO THE SOUTH.
MY POINT IS SIMPLY THAT WE ARE
RUNNING, BOUNCING OFF THAT
MARGIN, AT WHICH POINT THE
PIPELINES MAY NEED TO SHUT IN,
WHICH WILL HAVE A KNOCK ON
EFFECT ON THE AVAILABILITY OF
CRUDE FOR REFINERIES THAT RELY
ON THOSE PIPELINES FOR THEIR
THEIR CRUDE SOURCES. AND THERE
HAS BEEN A PRESUMPTION, I THINK
YOU'RE ALL FAMILIAR WITH THIS
MANY OF YOU HAVE BEEN PART OF
THIS DISCUSSION THAT SOMEHOW WE
CAN SHIFT FROM DOMESTIC CRUDE
PRODUCTION IN CALIFORNIA TO
SIMPLY IMPORTING WHATEVER WE
NEED. WE'VE ALREADY HEARD, EVEN
IN THIS COMMITTEE YESTERDAY, AND
TODAY, THAT THE PORTS ARE
EXPERIENCING INCREASING
CONGESTION, INCREASING
DIFFICULTY, WHETHER IT'S VESSEL
TRANSIT THROUGHOUT THE ENTIRE
PORT SYSTEM OR IT'S DOCK SPACE
AT BERTH AND TRANSFER OF
MATERIAL FROM SHIP THAT IS
TANKER TO REFINERY OR STORE TO
STORAGE. AND IT ALSO IS THE
OTHER WAY BECAUSE FOR REASONS
I'M HAPPY TO TALK ABOUT LATER,
WE WILL HAVE TO ALSO COMPETE FOR
DOCK SPACE TO EXPORT FOSSIL
DIESEL. WHEN RENEWABLE DIESEL
TAKES OVER IN CALIFORNIA. TURNER
MASON PREDICTS THAT TO HAPPEN
SOMETIME IN 2026. THE KNOCK ON
EFFECT OF ALL OF THIS, THE
CUMULATIVE EFFECT IS REFINERY
SHUTDOWNS ARE LOOMING. IF YOU
CAN SHOW THE NEXT SLIDE, THE
NEXT, NEXT SLIDE, PLEASE. THANK
YOU. THIS TO ME IS A VERY SCARY
GRAPHIC. IT'S ONE OF SEVERAL
SCARY GRAPHICS IN THE TURNER
MASON REPORT. THE LINES ARE
SIMPLY UP AT TOP. THERE'S A
GREEN LINE THAT SHOWS BASICALLY
A KIND OF A IT'S NOT BUSINESS AS
USUAL, BUT IT'S BASICALLY A SLOW
DECLINE. WE'RE USING THE SEC'S
ANTICIPATED DEMAND CURVES. THIS
IS THE SLOW CURVE AND SOMEWHERE
AROUND THE 2040S WE LOSE A
REFINERY ON THE OTHER END OF
THIS. AND THEY RAN 16 DIFFERENT
SCENARIOS, VARYING THINGS LIKE
CRUDE AVAILABILITY AT BIRTH,
OTHER VARIABLES. I WON'T GO
INTO. AND WE FOUND THAT SOMETIME
IN THE NEXT YEAR OR TWO, YOU CAN
EXPECT A REFINERY TO GO DOWN.
NOW WE ARE NOT PREDICTING AGAIN,
WE'RE NOT WE'RE NOT THE CEOS.
WE'RE NOT PREDICTING. THIS MODEL
IS AN OPTIMIZATION MODEL THAT
TURNER MASON RUNS. AND THEY FIND
THAT WHEN A REFINERY DROPS BELOW
65% UTILIZATION RATE IN
CALIFORNIA, IT DROPS OUT OF THE
MODEL. REALITY IS MUCH HARSHER.
REALITY IS KIND OF NASTY AND
CHAOTIC BECAUSE IN REALITY IT
COULD BE THAT MULTIPLE REFINERS
AND OPERATORS MAY LOOK AT THE
SAME MARKET CONDITIONS AND MAKE
A DETERMINATION ABOUT THEIR
ABILITY TO CONTINUE TO OPERATE
IN THE STATE OF CALIFORNIA.
THAT'S THE NON MODELED PART OF
OUR RESULTS. SO JUST AS A CODA,
IF I MAY, THE FINAL SLIDE OR
NOT, THE FINAL FINAL THE MAP
SLIDE. THANK YOU. JUST A
REMINDER THAT WHAT WE DO HERE IN
CALIFORNIA HAS REAL EFFECTS ON
OUR NEIGHBORS. I THINK WE ALL
KNOW THAT 88% OF NEVADA'S
REFINED PRODUCT SUPPLY COMES
FROM CALIFORNIA REFINERS.
SIMILARLY, 45% TO ARIZONA. WHEN
CALIFORNIA SNEEZES. HATS BLOW
OFF IN RENO, LAS VEGAS AND
PHOENIX. WE DO HAVE AN EFFECT ON
THOSE MARKETS, SO THEY ARE VERY
CONCERNED THAT WHAT WE ARE
CONTEMPLATING HERE IN CALIFORNIA
MAY HAVE SOME NEGATIVE EFFECTS
ON THEIR OWN CONSTITUENTS AND
THEIR OWN MARKETS. SO I'M GOING
TO END WHERE I STARTED A SPECIAL
SESSION IS TALKING ABOUT IF I
CAN DIRECT YOU BACK TO THE
REFINERY BOX ON YOUR PLACEMAT,
THOSE TANKS, IT'S A SMALL
PORTION OF A TINY BOX ON A GREAT
BIG MAP OF OPERATIONS. AND I'M
NOT SAYING STORAGE IS NOT
IMPORTANT. WHAT I'M SAYING IS
EVERYTHING ELSE IS PROBABLY WAY
MORE IMPORTANT BECAUSE THAT'S
THE SYSTEM THAT FUNCTIONS OR
DOESN'T. I'M GOING TO SIMPLY SAY
ONCE AGAIN, NO SHORTCUTS. I'M
REALLY APPLAUDING THE ENERGY
COMMISSION FOR ITS AT LEAST
STATED INTENTIONS IN ITS EFFORTS
TO REALLY ENGAGE THE INDUSTRY,
ENGAGE THOSE EXPERTS WHO ARE
GOING TO HELP THINK THROUGH THIS
STUFF. BUT YOU'RE NOT GOING TO
GET AN ANSWER IN JUST A MATTER
OF A FEW MONTHS AND THREE MINUTE
TESTIMONY. SO I'M GOING TO LEAVE
IT THERE. HAPPY TO HAVE
QUESTIONS. THANK YOU. THANK YOU,
DOCTOR ADAM, WE ARE NOW GOING TO
MOVE TO NORMAN ROGERS, WHO IS
JOINING US REMOTELY FROM THE
UNITED STEELWORKERS LOCAL 675.
THANK YOU. GOOD AFTERNOON, MADAM
CHAIRMAN. AND THE REST OF THE
COMMITTEE. AS STATED, I'M NORMAN
ROGERS. I'M FROM UNITED
STEELWORKERS LOCAL 675, LOCATED
IN CARSON, CALIFORNIA, AND OUR
LOCAL REPRESENTS OVER 2500
WORKERS IN EXTRACTION, LOGISTICS
AND THE REFINING OF PETROLEUM
PRODUCTS, I WASN'T IN ON
YESTERDAY'S GOINGS ON, SO I
MIGHT BE REPEATING SOMETHING
THAT WAS SAID THERE, BUT I'D
LIKE TO START BY GIVING THE
DEFINITION I USE WHEN I'M
EXPLAINING A TURNAROUND TO
SOMEONE, AND SO LET'S PICTURE
IT. SEPTEMBER 2019. AND WE START
A CAR. WE REV IT UP TO 5000 RPMS
AND WE RUN IT STRAIGHT, STRAIGHT
THROUGH TO TODAY. SO THAT'S FIVE
YEARS OF OPERATION AT THAT TIME,
WE SHUT IT DOWN AND WE DRAIN ALL
THE FLUIDS TO MAKE IT SAFE FOR
PEOPLE TO WORK ON. AND THEN ON A
24 OVER SEVEN OPERATION, WE GO
FROM BUMPER TO BUMPER,
INSPECTING, REPAIRING AND
UPGRADED UNTIL IT'S DETERMINED
WE'RE GOOD TO START BACK UP.
WHAT I WOULD POINT OUT FROM THIS
EXAMPLE IS SOMETHING I THINK
WE'VE ALL EXPERIENCED, AND
THAT'S A NOISE OR A SHIMMY OR
SOMETHING THAT'S NOT QUITE RIGHT
WITH OUR CAR, AS OPERATORS, OUR
FAMILIARITY WITH OUR EQUIPMENT
IS VERY SIMILAR TO THAT. AND WE
KNOW WHEN SOMETHING ISN'T RIGHT.
SO IN THE SCENARIO MENTIONED,
WE'RE TALKING THAT FIVE YEAR
RANGE. LET'S SAY IN NOVEMBER OF
2022, YOU HEAR SOMETHING THAT
DOESN'T SOUND RIGHT. YOU RAISE
YOUR CONCERNS, IT'S INVESTIGATED
AND IT'S DETERMINED IT WILL BE
INCLUDED IN THE NEXT TURNAROUND,
HOPEFULLY. AND I SAY HOPEFULLY
BECAUSE IT'S BEEN A LONG
STANDING BATTLE OF WHAT GETS
INCLUDED IN A TURNAROUND, ISSUES
OF LENGTH OF TIME. THE UNIT
MIGHT BE DOWN, BUDGET ISSUES ALL
COME INTO PLAY ON WHAT GETS
INCLUDED IN THE TURNAROUND SCOPE.
NOW THERE'S A NEW CONCERN THAT
THE 14 DAY FUEL SUPPLY MANDATE
WILL BE USED BY COMPANIES TO SAY
A UNIT CANNOT BE SHUT DOWN. WE
HAVE FOUGHT FOR DECADES TO GET
REGULATIONS TO A POINT WHERE WE
HAVE STOP WORK AUTHORITY, AND WE
CANNOT SIT BY SILENTLY TO SEE
THAT GO AWAY IF IT'S DEEMED THAT
SOMETHING NEEDS TO BE SHUT DOWN
DURING A TURNAROUND OR
OTHERWISE, WE NEED TO BE ABLE TO
DO SO. SO AS MENTIONED, IT TOOK
US YEARS TO WIN THAT REGULATORY
REGULATORY LANGUAGE. AND WE
CANNOT HAVE THAT UNDERCUT THE
NEXT PIECE WOULD HAVE TO DO WITH
WHAT I CALL IS THE FALSE
DISTINCTION BETWEEN WORKERS IN
THE COMMUNITY. WORKERS ARE THE
COMMUNITY. MANY OF OUR MEMBERS
LIVE NEAR THESE SITES, AND
BEYOND THAT, MANY OF OUR PEOPLE
WORK AT ONE REFINERY WHILE
LIVING NEAR ANOTHER. AND I
MENTIONED THIS BECAUSE STOP WORK
AUTHORITY EMPLOYEE PARTICIPATION
WAS ANOTHER ITEM WE SECURED OR
THOUGHT WE HAD IN THE 2017
UPGRADE OF REFINERY SAFETY
LANGUAGE. THE PROCESS SAFETY
MANAGEMENT STANDARD. AND I SAY I
THOUGHT WE HAD THAT BECAUSE THE
LANGUAGE IS UNDER ATTACK.
EMPLOYEE PARTICIPATION IS THE
SUBJECT OF AN ONGOING LAWSUIT,
ALONG THE LINES OF EMPLOYEE
PARTICIPATION. IT IT ENDS UP
BEING A FACTOR FOR PINCH POINTS
BECAUSE WE END UP TALKING ABOUT
RELIABILITY WHEN THE CHEVRON
INCIDENT TOOK PLACE IN 2012,
THAT LED US TO FINALLY GETTING
THE UPGRADED PROCESS SAFETY
REGULATIONS, IT WAS KNOWN THAT
THERE WAS THINNING PIPE THERE,
BUT THAT THOSE THAT KNOWLEDGE
NEVER SAW THE LIGHT OF DAY, IN
2015, WHEN EXXONMOBIL HAD THEIR
ISSUES AT THEIR FCC, IT WAS
KNOWN THAT THAT SLIDE VALVE
HADN'T BEEN LOOKED AT IN SIX
YEARS, THE EMPLOYEE
PARTICIPATION LANGUAGE THAT WE
WON IN THE PROCESS, SAFETY
REGULATIONS, PUTS OUR PEOPLE IN
THOSE MEETINGS. SO AT LEAST
THERE'S SOMEBODY THERE TO SAY
SOMETHING, FURTHER ALONG THE
LINES OF EMPLOYEE PARTICIPATION,
WE WOULD ASK THAT THERE BE A
WORKER REPRESENTATIVE ON THE
BOARD, AS THE REFINERY WORKERS,
WE ARE INVESTED IN THIS PROCESS,
UNLIKE ANYONE ELSE. WE ARE IN
THE INSIDE THE FENCE LINE
COMMUNITY AS WELL AS COMMUNITY
MEMBERS AS WELL AS CONSUMERS.
AND WE ARE PREPARED TO SHARE OUR
STORIES AND TAKE PART IN THE
PROCESS IF FOLKS ARE PREPARED TO
HEAR IT. AND I'LL LEAVE IT
THERE. THANK YOU. THANK YOU, MR.
ROGERS. AND WE'RE NOW MOVING TO
MIKE PATTERSON, WHO IS JOINING
US FROM THE INTERNATIONAL
ASSOCIATION OF HEAT AND FROST
INSULATORS LOCAL FIVE. THANK YOU
VERY MUCH, MY NAME IS MIKE
PATTERSON. I AM THE BUSINESS
MANAGER. THERE I'VE BEEN A
MEMBER OF THAT LOCAL FOR 50
YEARS. I WORKED IN THE FIELD FOR
40 YEARS WITH MY HANDS, AND I'VE
BEEN IN THE OFFICE FOR TEN, FOR
OVER 106 YEARS. OUR ORGANIZATION
HAS BEEN AT THE FOREFRONT.
PATTERSON, JUST BRING YOUR
MICROPHONE A LITTLE BIT CLOSER.
SORRY ABOUT THAT. THANK YOU. FOR
106 YEARS, OUR ORGANIZATION HAS
BEEN AT THE FOREFRONT OF HELPING
CALIFORNIA LOWER ITS CARBON
FOOTPRINT IN AND OUT OF THE
REFINERIES. WE HAVE ACCOMPLISHED
THIS THROUGH RIGOROUS SAFETY
TRAINING AND FIRST CLASS
APPRENTICESHIP PROGRAMS THAT
HAVE TAUGHT THOUSANDS OF MEMBERS
THE CRAFT AND SCIENCE OF
INSULATION. THESE ARE VALUABLE
OPPORTUNITIES THAT HAVE PROVIDED
A DIRECT PATH TO THE MIDDLE
CLASS, AND NO COST AT NO COST TO
THE ORGANIZATIONS MEN, WOMEN,
VETERANS AND DISADVANTAGED
WORKERS. COLLECTIVELY, WE WITH
OUR SISTER ORGANIZATION IN
NORTHERN CALIFORNIA, LOCAL 16,
WE EMPLOY THOUSANDS OF
INSULATORS IN CALIFORNIA AND
WORK WELL OVER 1,000,000 HOURS
PER YEAR, APPROXIMATELY HALF
THAT WORK DIRECTLY RESULTS FROM
WORK WE DO IN THE REFINERIES. TO
EXPRESS THIS MORE HUMAN TERMS.
AT THE END OF THE DAY, WE WORK
AT THE REFINERIES, HELPS US, OUR
MEMBERS, PROVIDE SAFE SHELTER,
PUT FOOD ON THE TABLE, GET TO
AND FROM WORK, MAYBE PAY A KID'S
EDUCATION, PUT CHRISTMAS
PRESENTS UNDER THE TREE. AS YOU
CAN SEE, OUR CONSTITUENTS AND
OUR MEMBERS HAVE A LOT ON THE
LINE HERE. WHILE WE UNDERSTAND
THAT THIS BILL MIGHT HAVE BEEN
PROPOSED WITH THE RIGHT INTENT,
WE FIRMLY BELIEVE THAT IT WILL
LEAD TO MANY PROBLEMS, MORE
PROBLEMS THAN IT SOLVES TO BEGIN
WITH. WE THINK IT IS. IT IS WISE
TO FORM A COMMITTEE. WE DON'T
THINK IT'S WISE TO FORM A
COMMITTEE THAT EXCLUDES VALUABLE
EXPERTISE THAT COMES FROM LABOR
AND OUR STATE REFINING PARTNERS.
THE FACT THAT THIS IS BEING
PROPOSED IS EXTREMELY
CONCERNING, AND A BAD IDEA. NO
ONE KNOWS MORE ABOUT HOW
SHUTDOWNS SHOULD BE PERFORMED
THAN THE MEN AND WOMEN IN THE
FIELD WHO ACTUALLY HAVE TO
PERFORM THE WORK. NOT HAVING
LABOR OR SOMEONE FROM THE
INDUSTRY REPRESENTED IS, QUITE
FRANKLY, OFFENSIVE, DANGEROUS
AND APPALLING. THERE IS ALSO AN
ISSUE OF INVENTORY HOW AND WHERE
DO YOU PROPOSE TO STORE ALL THIS
FUEL? I DON'T KNOW ABOUT YOU,
BUT THE STRONG MÁS STORING
MASSIVE AMOUNTS OF FUEL DOESN'T
SOUND LIKE A PRUDENT IDEA. IT
INTRODUCES MORE COMPLEXITY AND
UNNECESSARY RISK TO AN ALREADY
DANGEROUS AND COMPLEX SYSTEM.
WHILE THERE IS MUCH MORE I COULD
DISCUSS IN THE INTEREST OF TIME,
I WILL CLOSE WITH THIS. AT THE
END OF THE DAY. MY PRIMARY
RESPONSIBILITY AS A MANAGER OF
MY LOCAL IS TO PROTECT THE
ECONOMIC INTERESTS AND PERSONAL
SAFETY OF THE MEMBERS I SERVE,
BUT THIS GOES BEYOND THAT. THE
OIL AND GAS INDUSTRY IS
ESTIMATED TO EMPLOY OVER 100,000
PEOPLE IN CALIFORNIA DIRECTLY,
AND ACCORDING TO THE ECONOMIC
POLICY INSTITUTE, FOR EVERY ONE
JOB CREATED BY AN OIL REFINERY,
OVER 14 JOBS ARE CREATED IN THE
REST OF THE ECONOMY. SO ON
BEHALF OF ALL THE MEN AND WOMEN
OF LOCAL FIVE AND LOCAL 16,
INSULATOR INSULATORS, UNION ALL
OF MY BROTHERS AND SISTERS IN
THE BUILDING TRADES ALL THE
WORKERS IN THE OIL AND GAS
INDUSTRY THAT THIS BILL WOULD
AFFECT. I ASK ALL OF YOU TO
PARTNER WITH US FOR A BETTER
OUTCOME AND TO PLEASE DO NOT
SUPPORT THIS BILL. THANK YOU.
AND WE'LL NOW HEAR FROM JAMIE
COURT, WHO IS THE PRESIDENT OF
CONSUMER WATCHDOG. YEAH. WHILE
YOU'RE PULLING MY SLIDES UP,
I'LL JUST SAY I'VE BEEN DOING
THIS FOR A WHILE. I WAS ON THE
1999 ATTORNEY GENERAL, BILL
LOCKYER TASK FORCE REPRESENTING
THE ASSEMBLY. ANTONIO
VILLARAIGOSA APPOINTED ME TO
REPRESENT THE ASSEMBLY. AND I
HAVE I'VE LEARNED A BIT ABOUT
THIS INDUSTRY, WHEN THE SLIDES
COME UP, WE JUST PUT THE FIRST
GRAPH UP. PLEASE ONE OF THE
THINGS I'VE LEARNED IS IT'S THE
SAME OLD STORY. WHEN REFINERIES
GO DOWN, PRICES GO UP, PROFITS
GO UP. AND THIS FIRST SLIDE, I
THINK TELLS THE STORY I'M GOING
TO CHALLENGE THE WHISPER
REPRESENTATIVE WHO SAID, YOU
CAN'T FIGURE THIS OUT IN A THREE
MINUTE PRESENTATION. I'M GOING
TO TRY TO MAKE THIS HAPPEN. MAKE
IT SIMPLE. THIS IS THE GROSS
REFINING MARGIN OVER THE LAST
YEAR AND A HALF, THESE WERE
MANDATED NUMBERS UNDER SB 1322,
A BEN ALLEN BILL THAT YOU ALL
PASSED IN 2022 TO FORCE THE
REFINERS TO TELL US HOW MUCH
THEY'RE MAKING ON PROFIT ON
EVERY GALLON OF GASOLINE IN THE
STATE. THIS IS CALIFORNIA
GASOLINE. AND YOU'LL SEE THERE
ARE TWO HIGH POINTS THERE. ONE
IN SEPTEMBER OF 2023 AND ONE IN
APRIL OF 2024. THAT'S WHEN WE
KNOW THAT THEIR THEIR PROFITS,
THEIR GROSS REFINING MARGIN WAS
WELL OVER WHAT IT SHOULD BE OVER
$1.40, $1.20 WELL OVER A DOLLAR.
A GROSS REFINING MARGIN IS A
MEASURE REPORTED BY THE
REFINERS, AND IT TAKES OUT THE
COST OF CRUDE ENVIRONMENTAL FEES
AND TAXES. SO IT IS THE PUREST
MEASURE OF PROFITABILITY. THE
ONLY THING THAT'S IN THERE THAT
IS A COST THAT COMES OUT IS THE
OPERATIONAL COST OF THE
REFINERY. AND WE KNOW WHAT THOSE
ARE BECAUSE WE CAN LOOK AT THE
SEC FILINGS, THOSE RANGE FROM 17
TO $0.29. SO WE'RE TALKING ABOUT
MAKING $1.40. THAT IS A HEALTHY,
HEALTHY, HEALTHY PROFIT ON A
GALLON OF GAS. NEXT SLIDE
PLEASE. SO IF YOU LOOK AT THE
NEXT SLIDE I'VE OVERLAID WITH
THOSE PEAKS, THE DAYS OF SUPPLY.
AND YOU'LL SEE THAT ON THE FIRST
PEAK WE WERE DOWN TO 13 DAYS OF
SUPPLY. AND ON THE NEXT PEAK WE
WERE UNDER 15 DAYS OF SUPPLY.
THE TYPICAL DAYS OF SUPPLY IN
THE, IN CALIFORNIA IS 15 TO 18
DAYS. AND WHEN WE DROP BELOW, WE
SEE A COMMENSURATE PROFIT TAKING
FROM THE INDUSTRY, WHICH IS
REALLY EXTREME. NEXT SLIDE
PLEASE. THE NEXT SLIDE SHOWS YOU
WHAT THE GAS PRICES WERE AT
THOSE PEAKS OVER $5 AT BOTH OF
THOSE PEAKS. AND THAT WAS A
DELTA OF MORE THAN $1.50. WITH
US GAS PRICES. WE SHOULD HAVE A
DELTA OF 70 TO $0.80 WITH US GAS
PRICES, BECAUSE THAT'S THE COST
OF OUR ADDED TAXES AND
ENVIRONMENTAL FEES. ANYTHING
OVER THAT IS PROFIT TAKING. WHEN
WE WERE AT $1.50 OR MORE, IT'S
REALLY A PROBLEM. SO WE SEE IN
THIS SLIDE HOW THERE'S AN
INTERSECTION OF INVENTORY
DIPPING UNDER 15 DAYS. THE PRICE
SPIKING, THE PROFIT SPIKING.
IT'S ALL RIGHT THERE. AND IT'S
ALL HAPPENING IN THE LAST YEAR
AND A HALF. AND IT'S HAPPENING
AGAIN RIGHT NOW IN NORTHERN
CALIFORNIA. NEXT SLIDE PLEASE.
THIS IS A SLIDE THAT SHOWS THAT
THE OIL REFINERS ARE NOT USING
THEIR INVENTORIES. THEY'RE AT
55% CAPACITY IN THE WESTERN
REGION, 55% CAPACITY OF STORAGE.
RIGHT NOW. THAT IS THAT IS THAT
IS NOT, THAT IS THERE'S A LOT OF
ROOM FOR GROWTH. WE KNOW THAT
THEY KEEP 20 DAYS AND UPWARD OF
INVENTORY AND THAT MOST OF THE
YEAR, THAT'S WHAT IT'S AT
BETWEEN 15 AND 20 DAYS. THEY
HAVE THE CAPACITY TO DO IT
BECAUSE THEY'RE DOING IT. THEY
DO NOT NEED TO BUILD NEW STORAGE
TO KEEP 20 DAYS OF INVENTORY. SO
I THINK IT'S A BIT OF A RED
HERRING TO SAY THEY'RE GOING TO
NEED TO BUILD INVENTORY WHEN
WHAT I BELIEVE THE ENERGY
COMMISSION IS GETTING AT IS
ASKING FOR A MINIMUM INVENTORY
OF 20 DAYS OR 21 DAYS WHEN THAT
IS WHAT THEY KEEP RIGHT NOW. BY
THE WAY, ON THE IF WE CAN GO
BACK ONE SLIDE. I FORGOT TO
MENTION THAT UPTICK RIGHT THERE
BETWEEN JULY AND SEPTEMBER IN
2023, COST CONSUMERS $2.1
BILLION. THAT'S WHAT THE DPMO
JUST SAID. EARLIER, CONSUMERS
PAID $2.1 BILLION MORE THAN THEY
SHOULD HAVE FOR THAT UPTICK
BETWEEN JULY AND SEPTEMBER. SO
YOU'RE TALKING ABOUT THE COST OF
STORAGE, WHICH IF YOU GO TO
AUSTRALIA, IS A FRACTION OF A
PENNY TO KEEP THE EXTRA STORAGE
TO SAVE CONSUMERS $2.1 BILLION.
IT'S A GOOD TRADE. GO FORWARD TO
THE NEXT SLIDE, PLEASE. THE NEXT
SLIDE SHOWS THAT THIS HAS BEEN
DONE ELSEWHERE IN AUSTRALIA.
THEY KEEP 24 DAYS OF SUPPLY ON
HAND. THE UK DOES IT. IT'S DONE
ALL ACROSS THE WORLD KOREA AND
THE POINT IS THAT IF WE CAN
MAINTAIN AN ABSOLUTE RESUPPLY
COMMITMENT FROM THE OIL REFINERS,
THAT WILL KEEP THE SPOT MARKET
FROM GOING UP, IF THE OIL
REFINERS DON'T HAVE TO BUY ON
THE SPOT MARKET, OUR GAS PRICES
WILL NOT SPIKE. AND IT'S EXACTLY
WHAT HAPPENS IN ELECTRICITY AND
NATURAL GAS WHEN YOU'RE AN
ELECTRICITY CRISIS, YOU WANT TO
HAVE A SUPPLY, SO YOU'RE NOT
BUYING ON THE SPOT MARKET, THAT
REAL TIME SPOT MARKET BECAUSE
THOSE PRICES ARE REALLY HIGH. SO
WE HAVE THE ELECTRIC UTILITIES,
WHICH ARE REGULATED UTILITIES BY
LONG TERM CONTRACTS. SO YOU
DON'T HAVE TO BUY ON THE SPOT
MARKET AND PASS THOSE CONSUMERS
COSTS. SAME THING WITH NATURAL
GAS. WE HAD A PRICE SPIKE IN
SOUTHERN CALIFORNIA A COUPLE OF
YEARS AGO BECAUSE SOCAL GAS
BOUGHT ON THE SPOT MARKET
BECAUSE THEY RAN OUT OF THEIR
INVENTORIES. ALISO CANYON WASN'T
AVAILABLE. THEY HADN'T PLANNED.
ALL THIS IS ABOUT IS PLANNING.
PLANNING RESUPPLY. AND I'LL TELL
YOU THIS, I THINK YOU CAN TRUST
THE ENERGY COMMISSION TO GET
THIS RIGHT, BECAUSE I'VE BEEN
PUSHING THEM REALLY HARD TO GET
A PRICE GOUGING PENALTY AS QUICK
AS POSSIBLE. AND THEY HAVE BEEN
UNBELIEVABLY DELIBERATIVE ABOUT
IT. I'D SAY TO DELIBERATIVE,
BECAUSE IF WE HAD IT, WE COULD
PENALIZE THE COMPANIES FOR THE
SPIKE WE'RE FACING NOW. THEY ARE
VERY THOUGHTFUL. THEY WILL NOT
ENDANGER WORKER SAFETY. AND I
DON'T THINK THEY CAN ENDANGER
WORKER SAFETY UNDER THE CURRENT
LAWS, BECAUSE THAT COMES FIRST.
THEY WILL NOT FORCE UPON
REFINERS NEW SUPPLY CAPACITY IF
EXISTING CAPACITY EXISTS, AND
THEY WILL LOOK AT THE COST,
WHICH I GUARANTEE YOU ARE GOING
TO MITIGATE IN FAVOR OF
MAINTAINING EXISTING STORAGE
CAPACITY. IN ANY CASE, I HOPE
I'VE MADE SOME SENSE OF THIS FOR
YOU. THANK YOU. THANK YOU, MR.
COURT, MOVING TO ALESSANDRO
MAGNASCO, JOINING US FROM
CALIFORNIA FUELS AND CONVENIENCE
ALLIANCE. THANK YOU. GOOD
AFTERNOON, CHAIR, AND MEMBERS OF
THE COMMITTEE. MY NAME IS
ALESSANDRO MAGNASCO AND I
REPRESENT THE CALIFORNIA FUELS
AND CONVENIENCE ALLIANCE, WHICH
ADVOCATES ON BEHALF OF FUEL
MARKETERS, COMMON CARRIERS AND
GAS STATION OWNERS ACROSS
CALIFORNIA. I APPRECIATE THE
OPPORTUNITY TO SHARE HOW CURRENT
ENERGY POLICIES AND SUPPLY
DISRUPTIONS ARE AFFECTING THE
DOWNSTREAM SECTOR OF OUR FUEL
SUPPLY CHAIN. CALIFORNIA, AS
WE'VE ALL HEARD, IS OFTEN
REFERRED TO AS A FUEL ISLAND.
THIS MEANS THAT THE
TRANSPORTATION FUEL SUPPLY
WITHIN THE STATE IS BOTH
GEOGRAPHICALLY AND LOGISTICALLY
ISOLATED. NO OTHER STATE IN THE
CONTIGUOUS US REFINES THE
GASOLINE THAT WE USE, BECAUSE
WHILE IT'S THE CLEANEST IN THE
WORLD, IT IS ALSO EXTREMELY
EXPENSIVE AND DIFFICULT TO
PRODUCE. AS A RESULT, THE FUEL
WE USE MUST EITHER BE REFINED IN
STATE OR IMPORTED FROM FOREIGN
SOURCES. UNFORTUNATELY, WE ARE
NOW DOWN TO ONLY NINE
REFINERIES. AGAIN, AS WE'VE
HEARD THAT PRODUCE OUR GASOLINE.
THIS LEAVES OUR SUPPLY
INCREDIBLY TIGHT AND VULNERABLE
TO DISRUPTION. STATE POLICIES
HAVE ALSO PLAYED A SIGNIFICANT
ROLE IN SHRINKING THIS SUPPLY.
OVER THE YEARS. NUMEROUS
REGULATIONS HAVE DISINCENTIVIZED
INVESTMENT IN LOCAL REFINING
CAPACITY, WHICH IS WHY WE'RE
SEEING LOWER PRODUCTION AND
HIGHER PRICES AT THE PUMP. IN
ADDITION TO THESE POLICIES,
THERE'S ALSO INFRASTRUCTURE
CHALLENGES THAT COMPLICATE THE
SUPPLY CHAIN. THE JONES ACT AND
ITS BURDENSOME REQUIREMENTS
EFFECTIVELY MAKE IT COST
PROHIBITIVE TO MOVE FUEL BETWEEN
SOUTHERN AND NORTHERN CALIFORNIA
BY BARGE, AND WE LACK A PIPELINE
THAT CONNECTS THE TWO REGIONS
EFFECTIVELY. THIS HAS MADE
CALIFORNIA NOT ONE, BUT TWO
SEPARATE FUEL ISLANDS, WITH
TRUCKING BEING THE ONLY OPTION
FOR TRANSPORTING FUEL BETWEEN
THE TWO. MAKING MATTERS WORSE,
OUR HEAVY RELIANCE ON FOREIGN
IMPORTS MAKES US BEHOLDEN TO
EXTERNAL FACTORS THAT ARE BEYOND
OUR CONTROL. GEOPOLITICAL
TENSIONS OR WEATHER EVENTS IN
DISTANT REGIONS COULD CHOKE OFF
CRITICAL FUEL SUPPLIES. TO BE
CLEAR, IMPORTING IS NOT A BAD
THING OVERALL. IN FACT, OUR PART
OF THE SUPPLY CHAIN DOES
SOMETIMES IMPORT, AND THIS HELPS
BRING EXTRA LIQUIDITY TO THE
MARKET. BUT IF WE PUT OURSELVES
IN A PLACE WHERE WE ARE ONLY
RELIANT ON IMPORTS BECAUSE
REFINERS LEAVE THE STATE, WE
WILL BE PUTTING OURSELVES IN A
DIRE SITUATION. WHEN THESE
DISRUPTIONS OCCUR. DRIVERS
ACROSS CALIFORNIA RISK BEING
STRANDED WITHOUT FUEL, WITH NO
IMMEDIATE SOLUTION. THE
FRAGILITY OF OUR SUPPLY CHAIN IS
COMPOUNDED BY THE FACT THAT WE
CANNOT QUICKLY ADJUST TO THESE
INTERRUPTIONS DUE TO OUR
DEPENDANCE ON FARAWAY FOREIGN
SUPPLIERS AND THE LIMITATIONS ON
INTERNAL FUEL MOVEMENT. LOOKING
AHEAD, STATEWIDE POLICIES SUCH
AS THE BAN ON INTERNAL
COMBUSTION ENGINES, A MORE
STRINGENT LOW CARBON FUEL
STANDARD, AND CAP AND TRADE
PROGRAM, AND A PENDING GROSS
PROFITS CAP ON REFINERS ARE
POISED TO EXACERBATE THIS
ALREADY CHALLENGING SITUATION.
THESE POLICIES WILL FURTHER
LIMIT IN-STATE FUEL PRODUCTION
AND SHRINK OUR OUR TIGHT SUPPLY
EVEN MORE. 15 LOCAL GOVERNMENTS
HAVE BANNED NEW GAS STATIONS,
EFFECTIVELY BANNING NEW
COMPETITION FROM ENTERING THE
MARKET. THAT'S A PRETTY TERRIBLE
POLICY. IF YOU WANT TO BRING
DOWN PRICES. WE HEARD YESTERDAY
THAT TO GET THIS RIGHT THERE
WOULD BE CLOSE COLLABORATION
WITH INDUSTRY. HOWEVER, THE
ADVISORY COMMITTEE THAT THIS
BILL CREATES THAT WOULD BE
TASKED WITH GETTING THIS RIGHT
DOESN'T HAVE A SINGLE
REPRESENTATIVE FROM THE
INDUSTRY. IN FACT, THE BILL
EXPRESSLY PROHIBITS ANYONE THAT
HAS, QUOTE, BEEN EMPLOYED BY
CONTRACTED WITH, OR RECEIVED
DIRECT COMPENSATION FROM A
COMPANY THAT PRODUCES REFINED,
DISTRIBUTES, TRADES AND MARKETS,
OR SELLS ANY PETROLEUM PRODUCT
IN THE PRECEDING 12 MONTHS. SO
COLLABORATION DOESN'T REALLY
SOUND LIKE IT'S OFF TO A GREAT
START. WHEN SUPPLY TIGHTENS OR
REGULATIONS CHANGE, SMALLER
BUSINESSES ARE
DISPROPORTIONATELY AFFECTED AS
THEY HAVE LESS ROOM TO NAVIGATE
HIGHER WHOLESALE PRICES AND
INCREASE COMPLIANCE COSTS. WE
ARE THE PART OF THE SUPPLY CHAIN
THAT ADDS COMPETITION TO THE
MARKET. IF WE GET THIS WRONG, IT
WILL BE OUR SMALLEST OPERATORS
WHO WON'T BE ABLE TO WEATHER
EXTENDED SHORTAGES, FUEL
RATIONING AND SKYROCKETING
PRICES. AUSTRALIA WHO THIS
POLICY PROPOSAL IS MODELED
AFTER, IS CURRENTLY SUBSIDIZING
THEIR FEW REMAINING REFINERIES
TO THE TUNE OF BILLIONS OF
DOLLARS TO KEEP THEM
OPERATIONAL. I GUESS WE BETTER
START MAKING SOME SIGNIFICANT
ROOM IN THE STATE BUDGET IF
WE'RE GOING TO FOLLOW THEIR
LEAD. IN SUMMARY, CALIFORNIA'S
FUEL SUPPLY IS FRAGILE, AND
EXISTING AND FUTURE POLICIES
THREATEN TO FURTHER DESTABILIZE
IT, PUSHING COSTS HIGHER FOR
CONSUMERS AND CREATING ONGOING
VOLATILITY IN THE MARKET. I URGE
YOU TO CONSIDER THE FAR REACHING
CONSEQUENCES OF THESE POLICIES
AND HOW THEY MAY FURTHER HARM
CALIFORNIANS AND THEIR ACCESS TO
AFFORDABLE FUEL. THANK YOU.
THANK YOU. ALL RIGHT. WE'RE NOW
GOING TO TURN BACK TO THE
SCREEN. WE ARE JOINED BY
PROFESSOR SEVERIN BORENSTEIN
FROM THE UNIVERSITY OF
CALIFORNIA AT BERKELEY. THANKS
FOR HAVING ME, AND I APOLOGIZE.
I HAD SOME COMPUTER PROBLEMS,
BUT I HAVE SWITCHED COMPUTERS
AND I THINK THIS WILL WORK, I'M
SEVERIN BORENSTEIN. I AM FACULTY
DIRECTOR OF THE ENERGY INSTITUTE
AT UC BERKELEY'S HAAS SCHOOL OF
BUSINESS. I'VE STUDIED GASOLINE
MARKETS SINCE THE LATE 1980S AND
WRITTEN MANY PAPERS FROM CRUDE
OIL ON THEM, FROM CRUDE OIL TO
RETAIL COMPETITION. I SERVED ON
THE ATTORNEY GENERAL'S GASOLINE
TASK FORCE IN 1999 2000, AND I
CHAIRED THE SEC'S PETROLEUM
MARKET ADVISORY COMMITTEE FROM
2014 TO 2017. SINCE THEN, I'VE
CONTINUED TO TRACK AND POST
ABOUT HIGH GAS PRICES IN
CALIFORNIA AND ABOUT THE
DIFFERENTIAL BETWEEN CALIFORNIA
AND THE REST OF THE COUNTRY.
NEXT SLIDE PLEASE. PRIOR TO
2015, CALIFORNIA HAD OCCASIONAL
PRICE SPIKES, BUT OVERALL OUR
PRICES WERE DIFFERED FROM THE
REST OF THE COUNTRY BY ALMOST
EXACTLY THE TAXES AND
ENVIRONMENTAL FEES. SO WHEN YOU
DIFFERENCE THOSE OUT, YOU GET
WHAT'S TO THE LEFT OF THE RED
LINE HERE. THAT IS A
DIFFERENTIAL BETWEEN CALIFORNIA
AND THE REST OF THE COUNTRY.
THAT'S PRETTY CLOSE TO ZERO ON
AVERAGE AFTER 2015, THAT
COMPLETELY CHANGED. AND I HAVE
TO SAY, I WAS A SKEPTIC AT FIRST
THAT THIS WAS REALLY A CHANGE.
AND I WROTE A BLOG POST SAYING,
YEAH, IT THIS IS A SPIKE, BUT
IT'LL GO BACK TO NORMAL. AND IT
NEVER DID. SINCE 2015,
CALIFORNIA'S PRICES HAVE
EXCEEDED THE REST OF THE COUNTRY
BY A DIFFERENTIAL. AFTER TAKING
OUT THE DIFFERENCE IN TAXES AND
ENVIRONMENTAL FEES OF ON AVERAGE,
AROUND $0.40 A GALLON, THAT IS
ABOUT $60 BILLION IN EXTRA
PAYMENTS SINCE 2015, THE
CALIFORNIA DRIVERS HAVE PAID,
ALTHOUGH THIS STARTED WITH THE
SUPPLY DISRUPTION, THE VAST
MAJORITY OF THIS DIFFERENTIAL IS
UNRELATED TO ANY SORT OF
PHYSICAL SUPPLY SHORTAGE. NEXT
SLIDE PLEASE. AND I SAY THAT
BECAUSE IF YOU LOOK AT THE SPOT
MARKET FOR CALIFORNIA AND
COMPARE IT TO THE SPOT MARKET
FOR GASOLINE, THE TWO MAJOR ONES
IN THE GULF COAST AND NEW YORK,
YOU GET THIS. AND THIS IS THE
DIFFERENTIAL BETWEEN AN AVERAGE
OF THE NEW YORK AND GULF COAST
PRICES AND THE CALIFORNIA PRICE.
WE DON'T SEE THE CALIFORNIA
PRICE AT THE SPOT MARKET BEING
SUBSTANTIALLY HIGHER THAN THE
REST OF THE COUNTRY. AFTER 2015,
COMPARED TO BEFORE 2015. IF
ANYTHING, THERE'S A SLIGHT
DOWNWARD TREND. WHAT WE DO SEE,
HOWEVER, IS INCREASED
VOLATILITY. SINCE 2015, WE'VE
SEEN THESE VERY LARGE SPIKES TO
A MUCH GREATER EXTENT THAN WE
SAW PRIOR TO 2015. AND SO I
THINK THERE IS A REAL CONCERN
ABOUT THE VOLATILITY. BUT I
THINK IT'S IMPORTANT TO KEEP IN
MIND THAT THE UNDERLYING PROBLEM
THAT CALIFORNIANS ARE MONTH IN,
MONTH OUT, SPENDING TOO MUCH ON
GASOLINE IS NOT RELATED TO A
PHYSICAL SUPPLY SHORTAGE. IN
FACT, IF YOU LOOK IT, IT IS
THREE QUARTERS OF THE PRICE
DIFFERENCE BETWEEN CALIFORNIA
AND THE REST OF THE COUNTRY.
THAT IS NOT EXPLAINED BY TAXES
AND FEES OCCURS DOWNSTREAM FROM
THE SPOT MARKET. THAT IS IN THE
DISTRIBUTION, MARKETING AND
RETAILING SECTORS. OVERALL, I
HAVE CALLED THIS DIFFERENTIAL
BETWEEN CALIFORNIA AND THE REST
OF THE COUNTRY THE MYSTERY
GASOLINE SURCHARGE, AND 75% OF
THAT IS OCCURRING IN THESE
DOWNSTREAM SECTORS. SO LET ME
TURN QUICKLY TO THE INVENTORY
REQUIREMENT. THE BENEFITS OF THE
INVENTORY REQUIREMENT. NØ BACK
TO THE PREVIOUS SLIDE, PLEASE,
ACTUALLY BACK TO THE ONE FURTHER
BACK, THE BENEFITS OF THE
INVENTORY REQUIREMENT THAT IT
WILL HELP SMOOTH SOME OF THESE
EXTREME PRICE SPIKES IF IT IS
DESIGNED AND MANAGED PRUDENTLY,
BUT THAT REQUIRES A SIGNIFICANT
AMOUNT OF RESEARCH AND
PREPARATION. ALTHOUGH MR. MILDER
HAS NOT POINTED THIS OUT, I NEED
TO SAY THE DPMO IS TEN PEOPLE.
THOSE TEN PEOPLE ARE ALREADY
WORKING ON THE MARGIN PENALTY
AND ON THE RETAIL SECTOR. SO I
THINK IT IS UNREALISTIC TO
EXPECT THAT THAT SAME GROUP TO
BE ABLE TO QUICKLY DESIGN AND
IMPLEMENT A Ã INVENTORY
REQUIREMENT WITHOUT SUBSTANTIAL
ADDITIONAL RESOURCES. THEIR
BUDGET, BY MY CALCULATION, MUST
BE UNDER 2 OR $3 MILLION A YEAR.
AND THAT IS COMPARED TO AN
INDUSTRY WHERE CALIFORNIA
DRIVERS CURRENTLY SPEND OVER $50
BILLION A YEAR. SO I URGE THE
LEGISLATURE TO FUND THIS SORT OF
WORK ADEQUATELY SO THAT WE CAN
GET ADEQUATE, GOVERNMENT POLICY,
THAT'S WELL INFORMED. WE NEED TO
DETERMINE THE SIZE OF THE
INVENTORIES, THE TIMING AND
MECHANISM FOR THE RELEASE AND
FOR REFILL. WE ALSO NEED TO
DETERMINE THE PROCESS BY WHICH
RELEASE OF THOSE INVENTORIES
WOULD OCCUR IN PARTICULAR, WE
NEED TO AVOID POLITICAL
MANIPULATION OF THE RELEASES.
ONCE YOU HAVE AN INVENTORY LIKE
THIS, IT IS GOING TO BE VERY
TEMPTING FOR WHOEVER IS IN HAS
POLITICAL POWER TO TRY TO
RELEASE THAT INVENTORY WHEN IT
IS HELPFUL TO THEM TO PUSH DOWN
GASOLINE PRICES. THAT COULD BE
DURING SPIKES, OR IT JUST COULD
BE DURING A TIME WHEN SOMEBODY
BELIEVES THAT THE PRICES ARE TOO
HIGH AND WANTS TO ARTIFICIALLY
SUPPRESS THEM. THE COST OF THIS
REQUIREMENT IS THE COST OF
STORING GASOLINE. MY VIEW IS
THESE ARE LIKELY TO BE SMALL. I
KEEP HEARING ABOUT THE NEED TO
BUILD NEW TANKS, BUT THIS IS A
MINIMUM INVENTORY REQUIREMENT.
IN OTHER WORDS, IT KICKS IN AT
THE TIME WHEN INVENTORIES ARE
VERY LOW, SO THERE SHOULD BE
PLENTY OF CAPACITY FOR STORING
THAT GASOLINE. NOW, IT MIGHT NOT
BE AT EXACTLY THE RIGHT COMPANY
AND THE RIGHT LOCATION, WHICH IS
AN ARGUMENT FOR HAVING SOME SORT
OF TRADABLE COMPLIANCE
MECHANISM, WHICH OF COURSE WILL
ALSO REQUIRE SOME CAREFUL
DESIGN. BEYOND THAT, THE COST IS
THE COST OF CARING AND MANAGING
INVENTORIES, ALTHOUGH THAT'S NOT
NOTHING. IT'S LIKELY TO BE
PRETTY SMALL. THAT SAID, SO I
THINK IT'S UNLIKELY TO DRIVE UP
PRICES. BY A SIGNIFICANT AMOUNT.
FURTHERMORE, YES, WE WILL NEED
TO FILL THIS INVENTORY, BUT THE
FILL OF THIS INVENTORY WILL
OCCUR NOT AT TIMES WHEN THE
MARKET IS VERY STRESSED, BUT AT
TIMES WHEN THE MARKET HAS
ADDITIONAL EXCESS CAPACITY AND
THOSE INVENTORIES CAN BE FILLED
IN A COST EFFECTIVE WAY. I'LL
JUST SAY A COUPLE OTHER THINGS
TO CONCLUDE. IT'S BEEN MENTIONED
THAT WE ALWAYS GET OFF WHEN WE
TALK ABOUT GASOLINE. PEOPLE
START DRIFTING INTO TALKING
ABOUT CALIFORNIA OIL PRODUCTION.
CALIFORNIA OIL PRODUCTION IS
REALLY UNRELATED TO CALIFORNIA
GASOLINE PRICES. CALIFORNIA OIL
PRODUCTION IS PART OF THE WORLD
MARKET. I'VE BEEN HEARING THIS
ARGUMENT. THERE'S A NEW ONE HERE
THAT MAYBE PIPELINES WILL SHUT
DOWN, BUT THE SAME ARGUMENT
ABOUT CALIFORNIA OIL PRODUCTION
HAS BEEN MADE FOR YEARS. WE DO
NEED TO CONSIDER THE COSTS AND
BENEFITS OF CALIFORNIA OIL
PRODUCTION, WHETHER THE VALUE IT
CREATES IS GREATER THAN THE
ENVIRONMENTAL AND OTHER
CONCERNS. BUT I THINK WE HAVE TO
KEEP IN MIND THAT EVEN THE OIL
INDUSTRY, WHEN PRICES GO SKY
HIGH, SAY, YOU KNOW, THIS ISN'T
US. WE DON'T SET THE PRICE OF
CRUDE OIL. THE WORLD MARKET
DOES. AND THAT'S RIGHT. BUT
THAT'S ALSO BY THAT SAME
ARGUMENT, ALSO SHOWS US THAT
ADDITIONAL CALIFORNIA PRODUCTION
IS NOT GOING TO SIGNIFICANTLY
AFFECT CALIFORNIA PRICES.
LASTLY, I HAVE TO ADDRESS THE
ARGUMENT THAT, THESE PRICE
SPIKES OR PROFIT SPIKES AND THAT
THIS IS IN SOME WAY INDICATIVE
OF NEFARIOUS BEHAVIOR IN ANY
COMMODITY MARKET. IF ONE
PRODUCER HAS LOWERS PRODUCTION
BECAUSE THEY HAVE SOME SORT OF
PRODUCTION PROBLEM, OTHER
PRODUCERS BENEFIT. IF THERE IS A
FAILURE OF THE CORN HARVEST IN
ONE COUNTRY, THE CORN FARMERS IN
ANOTHER COUNTRY MAKE MORE MONEY
THAT THAT ALSO OCCURS WHEN
SELLERS HAVE REAL MARKET POWER.
BUT IT IS NOT IN ITSELF
INDICATIVE THAT THERE IS A
MARKET POWER PROBLEM. THERE
STILL COULD VERY WELL BE A
VOLATILITY PROBLEM WE WANT TO
DEAL WITH, BUT I THINK WE HAVE
TO CAREFULLY SEPARATE THE
PROBLEM OF MARKET COMPETITION.
AND I DO THINK WE HAVE A REAL
PROBLEM WITH THE SHORTAGE OF
MARKET COMPETITION FROM SIMPLE
VOLATILITY IN THE MARKET. MY
VIEW IS AND THE NEXT SLIDE
PLEASE LOOKING AT THIS, SPOT
MARKET GRAPH, IS THAT THE
BIGGEST PROBLEM WE HAVE IS NOT
IN PHYSICAL SUPPLY. THE BIGGEST
PROBLEM WE HAVE IS IN THE
ORGANIZATION AND CONTROL OF THE
DOWNSTREAM MARKET BY A FEW
SELLERS WHO HAVE A GREAT DEAL OF
INFLUENCE OVER THE DISTRIBUTION
SYSTEM AND THROUGH CONTRACTS
OVER THE RETAIL SYSTEM. THAT IS
WHERE MOST OF THE EXCESS PRICING
OF CALIFORNIA GASOLINE IS COMING
FROM. THANKS A LOT. THANK YOU,
PROFESSOR BORNSTEIN. AND I KNOW
ALL OF OUR PANELISTS GAVE US A
LOT OF GREAT INFORMATION. WHAT
WE'RE GOING TO DO, THOUGH, IS
BRING UP THE ADMINISTRATION
AGAIN, WE'RE WE'RE GETTING INTO
THE PROPOSAL BECAUSE I KNOW
THAT'S WHERE WE'RE QUESTIONS ARE
HEADED. SO WHAT WE'RE GOING TO
DO IS HAVE OUR PANELISTS REMAIN,
MAYBE, MR. CORTE, IF YOU WANT TO
SHIFT DOWN SO THAT OUR TWO
ADMINISTRATION FOLKS CAN BE AT
THE END, THEY ARE GOING TO
OFFICIALLY WALK US THROUGH THE,
MINIMUM INVENTORY PROPOSAL AND
THEN WE ARE GOING TO JUMP INTO
QUESTIONS BOTH ABOUT THE
PROPOSAL ITSELF AS WELL AS
QUESTIONS FROM, FOR PANELISTS,
EITHER ON THE PROPOSAL. OR ON
ANY OTHER TOPIC. SORRY, MR.
GARCIA, NO, WE'RE KEEPING THESE
FOLKS UP HERE. YEAH WE'VE I WE
WE'VE WE'VE MESHED THE AGENDA A
LITTLE BIT. YEAH. WE'RE GOING TO
PAUSE AFTER THIS FOR A MOMENT,
AND THEN WE'RE GOING TO MOVE
INTO A CONVERSATION ABOUT
ALTERNATIVE OPTIONS LATER. THANK
YOU AGAIN, CHAIR, WE'LL PULL MY
SLIDES UP. THANK YOU. SO, I'M
GOING TO GO THROUGH A FEW SLIDES
HERE, KIND OF TALKING THROUGH
AND BUILDING UPON WHAT WE'VE
DISCUSSED. THIS MORNING ABOUT
THE OPPORTUNITIES TO STABILIZE
THE FUEL MARKET, CALIFORNIA'S
FUEL MARKET, AND PRICES. SO NEXT
SLIDE, PLEASE. SO I JUST WANTED
TO I KNOW WE HAD A NUMBER OF
QUESTIONS ABOUT THIS AND WE
WANTED TO INCLUDE IT. SO WE HAVE
BROADLY THREE BUCKETS OF
STORAGE. AND TWO ARE INCLUDED
HERE. AND SO THE FIRST ONE IS
THE WITHIN THE REFINERY GATE. SO
YOU HAVE CARB GASOLINE AND THE
INDUSTRY EXPERT YESTERDAY DID AN
EXCELLENT JOB EXPLAINING THAT
THOSE TANKS IN THE REFINERY GATE
ARE MINI TANKS. RIGHT. SO LIKE
ONE OF OUR INDUSTRY COLLEAGUES
OVER THE LAST YEARS OF
DISCUSSION AND PUT IT IN A NICE
WAY SO I COULD PUT HERE, WHICH
IS IT'S LIKE MAKING CAKES AT THE
END. YOU NEED A TANK OF BAKING
SODA. YOU NEED A TANK OF MILK,
YOU NEED A TANK OF BUTTER, AND
YOU'RE BRINGING THEM ALL INTO A
MIXER WHERE YOU'RE KIND OF
PUTTING THE CAKES OUT. SO IT'S
THE SAME WAY WHAT YOU SEE THERE
IS REFINED FUEL THAT'S COMING
OUT SOME REFINED FUEL IS STORED,
BUT A LOT OF BLENDING COMPONENTS
ARE KEPT THERE TO BE BROUGHT
INTO MIXING ON A RADIAL BASIS.
SO WE ALSO HAVE NON CARB
GASOLINE AND THEN ALSO HAVE
CRUDE OIL. YOU KNOW TANKS THERE.
SO IF YOU LOOK AT JUST THE CARB
LIKE THE CARB GASOLINE AND THE
BLENDING STOCKS THAT GO INTO
THAT, THE OVERALL, ROUGHLY, IF
YOU CALCULATE THAT INTO THE DAYS
OF SUPPLY, MEANING HOW MANY DAYS
WORTH OF COMPONENTS DO WE HAVE?
THAT'S ABOUT 14 DAYS TODAY.
THAT'S THE AMOUNT THAT WE
REGULARLY CARRY WITHIN THE
TANKAGE THAT WE HAVE. AND THAT
GOES FROM 14 DOWN IN SEVERAL
MONTHS. AND ON THE OTHER SIDE
YOU HAVE COMMERCIAL STORAGE. SO
WHAT YOU HAVE IN THE IN A
TERMINAL STORAGE, IT'S A
SIMILAR, SAME TANKAGE, YOU KNOW,
A NUMBER OF COMPANIES OPERATE
THEM. TRANS MOUNTAIN, OLYMPUS
SHELL HAS NUSTAR. AND WHEN YOU
CALCULATE THE AMOUNT OF STORAGE
THEY HAVE, IT'S ABOUT 2 TO 3
DAYS WORTH. SO THAT'S THE
TOTALITY OF WHAT WE'RE WORKING.
AND THE THIRD BUCKET WHICH WE
DON'T WANT TO NECESSARILY UPLIFT
HERE IN THIS CONVERSATION IS THE
KINDER MORGAN. SO WHAT KINDER
MORGAN DOES IS ALSO HAS ANOTHER
14 DAYS WORTH. BUT THAT'S ALL
KIND OF GOING THROUGH. SO IT'S A
PASS THROUGH. AND THEN KIND OF
THINKING OF IT AS A STORAGE
CUSHION IS NOT A GOOD, GOOD IDEA.
AND AGAIN THIS IS INDUSTRY
LEVEL. WE'RE NOT TALKING ABOUT
ANY SPECIFIC REFINERY AND
DIFFERENT REFINERIES USE THEM
DIFFERENTLY. NEXT SLIDE PLEASE.
I MUTED MYSELF, THE WE TALKED
ABOUT THIS SLIDE IN THE MORNING
AND I JUST WANTED TO BRING IT
BACK UP. SO THOSE ULTIMATELY
WHEN YOU THINK ABOUT THE OVERALL
STOCKS THAT WE HAVE IN THE WEST,
THEY FLUCTUATE OVER THE OVER THE
YEAR. AND I DON'T WANT TO, YOU
KNOW, BELABOR THE POINT OTHER
THAN JUST NOTING THAT, YOU KNOW,
IN JUNE JULY TIME FRAME, THOSE
ARE MAXED UP AND THEN THEY GO
DOWN. AND WHAT WE'RE TALKING
ABOUT HERE REALLY IS ABOUT HOW
DO YOU MAINTAIN A CERTAIN RATE
OF DECLINE THAT WOULD
MEANINGFULLY SUPPORT THE SPOT
MARKET PRICES? RIGHT. SO THAT'S
WHAT WE WANT TO THINK ABOUT
HERE. NEXT SLIDE PLEASE. NOW
EVERYBODY LIKES THIS SLIDE. AND
I AND I WANT TO MAKE SURE THAT I
ABUNDANTLY MAKE IT CLEAR BECAUSE
WE'RE GOING TO TALK ABOUT THE
PROPOSAL HERE. THE PROPOSAL
NEVER MENTIONS 15 DAYS WORTH OF
SUPPLY. RIGHT. SO IT NOWHERE IN
THE LEGISLATION THERE IS 15 DAYS
WORTH OF SUPPLY AS A METRIC TO
BE USED. BUT IT TALKS ABOUT
THOUGH IS ABOUT IMPROVING THE
LIQUIDITY BASED ON THIS ANALYSIS
THAT WE'VE SHOWN. SO WHAT WE'VE
SHOWN HERE IS THERE IS A PRETTY
LINEAR RELATIONSHIP BETWEEN SPOT
MARKET PRICES UP UNTIL WE DROP
BELOW 15%, 15 DAYS WORTH OF
SUPPLY. AND AGAIN, JUST GOING
BACK TO THE MORNING SESSION,
JUST REMINDING YOU THAT THERE
ARE FOUR COMPONENTS. WE'RE
LOOKING AT WHERE THESE DAYS OF
SUPPLY IS A TWO WEEK AHEAD
FORECAST. SO WE'RE LOOKING AT
TODAY AND SAY HOW MUCH DO I HAVE
IN MY TANKS. HOW MUCH PRODUCTION
CAPACITY DO I HAVE RIGHT NOW
BASED ON THE OUTAGES BOTH
PLANNED AND UNPLANNED OUTAGES I
HAVE AND HOW MUCH VISIBILITY DO
I HAVE ON WHAT'S COMING THROUGH
MARINE VESSELS? THAT'S THAT'S
THE SUPPLY. AND THEN I'M LOOKING
AT AND SAYING, HOW MUCH DEMAND
DO I HAVE TO MEET? AND THAT'S A
SIMPLE FRACTION. AND IT'S JUST
PHENOMENALLY FITS THE DATA. AND
WHEN WE TALK TO THE INDUSTRY,
THE INDUSTRY MIGHT NOT LOOK AT
THE DAYS OF SUPPLY AS A METRIC.
BUT THE WAY I LOOK AT IT IS HOW
MUCH DO I HAVE ON PAD FIVE? PAD
FIVE IS 30 MILLION. WE'RE GOOD.
IT'S DROPPING DOWN TO 28. YOU
KNOW, WE'RE STRUGGLING. SO
THINGS LIKE THAT. SO EVERYBODY
USES A DIFFERENT METRIC. BUT
ROUGHLY WE ARE ALL KIND OF
GETTING AT THE SAME POINT. SO
WHAT WE'RE THEN TALKING ABOUT IS
ABOUT 15 DAYS. YOU BEGIN TO SEE
THAT INFLECTION AND THE ENTIRETY
OF THE PROPOSAL IS HOW DO WE
LOOK AT THE EXISTING TANKAGE
THAT WE HAVE IN CALIFORNIA AND
THINK ABOUT, IS THERE A WAY TO
OPTIMIZE AND NOT GO INTO ALL THE
WAY INTO THOSE 12 AND 13? AND
WHAT'S THE MAXIMUM WE CAN DO
HERE BY ADEQUATE PLANNING? AND
AS I'VE SHOWN IN THE PREVIOUS
SLIDE, IF WE JUST GO BACK TO
PREVIOUS SLIDE ONCE, PLEASE.
THANK YOU. THAT IS DIRECTLY
WHAT'S HAPPENING. THAT'S WHAT
INDUSTRY DOES. AND I WILL AGAIN
IN A NOTED OVER AND OVER, I WANT
TO CREDIT THE INDUSTRY WHO HAS
BEEN WORKING WITH US
COLLABORATIVELY THIS YEAR. NOT
ALL INDUSTRY PLAYERS ARE THE
SAME, AND I WANT TO JUST
ACKNOWLEDGE THOSE WHO HAVE BEEN
WORKING WITH US VERY, VERY
CONSTRUCTIVELY. AND I WOULD
SURMISE THAT THE REASON WHY WE
HAVE THOSE INVENTORIES ARE THOSE
GOOD CONVERSATIONS THAT WE HAVE.
BUT THE PROBLEM IS YOU KNOW, NOT
EVERYBODY WANTS TO WORK IN THAT,
IN THAT SPACE. AND IT'S
IMPORTANT FOR US TO BE ABLE TO
HAVE, YOU KNOW, A WAY TO WORK
WITH ALL OF THEM. NEXT SLIDE TWO
SLIDES DOWN, PLEASE. OKAY. SO
HERE NOW I'M GOING TO JUST GO
THROUGH THE SUMMARY INVENTORIES
REAL QUICK. JUST KIND OF GIVING
YOU A SNAPSHOT. WHAT YOU'RE
SEEING THERE ARE IN BLACK 2223
AVERAGES. YOU KNOW WE ALL KNOW
THAT WE HAD A LARGE PRICE SPIKES
DURING THAT TIME. AND THE
CORRELATION IS VERY VERY CLEAR.
RIGHT. SO LIKE WE HAVE YOU KNOW
THOSE OVERALL INVENTORIES MUCH
LOWER. LOOK AT 24 AND HOW WE'RE
DOING ON IT 24. WE'RE DOING MUCH
BETTER. AND AS A CONSEQUENCE ON
THE SPOT MARKET THERE ARE FEWER
TRADES. AND AS A CONSEQUENCE YOU
HAVE LESSER PRICE SPIKES. YOU
STILL HAVE IT AS A DIRECTOR,
MILDER TALKED ABOUT TODAY, THERE
IS STILL UPWARD MOVEMENT,
ESPECIALLY BECAUSE OF THE
TIGHTNESS IN THE SAN FRANCISCO
MARKET. BUT STILL, WE ARE IN A
BETTER SPOT. IF I LOOK BACK
ABOUT SIX WEEKS AGO, WE STARTED,
YOU KNOW, JUST AS THIS PRICE HAS
STARTED GOING UP, ABOUT SIX
WEEKS AGO, WE STARTED $0.70
BELOW COMPARED TO 22 AND 23. SO
ONCE BECAUSE OF THOSE HIGHER
INVENTORIES, WE WERE STARTING AT
A LOWER POINT. THAT WAS CONSUMER
SAVINGS. AND IT WAS PLANNED BY
THE INDUSTRY SAFELY TO BE THERE.
AND THEN AS WE STARTED, AS AS
DIRECTOR MILDER NOTED THIS
MORNING, A NUMBER OF, YOU KNOW,
I HAVE TO KIND OF BE MINDFUL OF
THE PIRATE STATUTE. SO I'M NOT
GOING TO QUOTE A SPECIFIC
CONFIDENTIAL INFORMATION. BUT AS
YOU LOOK AT THE INDUSTRY REPORTS
OF SPECIFIC, YOU KNOW, DECLINE
IN THE ACTUAL PRODUCTION, YOU
STARTED SEEING THAT UPTICK,
RIGHT? SO LET'S GO TO THE NEXT
SLIDE. THAT KIND OF FEEDS INTO
THAT NEXT SLIDE. SO THIS IS THE
INFORMATION THAT WE ARE TASKED
WITH PUBLICLY DISCLOSING EVERY
WEEK. WE DO THIS THROUGH OUR
WEEKLY UPDATE. A NUMBER OF
INDUSTRY COLLEAGUES ACTUALLY
TELL US IT'S REALLY HELPFUL FOR
THEM BECAUSE THEY SEE THIS
INFORMATION AND PLAN
ACCORDINGLY. AND AS YOU SEE
THERE AS AS BASED ON THE PUBLIC
REPORTS, WHAT WE HAVE HERE IS
THE PRODUCTION HAS DECLINED OVER
THE LAST THREE WEEKS. AND IF NOT
FOR THE HIGH INVENTORIES WE
HAVE, WE ARE SITTING ON RIGHT
NOW, THAT WOULD HAVE ESCALATED
THE PRICE SPIKES SIGNIFICANTLY.
AND THAT'S THE THAT'S THE
IMPORTANT PIECE THAT WE NEED TO
THINK THROUGH, WHICH IS THAT
THOSE INVENTORIES THAT THAT ARE
BEING MAINTAINED BY THE INDUSTRY
TODAY, WILL HAVE MITIGATED THAT
LARGER SPIKE WE COULD HAVE SEEN
AS COMPARED TO 22 AND 23. NEXT
SLIDE PLEASE. AND THIS IS JUST A
QUICK SNAPSHOT. THE DECLINE AS I
MENTIONED YESTERDAY IN DEMAND.
WE DON'T HAVE ACTUAL DEMAND DATA
BY MONTH. WE TYPICALLY GET IT
FROM CDTFA A COUPLE OF MONTHS
BEHIND. BUT IN THE LAST FIVE
YEARS WE HAVE DECLINED 10% IN
OUR GASOLINE DEMAND. AND THIS
YEAR WE'RE COMING ABOUT 1 TO 2%
BELOW LAST YEAR. NEXT SLIDE
PLEASE. AND I WANT TO USE THIS
OPPORTUNITY TO JUST THINK ABOUT
MAINTAINING MARKET LIQUIDITY AS,
AS A AS AN IMPORTANT TOOL THAT
WE HAVE, WHICH THE PROPOSAL IS,
PROVIDING AN OPPORTUNITY TO USE.
SO WHAT YOU'RE SEEING HERE IS
LET'S START TODAY PUTTING THESE
OBSERVATIONS TOGETHER. LET'S
WALK THROUGH A SCENARIO THAT
ILLUSTRATES HOW MAINTAINING
MARKET LIQUIDITY CAN PREVENT
PRICE SPIKES. LET ME EMPHASIZE
THAT THE PRICES, SUPPLY AND
DEMAND TRENDS ARE REALISTIC BUT
ARE HYPOTHETICAL AND ARE NOT
BASED ON ANY ACTUAL UPCOMING
REFINERY PRODUCTION, IMPORTS,
CONFIDENTIAL OR PROPRIETARY
DATA. THESE ARE JUST REALISTIC
BASED ON HISTORICAL AVERAGES IN
THE TOP, YOU SEE THE SUPPLY AND
DEMAND CONDITIONS WE HAVE
REFINERY PRODUCTION AVERAGING
ABOUT 720,000 BARRELS OF CAVA
PER DAY, WITH AN ADDITIONAL
60,000 BARRELS COMING IN THROUGH
MARINE IMPORTS. DEMAND IS
ESTIMATED ABOUT 80 800,000. AS I
MENTIONED THIS MORNING, BARRELS
PER DAY IN THIS EXAMPLE, LET'S
ASSUME ON DAY ONE THAT THE DAYS
OF SUPPLY METRIC WAS 15.5,
RIGHT? SO THAT'S WHERE WE'RE
STARTING FROM. THIS MEANS THAT
THE AVAILABLE SUPPLY AND
UPCOMING TRENDS PREDICT THERE IS
ENOUGH FUEL FOR SUPPORTING 15
DAYS OF CALIFORNIA DEMAND, WHICH
IS ABOUT 12.4 MILLION BARRELS AT
THAT POINT. HERE WE ESTIMATE THE
SPOT MARKET DIFFERENTIAL WILL
FALL BETWEEN ABOUT $0.25 ABOVE
NIMAX, BECAUSE THAT'S WHAT THE
DATA SHOWS. LET'S ALSO ASSUME
THIS PUTS THE RETAIL PRICE AT
ABOUT 475 PER GALLON. AGAIN WE
HAVE A NUMBER OF QUESTIONS
ABOUT, YOU KNOW, WHY ARE GAS
PRICES ARE HIGHER TO START WITH
WITH A HIGHER TAX AND FEES. AND
THAT IS NOT SOMETHING WE ARE
DEBATING. AND THAT'S THERE. THIS
IS ABOUT PRICE SPIKE AND MEANING
CALIFORNIANS WILL SPEND ABOUT
$167 MILLION TOTAL ON GASOLINE
EACH DAY. SO THAT'S WHAT WE ARE
WE ARE LOOKING AT ON THAT
PARTICULAR DAY. NEXT GOES TO THE
NEXT SLIDE, PLEASE. OKAY.
LOOKING AGAIN AT THE TOP. TOP
RIGHT. JUST KIND OF IN A
POINTING YOUR ATTENTION TO THAT
ON SUPPLY AND DEMAND CONDITIONS
ARE OUT OF BALANCE RESULTING
LET'S SAY IN A DEFICIT OF 20,000
BARRELS PER DAY, THERE IS AN
OUTAGE. THERE'S ABOUT 20,000
BARRELS A DAY OUTAGE. IF WE LOOK
BACK AT THE GRAPH, WE CAN SEE
AFTER FOUR WEEKS, ROUGHLY AFTER
FOUR WEEKS, WE HAVE MOVED FROM
OUR INITIAL POINT OF 15.5 DAYS
DOWN TO 14.8 DAYS OF SUPPLY. AND
BECAUSE OF THAT 560 000 BARREL
DRAWDOWN OF THE INVENTORIES THAT
ARE REQUIRED TO DO SO AT 14.8
DAYS OF SUPPLY, WE WOULD EXPECT
THE SPOT MARKET PRICE
DIFFERENTIAL TO INCREASE AND THE
RETAIL PRICES TO BUMP UP ABOUT
$0.15 TO 490 AT THAT POINT. OVER
THESE FOUR WEEKS, CALIFORNIANS
WOULD HAVE SPENT AN ADDITIONAL
$78 MILLION TO PURCHASE THE SAME
AMOUNT OF FUEL DUE TO THOSE 15
CENT AVERAGE. NEXT SLIDE. NOW
LET'S THINK ABOUT WHAT'S GOING
TO CONTINUE HAPPEN. WHILE THE
LAST SCENARIO IS NOT WHAT WE
HOPE WOULD HAPPEN, THERE ARE
OTHER FACTORS THAT CAN MAKE THE
SITUATION WORSE. LOOKING AGAIN
AT THE TOP, LET'S ASSUME THAT IN
THIS ALTERNATE SCENARIO, DURING
A FOUR WEEK PERIOD, THE OUTAGE
RATES WERE SIGNIFICANTLY HIGHER.
IF WE LOOK BACK AT THE GRAPH, WE
CAN SEE THAT THE FOUR WEEKS WE
HAVE MOVED FROM OUR INITIAL
POSITION OF 15.5 DAYS TO 13
DAYS, AND THAT COULD REALLY
HAPPEN. THAT HAPPENED SEVERAL
TIMES IN THE LAST COUPLE OF
YEARS. AND AT THAT POINT, AT 13
DAYS OF SUPPLY, BASED ON THE
PRICE SPIKE OBSERVED IN 22 AND
23, WE WOULD HAVE EXPECTED THE
SPOT MARKET DIFFERENTIAL TO
INCREASE THE RETAIL PRICES BY $1
TO $5.75. OVER THOSE FOUR WEEKS,
CALIFORNIANS WOULD SPEND ABOUT
$518 MILLION IN EXCESS FUEL
PRICES. NEXT SLIDE. NEXT SLIDE
PLEASE. FINALLY, LET'S LOOK AT
THE THIRD SCENARIO IN WHICH THE
REFINERY EVENTS OR COMBINATION
OF EVENTS STILL OCCUR. BUT THIS
TIME INDUSTRY TOOK ACTION TO
RESUPPLY BY IMPORTING ADDITIONAL
CARGOES. IT'S REALLY IMPORTANT
HERE TO JUST TAKE A MOMENT. IF
THE INDUSTRY HAS A PLANNED
OUTAGE, THIS IS THE EASIEST CASE
TO THINK THROUGH. IF THEY HAVE A
PLANNED OUTAGE, THEY HAVE
VISIBILITY. YOU KNOW THEY HAVE
TO TELL US ABOUT 120 DAYS
BEFORE. AND SO THEY HAVE AT
LEAST FOUR MONTHS. AND AS MANY,
MANY OF THE INDUSTRY EXPERTS
POINT, AND I AGREE WITH THEM, IT
TAKES ABOUT 30 TO 40 DAYS TO GET
A SHIP INTO CALIFORNIA. SO THEY
ARE IN THE BEST POSITION AND
OBVIOUSLY, IF GRANTED, THIS
AUTHORITY WILL WORK WITH THEM
BEST POSITION TO SAY, HOW AM I
GOING TO OPTIMIZE TO MAKE SURE
THAT I'M NOT GOING INTO THE SPOT
MARKET TO REACTIVELY BUY THINGS.
AND I WILL ACKNOWLEDGE RIGHT
NOW, AGAIN, THERE ARE INDUSTRY
PLAYERS WHO DO THAT. THERE ARE
INDUSTRY PLAYERS WHO ARE
ACTIVELY PLANNING TO MAKE SURE
THAT THEY DON'T DO THAT IN THE
SPOT MARKET, AND NOT EVERYBODY
DOES THAT. AND THAT'S WHY YOU
SEE THOSE PRICE SPIKES. SO IN
THIS CASE, IF THERE IS ACTION
FROM THE INDUSTRY, THE MARKET
TIGHTNESS IS AVOIDED. AND THEN
WE'RE AT ONE $1 PER GALLON
INCREASE NOT REALIZED. INSTEAD
WE ARE BACK AT THE INITIAL
CONDITIONS AND ABOUT 14.8 DAYS
OF SUPPLY. AND IN THIS CASE
BECAUSE OF THE RESUPPLY
OBLIGATIONS WOULD AVOID WOULD
AVOID 440,000,000IN ADDITIONAL
COSTS. THAT'S REALLY WHAT WE'RE
TALKING ABOUT. HOW DO WE
ACTIVELY PLAN WITH THE INDUSTRY?
I WILL I WILL POUND IT OVER AND
OVER TO JUST MAKE SURE THAT I
GET IT, BECAUSE I HAVE A NUMBER
OF INDUSTRY COLLEAGUES WHO ARE
REACHING OUT AND SAYING, HEY, WE
ARE WORKING IN GOOD FAITH. SO I
WANT TO MAKE THAT POINT NOT ALL
INDUSTRY PLAYERS MIGHT HAVE
SPACE AND SOME INDUSTRY PLAYERS
ARE ACTIVELY PLANNING. IT'S
ABOUT HOW DO WE MAKE THE ENTIRE
INDUSTRY WORK TOGETHER
COHESIVELY TO ENSURE THAT THE
MAXIMUM AMOUNT OF RESUPPLY AND
THOSE ACTIVE PLANNING IS DONE?
NEXT SLIDE PLEASE. SO WITH THAT
LET'S JUST KIND OF GO INTO THE
OTHER, YOU KNOW, ADDITIONAL
CONSIDERATIONS. ACTUAL SUPPLY
AND DEMAND BALANCE REQUIRES
CAREFUL PLANNING. AND I WILL
NOT, UNDERMINE WHAT THE INDUSTRY
EXPERTS YESTERDAY MENTIONED.
IT'S A VERY COMPLEX, FUNCTION,
YOU KNOW, AND I WANT TO GO BACK
TO THIS. I'M AN ENGINEER AT
HEART, AND THAT'S HOW I THINK,
YOU KNOW, MY WORK EVERY MORNING,
A WEEK AHEAD AND A MONTH AHEAD
AND A YEAR AHEAD, INDUSTRY IS
DOING THIS COMPLEX MODELING.
THEY'RE RUNNING THEIR
OPTIMIZATION MODEL AND SAYING,
HOW DO I CARRY THESE DIFFERENT
LEVELS OF SUPPLY? AND THE
CONSTRAINTS THEY HAVE, YOU KNOW,
THEY USE LINEAR PROGRAMING. THEY
THEY MENTIONED THAT LINEAR
PROGRAMING IS ONE OF MANY
DIFFERENT TYPES OF OPTIMIZATION
PROBLEMS. AND WHAT THEY'RE
TRYING TO DO IS SAYING, MY
OBJECTIVE FUNCTION IS TO
MAXIMIZE REVENUE AND NOTHING
AGAINST THAT. AND WE TALKED
ABOUT THIS YESTERDAY. IT'S ABOUT
HOW ARE YOU THEN THINKING ABOUT
ALL ALL THE DIFFERENT
CONSTRAINTS YOU HAVE AND
ENSURING YOUR PROFIT
MAXIMIZATION OR REVENUE
MAXIMIZATION. WHAT WE WOULD DO
IDEALLY, IF THE BILL WERE TO BE
PASSED, IS WORK WITH THEM, TO
HAVE THEM RUN DIFFERENT
SCENARIOS AND TELL US UNDER
DIFFERENT SCENARIOS, WHAT WOULD
BE THAT REVENUE LOST, BUT WHAT
WOULD BE THE OVERALL BENEFIT TO
THE CONSUMERS? AND IF THAT
REVENUE LOSS IS MINIMAL ENOUGH
WITH THE BENEFIT, THAT'S
SOMETHING WE WANT TO CONSIDER.
SO AGAIN, IT ALL POINTS TO THE
MINIMUM INVENTORY LEVELS. AND I
WANT TO JUST PAUSE, JUST MAKE MY
CLOSING COMMENT AND PASS IT TO
MY COLLEAGUE HERE. IN ESSENCE,
WHAT WE'RE TALKING ABOUT IN THE
PROPOSAL FROM FROM THE GOVERNOR
AND THE ADMINISTRATION IS WHAT
DO WE DO TO MAXIMIZE OUR
PRE-PLANNING TO AVOID REACTIVE
BEHAVIOR UNDER CONSTRAINTS? AND
THE THRESHOLD QUESTION THEN
BECOMES, DO WE HAVE ENOUGH
EVIDENCE TODAY TO SUGGEST THAT
THERE IS ENOUGH CUSHION TO
IMPROVE EFFICIENCY? AND I
BELIEVE, YES, WE HAVE SHOWN YOU
THAT THERE IS ENOUGH CUSHION
JUST COMPARING 22 TO 20 3 TO 24
THAT WE HAVE PLANNED BETTER THIS
YEAR. SO THAT'S THE THRESHOLD
QUESTION. CAN WE PLAN LIKE THAT
EVERY YEAR? RIGHT. AND CAN WE
PLAN WITH THAT LIKE THAT WITH
EVERY INDUSTRY PLAYER. AND WHILE
WE HAVE, YOU KNOW, AN INDUSTRY
PLAYER TODAY WHO'S WORKING VERY
COLLABORATIVELY, CAN WE DO THAT
WITH EVERYBODY IN THAT
COORDINATED, COLLABORATIVE
FASHION? THAT'S THE FIRST
THRESHOLD. QUESTION TWO YOU
KNOW, DO WE ACT NOW? AND THE
ANSWER IS THE STATUS QUO IS NO
ACTION. AND WE WILL SEE MORE
PRICE SPIKES MOVING FORWARD. AND
EVEN IF YOU WERE TO GIVE THIS
AUTHORITY, GIVEN HOW LONG IT
TAKES, A RULEMAKING TO BE DONE,
IT WILL TAKE TIME FOR US TO
REALLY TAKE THE BENEFITS OF
THIS, BUT WILL FORCE THE
CONVERSATIONS. IT WILL HELP US
CONTINUE TO WORK COLLABORATIVELY
WITH INDUSTRY. AND THE THIRD ONE
IS UNDER WHAT GUARDRAILS WOULD
WE WANT US TO DO THAT? AND I
THINK BASED ON THIS MORNING'S
CONVERSATION IN ASSEMBLYMEMBER'S
ASKED THAT QUESTION. WE LOOK
FORWARD TO YOUR GUIDANCE ON
THAT. WHAT GUARDRAILS SHOULD AN
AGENCY GET IN THINKING THROUGH
THIS? AND WE WOULD NOT OBVIOUSLY
WITHIN WE'LL WORK WITHIN THOSE
GUARDRAILS AND ENSURE THAT THE
BENEFITS ARE MAXIMAL AND THE
RISKS ARE MITIGATED. SO WITH
THAT, I'LL PASS IT TO DIRECTOR
MILLER. THANK YOU SO MUCH. AND
FIRST, THANKS TO THE CHAIR FOR
INCLUDING DPMO IN THE SUBSEQUENT
CONVERSATION, TRYING TO USE THIS
TIME WISELY, I WANT TO ADDRESS
FOUR POINTS. TRY AND SPELL OUT A
LITTLE BIT DPMO VIEW OF BEST
PRACTICES PEOPLE HAVE BEEN
TALKING ABOUT. WHAT IS THIS
GOING TO LOOK LIKE? WE WANT TO
SHARE OUR THOUGHTS. IT WILL
ULTIMATELY BE A COMMISSION
DECISION, BUT SHARE OUR THOUGHTS
ON THAT. ADDRESS THE GUARDRAIL
GUARDRAILS ISSUE THAT
ASSEMBLYWOMAN PAPPIN RAISED.
TALK ABOUT EXISTING STORAGE AND
TALK ABOUT OTHER COUNTRIES. I
THINK THE STARTING POINT IS
INDUSTRY NEEDS TO MAKE PROFIT,
AND I THINK IT'S IMPORTANT FOR
US TO UNDERSTAND THAT THE PROFIT
MOTIVE NEEDS TO BE THERE, BUT
THAT THE PROFITS WE HAVE SEEN
OVER THE LAST FEW YEARS WITH
THESE PRICE SPIKES ARE NOT
NORMAL. AND SO WE HAVE TO DESIGN
A PROGRAM THAT ALLOWS FOR
PROFIT, BUT ALSO TAKES PLANNING
FOR THE STATE INTO
CONSIDERATION. SO WE'RE GOING TO
SKIP IF WE CAN BRING UP OUR
SLIDE DECK HERE. SKIP AHEAD TO A
SLIDE THAT SAYS BEST PRACTICES
FOR RESUPPLY. AND THIS SHOULD BE
ONE ONE MORE ALONG. SO THIS IN
OUR VIEW IS A NON-EXHAUSTIVE
LIST OF BEST PRACTICES. FIRST
PLAN FOR THE CRITICAL MONTHS
WHEN WE KNOW SUPPLY FALLS LOWEST
AND PRICE SPIKES HAPPEN. SECOND,
UTILIZE EXISTING STORAGE. I'M
GOING TO END WITH THE SAME CHART
I USED THIS MORNING. THE STORAGE
CURRENTLY EXISTS. PROFESSOR
BORNSTEIN TALKED ABOUT MINIMUM
INVENTORIES, MEANING OPERATE
CLOSER TO HOW YOU DO THE REST OF
THE YEAR, REQUIRE GREATER
RESUPPLY FROM MAINTENANCE DURING
BUSY MONTHS. THIS IS CRITICAL.
PART OF THIS LEGISLATION GIVES
CEC NEW AUTHORITY TO SAY, IF
YOU'RE GOING OFFLINE, PLAN
RESUPPLY. SO IF REFINERS ARE
GOING OFFLINE IN THE WINTERTIME,
FOR EXAMPLE, MAYBE THAT RESUPPLY
REQUIREMENT IS NOT AS AS HIGH AS
IT IS IN THE SUMMERTIME TO
INCENTIVIZE THEM TO DO
MAINTENANCE AT A BETTER TIME OF
YEAR SHOULD ALSO ALLOW FOR
PHASED INVENTORY BUILD UP. WHEN
PRICES ARE LOW. SO LOOK TO BUILD
THE INVENTORIES WHEN PRICES ARE
LOW, LOCK IT, BUY LOW, HAVE THAT
INVENTORY IN PLACE SO THAT IF
THERE IS A, YOU KNOW, AN
IMPENDING PRICE SPIKE OR PRICES
GOING UP, INVENTORY CAN SELL AT
A PROFIT FROM THOSE FROM THOSE
INVENTORIES THAT THEY'VE BUILT
UP, HAVE RULES TO INJECT
LIQUIDITY DURING A DISRUPTION,
TO STABILIZE PRICES. LET ME BE
REALLY CLEAR. THIS IS INTENDED
AS A BUFFER THAT IS ACCESSIBLE
TO INDUSTRY. AND WHERE CEC MAKES
RULES THAT ALLOW AND EVEN
REQUIRE LIQUIDATING SOME OF
THOSE BUFFER STOCKS AS PRICES GO
UP. AND THIS WOULD NOT THEREFORE
BE A POLITICAL DECISION, BUT
RATHER ONE BY ECONOMICS AND
WHAT'S HAPPENING IN THE MARKET.
THEN ON THE REPLENISHMENT SIDE,
AFTER THERE'S A DISRUPTION,
AGAIN, ALLOW PHASED IN BUILDING
UP OF INVENTORIES BECAUSE WE
DON'T WANT TO ADD THE STRESS OF
ADDITIONAL PURCHASING DURING THE
DISRUPTION. GIVE SOME TIME ON
THE BACK END TO BUILD THE STOCKS
UP AGAIN. WHEN PRICES ARE LOW.
AND THEN LAST, CONSIDER COUNTING
INBOUND CARGOES TO ADD IMMEDIATE
LIQUIDITY. WHAT THAT MEANS IS
YOU HAVE STORAGE HERE IN
CALIFORNIA. AN EVENT HAPPENS.
YOU THEN MAKE THAT INVENTORY
ACCESSIBLE TO THE MARKET. THAT'S
INSTANT LIQUIDITY. AND YOU ORDER
BACKFILL THAT WILL ARRIVE IN THE
COMING WEEKS. AS WE GO TO THE
NEXT SLIDE, I WANT TO ADDRESS
ASSEMBLYMEMBER PAPIN'S QUESTION
ABOUT GUARDRAILS AS A PERSONAL
POINT. HAD THE GREAT FORTUNE OF
WORKING WITH GINA PAPIN AT THE
ATTORNEY GENERAL'S OFFICE AND
JUST WANTED TO NOTE THAT HERE,
THE PROPOSED LANGUAGE IN THE
BILL HAS SOME REALLY IMPORTANT
GUARDRAILS THAT WE WANTED TO
FLAG. ONE IS IT REQUIRES THE CEC
TO DO A COST BENEFIT ANALYSIS
BEFORE IMPOSING A REGULATION. IT
ALSO REQUIRES FINDINGS THAT THE
REGULATION WOULD INCREASE SUPPLY
AND WOULD LOWER PRICES. AND THEN
THE CEC HAS TO REPORT BACK ON AN
ANNUAL BASIS ABOUT WHETHER
THAT'S WORKING OR NOT. I WOULD
SUBMIT THESE ARE REALLY
SIGNIFICANT GUARDRAILS AND WELL
THOUGHT OUT GUARDRAILS TO REALLY
HOLD THIS PROCESS TO ACCOUNT.
I'M HERE IN PART BECAUSE OF A
PRIOR BILL THAT GAVE NEW TOOLS
TO CEC TO BRING DATA TO YOU AND
TO BRING PROPOSED POLICY
SOLUTIONS. AND I THINK THIS IS
PART OF AN ONGOING DIALOG. ONE
MORE SLIDE HERE ON STORAGE. WE
SAW THIS BEFORE. IT'S JUST
UNMISTAKABLE. THERE IS STORAGE
YEAR ROUND AT HIGHER LEVELS. AND
THEN FOR BUSINESS DECISIONS OR
OTHERWISE, THEY'RE ALLOWED TO
DIP WHEN DEMAND IS STILL STRONG
AT THE END OF THE SUMMER. AND WE
HAVE PRICE SPIKES. SO THE
STORAGE IS THERE. AND SOMETIMES
COMPLEXITY CAN GET IN THE WAY OF,
OF VERY OBVIOUS DATA. YES. THERE
IS A DIFFERENCE BETWEEN WITHIN
FENCE LINE STORAGE AND
COMMERCIAL STORAGE, BUT BOTH
WHATEVER NUMBERS YOU LOOK AT IT
TELLS THE SAME STORY. WE CAN
OPERATE AT A HIGHER BASELINE
WHEN PRICE SPIKES ARE MORE
LIKELY, AND THAT WILL PREVENT
THE PRICE SPIKES. AND AS I
CONCLUDE, I WOULD LIKE TO REALLY
REFERENCE THE INTERNATIONAL
ENERGY AGENCY. DPMO HAS BEEN
TALKING TO OTHER COUNTRIES,
AUSTRALIA AND OTHERS, AND I
WOULD LIKE TO JUST NOTE THIS IS
NOW PRETTY WIDESPREAD AROUND THE
WORLD, AND I WOULD SAY WE DON'T
EVERY COMPARISON ALLOWS FOR
DISTINCTION, RIGHT? WE'RE NOT
THE SAME AS AUSTRALIA, BUT WE'RE
ALSO NOT THE SAME AS SWITZERLAND
OR GERMANY, EXCEPT THAT THEY ALL
HAVE THESE TYPES OF REQUIREMENTS
TO, TO PROVIDE THAT NEEDED
BUFFER. SO CALIFORNIA. NEEDS TO
DESIGN A CALIFORNIA SOLUTION,
NOT NECESSARILY THE SAME. AND
THE CALIFORNIA'S ECONOMY IS AS
BIG AS OR BIGGER THAN THESE
OTHER NATIONS. AND SO WE SHOULD
ALSO THINK ABOUT RESILIENCY IF
THERE'S, YOU KNOW, GOD FORBID,
ANOTHER BIG EARTHQUAKE OR
NATURAL DISASTER, HAVING MORE OF
A SUPPLY IS GOOD FOR PROTECTING
CONSUMERS FROM PRICE SPIKES, BUT
IT'S ALSO GOOD FOR BUSINESS TO
HAVE MORE STABILITY AND
PLANNING. AND RESILIENCY FOR
NATURAL DISASTERS. THANK YOU.
ALL RIGHT. THANK YOU, WE ARE
GOING TO GO AHEAD AND OPEN IT UP
NOW FOR QUESTIONS AGAIN, EITHER
QUESTIONS RELATED TO THE
PROPOSAL AT HAND OR ANY OTHER
QUESTION YOU MIGHT HAVE FOR ANY
OF THE OTHER PANELISTS, MR.
ZUBIATE WILL BEGIN WITH YOU. SO
THANK YOU. MR. GRINDA. I REALLY
APPRECIATE THE PRESENTATIONS
FROM EVERYONE TODAY, YOU KNOW,
I'M SOMEONE WHO I THINK I THINK
YOU'VE MADE A CONVINCING CASE
THAT WE NEED TO DO SOMETHING TO
PROTECT PRICE SPIKES. I MEAN,
JUST LOOKING AT THE CHARTS.
CALIFORNIA IS, OUR FUEL MARKETS
ARE ACTING DIFFERENTLY THAN THE
NATIONAL, THAN WHAT'S HAPPENING
AT THE NATIONAL LEVEL. AND
THEY'RE ACTING DIFFERENTLY THAN
OTHER STATES. SO I'M CONVINCED
WE SHOULD BE DOING SOMETHING.
AND SO I THINK THE QUESTION IS
ABOUT REALLY, IS THIS PROPOSAL
THE RIGHT THING THAT WE SHOULD
BE DOING? AND SO THAT'S SORT OF
THE WAY I'M APPROACHING IT, I DO
HAVE SOME QUESTIONS THAT MAY
TAKE A LITTLE MORE TIME TO
ANSWER. AND SO I WANTED TO SORT
OF FIRST, BECAUSE I DON'T WANT
TO TELL ME WHEN I RUN OUT OF
TIME, MADAM CHAIR, I'D LIKE TO
AT LEAST GET SOME OF THE SMALLER
ITEMS OUT ON THE TABLE IN TERMS
OF SORT OF CONCERNS THAT I HAVE,
YOU KNOW, OBVIOUSLY I'M GOING TO
BE MORE, MORE COMFORTABLE THE
MORE GUARDRAILS THERE ARE AROUND
THIS. AND SO I JUST WANTED TO
FLAG SOME AREAS WHERE I THOUGHT
THE GUARDRAILS NEEDED SOME MORE
ATTENTION, IN 2022, 53, 54.2,
WHERE WE BASICALLY SET OUT THE
STANDARD TO MINIMIZE THE IMPACT
OF MAINTENANCE RELATED
PRODUCTION ON FUEL PRICES, I
THINK THERE SHOULD BE ADDITIONAL
ADDITIONAL PART OF THE STANDARD
THAT IS FOCUSED ON THE IMPACTS
ON JOBS. AND I THINK AS MY
COLLEAGUE FROM TORRANCE
INDICATED, THE IMPACTS ON
FENCELINE COMMUNITIES, I THINK
THOSE ALL HAVE TO BE PART OF
WHAT WE'RE LOOKING AT. IT CAN'T
BE JUST FUEL PRICES. IT'S GOT TO
BE, IT'S GOT TO BE SORT OF WHAT
THE IMPACTS ARE ON THE FOLKS
THAT ARE WORKING IN THE
REFINERIES AND IN THE INDUSTRY,
AS WELL AS THE FENCELINE
COMMUNITY. SO I'M HOPING THAT
THAT COULD BE WORKED IN THERE,
IN TERMS OF, THE SECOND PART
RELATED TO THE TURNAROUND AND
MAINTENANCE EVENTS, IT BASICALLY
REQUIRES THAT THE REFINER HAS
MADE RESUPPLY PLANS OR OTHER
ARRANGEMENTS SUFFICIENT TO
ENSURE THAT THE LOSS OF
PRODUCTION DURING THE TURNAROUND
OR MAINTENANCE EVENTS IS NOT
ADVERSELY AFFECT THE
TRANSPORTATION FUEL MARKET.
AGAIN, I THINK THE STANDARD
SHOULD BE BROADER THAN THAT,
INCLUDING FOCUSING ON JOB
IMPACTS, JOB DISRUPTIONS, AND
ALSO ENVIRONMENTAL IMPACTS,
IMPACTS TO FENCELINE
COMMUNITIES, GETTING DOWN TO TWO
5350 4.4, I THINK THE THIS I
THINK I WOULD HOPE THAT WE COULD
WORK ON TIGHTENING THIS UP. I'M
A LAWYER AND I READ EVERYTHING
CAREFULLY, WHEN I SEE SOMETHING
THAT SAYS THE REGULATIONS
ADOPTED UNDER THIS SECTION MAY
PROVIDE FOR. BUT ARE NOT LIMITED
TO, ANY OF THE FOLLOWING. THAT'S
A PRETTY BROAD DELEGATION OF
AUTHORITY. SO I'D LIKE TO SORT
OF SEE THAT TIGHTENED UP SOME,
THIS IS THE AREA WHERE WE
ACTUALLY ESTABLISH MINIMUM
LEVELS, AND I WANTED TO POINT
OUT THAT THERE'S AN ESTABLISHED
LEVEL THAT'S DIFFERENT FROM THE
MINIMUM LEVEL. AND I'LL TURN
BACK TO THIS IF I HAVE TIME AT
THE END AND SORT OF JUST TALK
ABOUT MY CONCERNS ABOUT THE
ESTABLISHMENT OF THE MINIMUM
LEVEL, THEN GOING DOWN TO THE
NEXT ITEM, WHEN WE GO INTO THE,
THE STANDARDS FOR THE
REGULATIONS, SECTION C SAYS,
NOTWITHSTANDING A, THE
COMMISSION SHALL NOT ADOPT A
REGULATION PURSUANT TO THIS
SECTION UNLESS IT FINDS THE
LIKELY BENEFITS TO CONSUMERS
FROM THE AVOIDED PRICE
VOLATILITY OUTWEIGH THE
POTENTIAL COST TO CONSUMERS.
AGAIN, HERE, THE ISSUE I HAVE
HERE IS, AGAIN, THAT I THINK WE
SHOULD BE LOOKING AT. AND THEN
THERE'S A NUMBER OF THINGS BELOW
IT THAT SORT OF ARE THAT YOU ARE
INSTRUCTED TO CONSIDER AS YOU'RE
MAKING THAT BROADER
DETERMINATION THAT AGAIN, I
THINK THE DETERMINATION SHOULD
BE MORE THAN JUST REDUCTION IN
COST. IT SHOULD BE ALSO JOB
IMPACTS AS WELL AS FENCE LINE
ENVIRONMENTAL IMPACTS AS PART OF
THE STANDARD, I THINK IF THE IF
THE GOAL HERE IS TO, DO
SOMETHING WITHIN THE EXISTING
TANK INFRASTRUCTURE, I THINK
THAT SHOULD BE SOMETHING THAT'S
SPECIFICALLY NOTED THAT THAT'S
THE THAT THAT IS THE, THAT THAT
IS ONE OF THE CONSTRAINTS. AND I
THINK WE HAVE SORT OF WE HAVE,
YOU KNOW, TESTIMONY FROM BOTH
THE INDUSTRY AND THE UNIONS AND
THE ENVIRONMENTAL AND THE
ENVIRONMENTAL JUSTICE
COMMUNITIES ABOUT MAKING SURE.
AND I AND I TRUST THAT THAT'S
THAT. BUT IT DOESN'T SAY THAT IN
THE, IN THE LEGISLATION. SO I'M
HOPING THAT WE COULD DO, THERE
SHOULD BE THERE COULD BE SOME
MORE FOCUS ON THAT, NEXT ITEM IS
ABOUT THE, THE, EXPERT
COMMISSION, I AGREE WITH SOME OF
THE TESTIMONY TODAY THAT THE
EXPERT COMMISSION IS TOO NARROW.
I MEAN, I OBVIOUSLY HAVE A LOT
OF RESPECT FOR THE ACADEMIC
EXPERTS THAT ARE ON THE
COMMISSION, BUT IT DOES NEED TO
INCLUDE REPRESENTATIVES FROM
LABOR AND CONSUMER
REPRESENTATIVES, AS WELL AS
ENVIRONMENTAL JUSTICE
REPRESENTATIVES AND ACTUALLY
FOLKS THAT HAVE RUN REFINERIES.
I MEAN, I THINK ALL OF THOSE
FOLKS NEED TO BE ON THE PANEL TO
MAKE SURE THAT WE'VE GOT A BROAD
RANGE OF INFORMATION THAT IS
BEING, CONSIDERED AS PART OF
THIS, LET'S SEE. NUMBER THREE,
ENVIRONMENTAL IMPACT. SO LET ME
GET BACK TO I HAVE ONE OTHER
THING WHICH I CAN'T FIND NOW,
BUT I WANTED TO SORT OF GET BACK
WITH THE REMAINING TIME AND SORT
OF GETTING BACK TO THIS SORT OF
INVENTORY ISSUE. I THINK ONE OF
THE THINGS THAT THAT YOU
INDICATED IN YOUR OPENING
COMMENT IS THE IS THAT YOU THINK
THAT THERE'S BEEN A SUFFICIENT
CASE MADE THAT THIS COULD BE
THAT, THAT WE COULD ACTUALLY
HAVE MORE INVENTORY CREATED
WITHIN THE EXISTING
INFRASTRUCTURE, AND I'M NOT
CONVINCED YET THAT THAT'S THE
CASE. THAT DOESN'T NECESSARILY
MEAN THAT WITH BRACKETS IN THE
BILL THAT WE COULDN'T DELEGATE
TO THE AGENCY, THE TO GO AHEAD
AND DO THAT WORK, AND SO, YOU
KNOW, I SORT OF LOOK AT THIS AS
A, YOU KNOW, WE HAVE SORT OF TWO
CASES THAT ARE BEING MADE AND I
REALLY DON'T KNOW THE WHETHER
THE ANSWER IS CORRECT AND SORT
OF HOW MUCH WORK YOU'VE ALREADY
DONE. BUT, YOU KNOW, IN ONE
CASE, YOU PRESENTED DATA THAT
SHOWS THAT THERE'S EXISTING
SPARE INVENTORY THAT'S ALREADY
THAT'S ALREADY SORT OF THERE, ON
THE OTHER HAND, I'VE HEARD FROM
SOME FOLKS THAT HAVE BRIEFED MY
OFFICE THAT THIS IS SORT OF LIKE
THAT YOU ACTUALLY HAVE TANKS
THAT ARE ACTUALLY BEING USED FOR
OPERATIONS. AND WHEN YOU LOOK AT
SORT OF THE FOOT OF THE TANK,
ESSENTIALLY WHAT THIS WOULD DO
IS IT WOULD REQUIRE THAT THEY
ACTUALLY HAVE 15 DAYS OR SEVEN
DAYS OR WHATEVER YOU END UP
BEING. IT WOULD HAVE TO BE SORT
OF AT THE BOTTOM OF THE TANK.
YOU'RE SORT OF RAISING THE HEEL
OF THE TANK UP AND YOU'RE ONLY
ABLE TO USE THE OPERATIONAL PART
FOR THAT. I DON'T KNOW. YOU
KNOW, TO ME IT'S SORT OF LIKE
HAVING MY KID WITH CHOCOLATE
MILK, YOU KNOW, IT'S SORT OF
LIKE IF HE ONLY HAS ONE GLASS
FOR THE CHOCOLATE MILK, I TELL
HIM HE CAN ONLY DRINK TWO THIRDS
OF THE GLASS, DOES THAT GIVE HIM
ENOUGH CHOCOLATE MILK OR OR IS
15 DAYS HALF OF THE GLASS OR IS
THE WHOLE GLASS SOMETHING THAT
HE NEEDS FOR THE OPERATIONS? AND
WE NEED TO MAKE SURE THAT
THERE'S A CARTON IN THE
REFRIGERATOR WITH THOSE EXTRA
DAYS. I DON'T KNOW THE ANSWER TO
THAT. AND I TELL YOU, I'M REALLY
CONFUSED ABOUT IT. I THINK I'M I
TRUST THAT THAT YOU ALL WILL
WILL GET TO THAT, GET TO THOSE
ISSUES. BUT THAT'S SOMETHING
THAT I THINK I SORT OF FEEL LIKE
I DON'T HAVE A GOOD SENSE OF
WHETHER OR NOT THERE IS,
ADEQUATE. STRUCTURAL TANK
CAPACITY AND I SHARE THE
CONCERNS OF THE ENVIRONMENTAL
COMMUNITY THAT WE DON'T WANT TO
BE ACTUALLY INVESTING IN MORE
TANK CAPACITY BECAUSE OF THE
IMPACT THAT IT HAS ON OUR
NEIGHBORHOODS. LET ME SEE. ONE
ONE LAST QUESTION. COULD YOU
JUST SORT OF THIS WILL BE THE
QUESTION AFTER ALL OF THIS,
COULD YOU SORT OF DISCUSS THE
PROS AND CONS? YOU KNOW, THIS IS
A REALLY IMPORTANT REGULATION.
IT'S A, IT'S A IT'S A BROAD
GRANT OF AUTHORITY. THE CEC, I
HAVE A LOT OF RESPECT FOR THE
CEC. I THINK IT'S REALLY ONE OF
THE MOST PROFESSIONAL AND, AND
EQUIPPED GOVERNMENT AGENCIES AND
THE ENVIRONMENTAL SPACE AND THE
STATE. AND SO I HAVE A LOT OF, A
LOT OF CONFIDENCE IN IT. BUT ON
THE OTHER HAND, THIS IS
SOMETHING THAT AFFECTS, I THINK,
THE ENTIRE STATE OF CALIFORNIA.
IT AFFECTS ALMOST EVERY
CONSUMER. IT IS HAS PROBABLY A
LEVEL OF IMPORTANCE THAT IS
GREATER THAN ALMOST ANYTHING
THAT I THINK WE'VE DEALT WITH
SINCE I'VE BEEN HERE. AND SO
COULD YOU TALK ABOUT SORT OF THE
PROS AND CONS OF ACTUALLY HAVING
A STEP THAT WOULD COME BACK TO
THE LEGISLATURE WITH SOME
INTERIM ANALYSIS OF HOW YOU MET
THOSE STANDARDS AND THE, YOU
KNOW, WHEN YOU LOOK AT SECTION
C, ONE, TWO, THREE, FOUR, ALL OF
THOSE SORT OF THE SUB SUB
THINGS, PLUS HOPEFULLY THE
THINGS THAT I TALKED ABOUT
ADDING WHETHER WHETHER THERE'S
SORT OF WHAT THAT WOULD DO, WHAT
THE PROS AND CONS WOULD BE OF
SORT OF COMING BACK TO THE
LEGISLATURE WITH EITHER A REPORT
OR A SUB APPROVAL OR AN APPROVAL
FROM A COMMITTEE HERE IN THE
LEGISLATURE. COULD YOU SORT OF
TALK A LITTLE BIT ABOUT THAT?
THANK YOU. ASSEMBLY MEMBER. AS
ALWAYS, THANK YOU FOR THE
DETAIL. TAKING NOTES, THANK YOU
FOR ALL YOUR OBSERVATIONS, IN
TERMS OF, YOU KNOW, JUST THE
PROCESS OF KEEPING ACCOUNTABLE
AND, AND I ABSOLUTELY AGREE WITH
YOU. THIS IS THIS IS
COMPLICATED, RIGHT? I MEAN, I
MEAN, AS DIRECTOR MILLER
MENTIONED, THERE'S BOTH
COMPLICATION AND THERE ARE SOME
SIMPLE FACTS, RIGHT? SO THE
SIMPLE AGAIN, WE'LL MAKE SURE
THAT THE ANALYSIS IS SHARED WITH
YOU, SOME OF THE INFORMATION
THAT WE HAVE REFINERY BY
REFINERY CANNOT BE SHARED WITH
YOU. AND THAT'S WHY YOU SEE THIS
AGGREGATED INFORMATION,
PUBLICLY. BUT YOU KNOW, WE HAVE
ENOUGH CONFIDENCE FROM THE
INFORMATION WE HAVE THAT THERE
ARE THERE ARE STORAGE, RIGHT? SO
JUST KIND OF ON THE THRESHOLD
QUESTION, ON THE ON THE KIND OF
FOLLOW UP QUESTION, WE WELCOME
THOSE KIND OF CONTINUED
COLLABORATION AND PARTNERSHIP
WITH THE LEGISLATURE. I MEAN, I
THINK WE DO THIS IN ALL
IMPORTANT ASPECTS THAT THAT HAS
BEEN PASSED OVER THE LAST COUPLE
OF YEARS. SO WE WELCOME THAT
CONVERSATION. ABSOLUTELY. THE
LAST THING, THE ONE THING THAT I
COULDN'T REMEMBER, AND IT'S JUST
A QUESTION OR MAYBE A COMMENT
AND THAT IS, I SEE ONE OF THE
OPTIONS THAT YOU CONSIDERED IN
THE LARGER ASSESSMENT WAS A
PUBLICLY MAINTAINED, MAINTAINED
FUEL RESERVE. I WONDER IF YOU
COULD JUST TALK A BIT ABOUT
THAT. WHY YOU HAVEN'T, WHY
THAT'S NOT THAT'S SOMETHING THAT
YOU'VE, AT LEAST AT SOME LEVEL,
NOT DECIDED TO PURSUE. AND
WHETHER OR NOT YOU'D BE WILLING
TO SORT OF AT LEAST LOOK AT THAT
AS ANOTHER OPTION AS PART OF THE
RULEMAKING. YES, ABSOLUTELY. I
THINK THE WAY THAT WE'VE KIND OF
STRUCTURED THE ASSESSMENT WAS
WHAT CAN BE DONE QUICKLY AND
WHAT NEEDS ADDITIONAL TIME. I
THINK AS MANY OF YOU POINTED
OUT, THE LONGER TERM TRANSITION
AND WHAT THAT DOES IN TERMS OF
HAVING THAT RESERVE IS A
DISCUSSION WE SHOULD HAVE AND I
THINK WE SHOULD CONTINUE TO HAVE
THAT. BUT I DON'T THINK THAT'S
SOMETHING WE'LL BE ABLE TO DO
QUICKLY. BUT I WANT TO JUST MAKE
ONE POINT ON THAT. GIVEN THAT
THE DEMAND IS GOING DOWN, YOU
WILL HAVE EXISTING STORAGE TANKS
AVAILABLE. WE HAVE HAD
CONVERSATION WITH THE INDUSTRY.
WHERE AS THESE CONVERSIONS AND,
AND POTENTIAL RETIREMENTS MIGHT
OCCUR, THAT ADDITIONAL SPACE
COULD BE, YOU KNOW, POTENTIALLY
BE LEASED BY THE STATE, RATHER
THAN BUILDING NEW TANKS. SO I
JUST WANT TO PUT THAT AS A, AS A
PLUG POINT OF LIKE A LONG TERM
CONVERSATION. AND THIS IS WHAT
WE'RE TRYING TO DEAL IN. THE
TRANSITION PLANNING PROCESS IS
WHILE WE HAVE THE THRESHOLD
ANSWERS ON SOME OF THEM, THAT
CAN IMMEDIATELY BE DEPLOYED, I
THINK THE LONG TERM, IT'S Ã.
AND, YOU KNOW, WE SHOULD DO THIS
AND OTHER THINGS WE NEED TO
EXPLORE. THANK YOU. AND I THINK
THAT, YOU KNOW, THE OTHER THING,
AS PART OF WHAT YOU DO WHEN YOU
GET INTO THE REGULATION, I THINK
IT'S GOING TO BE REALLY
IMPORTANT TO SORT OF DEVELOP
CRITERIA ABOUT SORT OF WHEN THE
ESTABLISHED RESERVE JUST DIPPED
INTO UNDERSTANDING HOW THAT'S
CLEAR. I MEAN, IT JUST SEEMS
VERY, VERY COMPLICATED, WHICH IS
ACTUALLY WHY YOU WOULD DO THINGS
THROUGH A REGULATORY PROCESS
RATHER THAN THROUGH LEGISLATION.
BUT I ALSO THINK THAT BECAUSE
THIS IS SO IMPORTANT AND HAS
SUCH A BIG IMPACT ON THE
ECONOMY, THAT THERE SHOULD BE A
STEP WITH THE LEGISLATURE'S
INVOLVEMENT AT SOME POINT. SO
WITH THAT, THANK YOU, MADAM
CHAIR, FOR GIVING ME SUCH A
BROAD LEEWAY. THANK YOU. COULD I
COMMENT BRIEFLY ON ONE ASPECT?
THE EXPERT ADVISORY COMMITTEE, I
UNDERSTAND THE NEED FOR INPUT
FROM STAKEHOLDERS, BUT I THINK
THAT'S A VERY DIFFERENT FUNCTION
THAN BRINGING IN EXPERTS TO
GIVE, NON STAKEHOLDER UNBIASED,
INPUT. AND SO IT MIGHT MAKE MORE
SENSE TO HAVE TWO SEPARATE
COMMITTEES, AN EXPERT ADVISORY
COMMITTEE AND A STAKEHOLDER
INPUT COMMITTEE. SO BOTH EXIST.
BUT I THINK MIXING THEM WILL
ACTUALLY MAKE EACH OF THEM LESS
EFFECTIVE. THANK YOU. PROFESSOR,
ASSEMBLY MEMBER BENNETT. THANK
YOU VERY MUCH. CHAIR CODY, I
APPRECIATE IT. AND I WAS JUST
TRYING TO GET DOWN THAT
SUGGESTION FROM, THE PROFESSOR,
YOU KNOW, WE HAVE TWO ISSUES IN
FRONT OF US. AND, ONE IS THE
QUESTION, THE NARROW QUESTION OF
CAN WE DO BETTER IN TERMS OF
INVENTORIES? TO ADDRESS PRICE
SPIKES OUT THERE. THE OTHER ONE
THAT'S A LARGER ISSUE IS THE ONE
THAT THE CHAIR BROUGHT UP, WHICH
IS THIS WHOLE THE WHOLE RISK TO
THE SYSTEM. I THINK WE HAVE TO
RECOGNIZE THAT TODAY, WE CAN'T
TACKLE THE SECOND QUESTION, BUT
TODAY IS ACTUALLY THE BEGINNING
OF TACKLING THE SECOND QUESTION,
THAT THE FIRST THING WE NEED TO
DO IS TAKE A FAIRLY NARROW
ASPECT, BUT THERE'S NO QUESTION
WE ARE AT GREAT RISK AND WE
SHOULD ALL ROLL UP OUR SLEEVES
AND TRY TO WORK WELL TOGETHER TO
MAKE THAT HAPPEN, BUT WE CAN DO
THIS WELL IN CALIFORNIA. OTHER
COUNTRIES HAVE ALREADY DONE
THIS, RIGHT. AND IT CAN BE DONE
IN A WAY THAT BENEFITS
CALIFORNIANS. WE SHOULD MAKE
SURE THAT WE DO DO IT IN THAT
WAY. THAT BENEFITS CALIFORNIANS,
BUT I FEEL STRONGLY WE SHOULD
BEGIN THIS EXPLORATION NOW,
BECAUSE IF WE DON'T, IT'S
ACTUALLY 15 MONTHS FROM NOW
BEFORE WE START. AND EVERYBODY
TALKS ABOUT HOW CRITICAL THIS
IS. AND QUITE FRANKLY, 15 MONTHS
FROM NOW, WE HAVE TO BE WORKING
ON THE BIGGER THINGS LIKE THE
CHAIR TALKED ABOUT AND LIKE WHAT
WHISPER TALKED ABOUT. WE HAVE TO
BE WORKING ON THOSE THINGS WHILE
THIS IS GOING ON. THE SEC'S
DEMONSTRATED GOOD FAITH, AND I
APPRECIATE, MY SEATMATE TALKING
ABOUT THEY'RE A TRUSTED AGENCY
THAT'S OUT THERE. AND THEY HAVE
IDENTIFIED BOTH THE PROS AND
CONS OF ALL OF THEIR
SUGGESTIONS. THEY'VE THEY'VE
IDENTIFIED A WILLINGNESS TO HAVE
GUARDRAILS THAT ARE OUT THERE,
AND THIS NON-REVOLUTIONARY IDEA,
WHICH I CALL NON-REVOLUTIONARY,
WHEN YOU FIND OUT THAT MUCH OF
THE REST OF THE WORLD IS, IS
DOING THIS RIGHT, WHAT IT NEEDS,
IS IT NEEDS GOOD FAITH
STAKEHOLDERS TO WORK WITH THE
CEC, RIGHT? AND I WANT THIS TO
BE THE INVITATION FOR US TO GO
OUT THERE AND SAY, LOOK, THIS
NEEDS TO HAPPEN IN CALIFORNIA
AND WE CAN SIT THERE AND, YOU
KNOW, FIGHT IT AND PUT OUT
MISINFORMATION AND TRY TO BLOCK
EVERYTHING, OR WE CAN WORK
TOGETHER AND THERE'S NO QUESTION
THAT IN MY MIND, THE CEC HAS
DEMONSTRATED A REAL WILLINGNESS.
I'VE HEARD NOBODY CRITICIZE THE
CCS PROFESSIONALISM IN TERMS OF
THEY'RE WILLING TO WORK WITH THE
REFINERIES, THEY'RE WILLING TO
WORK WITH THE INDUSTRY, THEY'RE
WILLING TO WORK WITH LABOR,
THEY'RE WILLING TO WORK WITH ALL
OF THE STAKEHOLDERS BECAUSE WE
WILL COME UP WITH A BETTER
SOLUTION. IF EVERYBODY IS
POSITIVELY PARTICIPATING, AND
BUT WE NEED EVERYBODY TO
POSITIVELY PARTICIPATE, NOT COME
UP WITH, YOU KNOW, SHORT
SOUNDBITES THAT, YOU KNOW, TRY
TO DERAIL THE PROCESS AS WE AS
WE MOVE FORWARD. IF THAT'S THE
CASE, WE'RE MUCH LIKE MUCH MORE
LIKELY TO GET GOOD RESULT FROM
THIS EFFORT. WE'RE MUCH MORE
LIKELY TO HAVE SOMETHING THAT
DOESN'T NEED AS MANY GUARDRAILS.
RIGHT. AND THE SUGGESTION OF
PROFESSOR BORNSTEIN, I THINK, IS
REALLY AN EXCELLENT ONE, YOU YOU
MIX UP THE TWO COMMITTEES AND
YOU YOU HAVE VERY DIFFERENT SORT
OF INPUTS. THE THE TWO FINAL
THINGS THAT I WOULD LIKE TO
OFFER, HERE IS THAT WE NEED TO
MAKE SURE THAT WE GIVE THE CEC
ENOUGH AUTHORITY THAT IT
INCENTIVIZES THE INDUSTRY AND
ALL THE OTHER STAKEHOLDERS TO
GENUINELY ENGAGE. IF WE WEAKEN
THEIR AUTHORITY SO MUCH, PEOPLE
SAY, HEY, WE DON'T HAVE TO WORRY
ABOUT THAT. WE'RE JUST GOING TO
GO AND CONTINUE TO BLOCK IT OR
DO WHAT WE WANT THROUGH THE
LEGISLATIVE EFFORT. SO WE HAVE
TO MAKE SURE THAT THE CEC HAS
ENOUGH AUTHORITY. AND ONE OF THE
THINGS TO HAPPEN IS YOU CAN HAVE
ADVISORY COMMITTEES, ETC. BUT
THE FINAL RECOMMENDATION THAT
COMES TO US SHOULD BE THE
AGENCY'S RECOMMENDATION. WITH
ALL OF THIS INPUT FROM FROM THE
TWO COMMITTEES AND THE OTHER
THING THAT I WOULD LIKE TO OFFER
INPUT ON IS JUST THIS. I WOULD
HOPE THAT WE MIGHT BE ABLE TO
MODIFY THE LANGUAGE OF THIS BILL
TO DO SOMETHING THAT WE'VE BOTH
TALKED ABOUT HERE, AND THAT IS
COME BACK WITH REFORMS OF THE
SPOT MARKET IN TERMS OF THINGS
LIKE ENSURING THAT ALL
TRANSACTIONS HAVE TO BE
REPORTED. YOU KNOW, CALIFORNIANS
ARE DEPENDENT UPON AN UNELECTED,
ALMOST UNSUPERVISED, BUT FAIRLY
UNREGULATED AGENCY THAT IS
DETERMINING THE SPOT PRICE AND
DETERMINING MILLIONS OF BILLIONS
OF DOLLARS OF EXPENDITURES BY
CALIFORNIA TAXPAYERS. THAT'S
PROBABLY SOMETHING WE SHOULD PAY
ATTENTION TO. AND SO WITH THAT,
I APPRECIATE THAT WE'VE HAD
GREAT HEARINGS, AND I THINK THAT
THE ARGUMENT, THE LAST
PRESENTATION, THIS WILL BE THE
FINAL THE LAST PRESENTATION HERE
YOU SUMMARIZE WHAT MANY OF US
HAVE BEEN SORT OF CIRCLING THE
WAGONS AROUND TRYING TO SAY, HOW
DOES THIS WORK? AND YOU'VE SHOWN
A WAY THAT THIS CAN WORK SO THAT
WE CAN HAVE BETTER INVENTORY
LEVELS, NOT PERFECT. YOU'VE
YOU'VE SHOWN HOW THIS CAN HAVE
FLEXIBILITY, THAT IT CAN BE DONE
IN COOPERATION WITH THE INDUSTRY
THAT WHEN ISSUES THAT HAVE BEEN
RAISED SAYING THIS IS TOO RIGID,
YOU CAN BUILD FLEXIBILITY INTO
IT. THIS CAN BE DONE AND I WISH
YOU GOOD. WELL, IF WE DO GO
FORWARD AND I HOPE THAT'S WHERE
WE WILL GO WHEN THE COMMITTEE
TAKES ACTION AS WE MOVE FORWARD
THIS NEXT WEEK. THANK YOU VERY
MUCH, CHAIR. THANK YOU. ASSEMBLY
MEMBER. ASSEMBLY MEMBER. ALVAREZ
THANK YOU, MADAM CHAIR. AND I
TOO HAVE COMMENTS, JUST LIKE OUR
COLLEAGUES AND I. I WANT TO
START OFF BY SAYING THAT WHAT I
HEARD FROM BOTH OF OUR
COLLEAGUES, I THINK, COLLEAGUES,
I THINK, I WOULD ALIGN MYSELF
WITH THE MAJORITY OF THOSE
COMMENTS, I WOULD ALSO JUST LIKE
TO, TO SAY FROM OUR PREVIOUS
CONVERSATION HERE THAT THERE'S A
LOT OF WORK THAT STILL NEEDS TO
BE DONE. THERE'S ANALYSIS THAT,
NEEDS TO BE DONE. AND MY
UNDERSTANDING HERE IS THAT
PERHAPS LEGISLATION IS NOT
REQUIRED TO DO THAT. MAYBE WE DO
WANT TO DO LEGISLATION BECAUSE
THERE'S THINGS WE WANT TO
ACCOMPLISH. AND I'M CERTAINLY
OPEN TO THAT. BUT I THINK ALL
THE QUESTIONS ASKED BY THE TWO
COLLEAGUES BEFORE ME ARE
QUESTIONS THAT NEED TO BE
ANSWERED BEFORE WE CAN REALLY,
DEFINITIVELY TAKE ANY ACTION. I
HOPE I CHARACTERIZE BOTH OF
THEIR, THEIR COMMENTS CORRECTLY
WHEN I WHEN I SAY THAT I AGREE
WITH THAT, AS I LOOKED THROUGH
THE REPORT, I WAS LOOKING FOR
THOSE PIECES IN THE REPORT THAT
MAYBE GOT US TO THIS PLACE OF
NGUYEN NGUYEN, I THINK I AGREE,
I THINK THE CDC HAS DONE A GREAT
JOB, I AM I REALLY APPRECIATE
THE EFFORT. THAT'S BEEN PUT IN
THE THOUGHTFULNESS. I ALSO AGREE
THAT THERE IS SOMETHING HERE AND
WE NEED TO FIGURE OUT HOW WE
ADDRESS IT, AND AGAIN, I THINK
MORE ANALYSIS IS NEEDS TO
DETERMINE THAT TO HELP US
DETERMINE THAT, BUT YOU KNOW, IN
YOUR, IN YOUR, IN YOUR OPTIONS
TOWARDS I GUESS IT BEGINS ON
PAGE 57 HERE IN THE REPORT,
THERE'S DIFFERENT PROS AND CONS,
AND I APPRECIATE ALL THAT. AND
WHAT CAUGHT MY ATTENTION WERE
TWO IN PARTICULAR, FIRST WAS,
PRODUCTION ENHANCEMENT STRATEGY
ON E15 ETHANOL 15, WHICH I WANT
TO TALK ABOUT. AND, PRODUCTION
ENHANCEMENT STRATEGIES ON CARB
FERINO NOW ON THE, THE RENO ONE,
AND THE REASON WHY THESE CAUGHT
MY ATTENTION, COLLEAGUES IS
BECAUSE THEY BOTH SEEM TO DO
WHAT WE ARE, I THINK INTENDING
TO DO WITH THIS CONVERSATION AND
WITH THIS SPECIAL SESSION, WHICH
IS IMPACT, THE COST OF THE PRICE
OF GASOLINE TO CONSUMERS AND TO
ME IN MY ASSESSMENT OF ALL OF
THESE, READING THE PROS AND CONS
AND THE ISSUES THAT NEED TO BE
RESOLVED, THESE TWO SEEM TO BE
WHAT COULD HAVE IMMEDIATE IMPACT
OR VERY QUICKLY HAVE IMPACT AT
THE COST AT THE PUMP FOR
CONSUMERS, IN THE CASE OF RENO,
I'M OKAY IF THE PRICE IN RENO
INCREASES. IF YOU CITE THAT AS A
CON, IF THAT HELPS US, I'M OKAY
WITH THAT. RIGHT, BUT I THINK
THAT ONE HAS SOME OTHER
QUESTIONS. THERE AND IN THE CASE
OF ETHANOL 15, WHAT REALLY
CAUGHT MY ATTENTION WAS, ON PAGE
49, YOU TALK ABOUT THE RESEARCH.
THE QUOTE IS RESEARCH SUGGESTS
THAT E15 WOULD LIKELY NOT
INTRODUCE ADDITIONAL HARMS. AND
THE TESTING RESULTS SHOW THE USE
OF E15 VERSUS E10, WHICH IS WHAT
WE USE NOW, WILL REDUCE TAILPIPE
EMISSIONS FOR MOST POLLUTANTS. I
THINK AT THIS POINT, I ALSO
SHOULD ACKNOWLEDGE THROUGHOUT
YOUR REPORT YOUR MENTION AND
YOUR CARE TO COMMUNITIES THAT
ARE IMPACTED THE MOST. THE
VULNERABLE COMMUNITIES. AND THAT
IS WHY THIS PARTICULAR SOLUTION
IS APPEALING TO ME, ON PAGE 63,
THE ACTUAL, RECOMMENDATION OR
OPTION HERE THAT YOU PRESENT, IT
SAYS THAT THIS IS THE BEST PART
FOR ALL OF US. I HOPE WE ALL
CATCH THIS, THAT THIS OPTION
QUOTE WILL LIKELY IS LIKELY TO
LOWER THE PRICE OF CALIFORNIA
FUEL DUE TO ADDITIONAL SUPPLY
AND OF EVERYTHING ELSE IN HERE.
THIS IS THE ONE THING THAT
REALLY, I THINK, CAUSED MY
ATTENTION, BECAUSE IT ACTUALLY
ACCOMPLISHES WHAT WE ALL HOPE TO
ACCOMPLISH. SO, IN MY MIND, YOU
KNOW, WIN WINS ARE LOW HANGING
FRUIT THINGS WE CAN ACTUALLY GET
ACCOMPLISHED AS SOON AS POSSIBLE.
THIS THIS SEEMS TO BE ONE. IT
SEEMS TO BE ONE OF THE EASIEST
STEPS THAT WE CAN TAKE TO
IMPROVE SUPPLY, PROTECT THE
ENVIRONMENT, REDUCE COST. THAT'S
WHAT WE ALL WANT TO ACCOMPLISH
WITH THIS CONVERSATION.
CERTAINLY THERE'S MORE. AN
ANALYSIS SHOULD BE DONE ON THE
OTHERS, AND I SUPPORT THAT. BUT
I THINK IT'S PRETTY CLEAR TO ME
THAT AT LEAST THIS OPTION IS ONE
THAT NEEDS TO BE SERIOUSLY,
CONSIDERED AS SOON AS POSSIBLE
AND TO BE IMPLEMENTED AS SOON AS
WE CAN. SO AGAIN, THANK YOU FOR
THE WORK THAT YOU'VE DONE. THANK
YOU, MR. ALVAREZ. AND ACTUALLY,
BEFORE BEFORE I MOVE TO THE NEXT
MEMBER, I JUST WANT TO FOLLOW UP
ON THAT. AND I GUESS TURN THAT
INTO A QUESTION. SO BOTH IN
READING, THE TRANSPORTATION
FUELS ASSESSMENT AND ALSO IN THE
WAY THAT MY COLLEAGUE SUMMARIZED
IT, IT SEEMS LIKE A COMPLETE NO
BRAINER. ARE WE MISSING? AM I
MISSING SOMETHING? SHOULD WE? IS
THERE ANY REASON WHY WE SHOULD
NOT MOVE FORWARD WITH E15? I
ALSO WELCOME DIRECTOR MILDER TO
TALK, BUT WE HAVE BEEN
DISCUSSING THIS THOROUGHLY AS A
STATE TEAM. DPMO CARB. I THINK
THERE IS A WIDE RECOGNITION THAT
IT WOULD INCREASE SUPPLIES BY 5
TO 10%, IF BLENDED. SO I THINK
THAT'S SOMETHING THAT WE SHOULD
ACTIVELY THINK THROUGH. WHAT IF
ANYTHING, DO YOU NEED FROM THE
LEGISLATURE TO DO THAT? I THINK
IMPLEMENTATION WOULD GO THROUGH
CARB, AND I THINK YOU KNOW, CARB
PROBABLY WOULD REQUIRE RESOURCES
TO IMPLEMENT THAT. OKAY I AGREE
WITH THE VICE CHAIR THAT E15 IS
A POTENTIAL SUPPLY BOOSTER AS AS
REFLECTED IN THE ASSESSMENT, IT
WOULD TAKE SOME TIME. SO MOVING
FORWARD QUICKLY TO GET THAT
IMPLEMENTATION STARTED WOULD BE
CRITICAL. ON THE TIMING
QUESTION. I DO WANT TO, REFLECT
BACK ON THE VERY THOUGHTFUL
COMMENTS BY ASSEMBLY MEMBER
ALVAREZ THERE. THERE IS REAL
URGENCY STUDYING, GETTING MORE
ANALYSIS NOW IS IMPORTANT. BUT
IN ORDER TO HAVE THESE POLICIES
IMPLEMENTED BY NEXT SUMMER, THE
PROCESS NEEDS TO START NOW. AND
ON THE ANALYSIS FRONT, I HAVE A
THIRD GRADER AND A FIFTH GRADER.
SO THE CHOCOLATE MILK ANALOGY
REALLY APPLIES APPEALS TO ME.
E15 IS ANOTHER INGREDIENT. YOU
GOT MILK, YOU GOT CHOCOLATE.
MAYBE E15 IS A IS VANILLA, WE
KNOW THAT EVERY ONE OF THE
REFINERS HAS BEEN MAKING MORE
CHOCOLATE MILK THIS YEAR THAN
THEY DO IN SEPTEMBER, AND
HOLDING MORE. SO THERE IS SOME
STUDY TO GO TO. WHAT CONTAINERS
DO THEY USE? HOW BIG ARE THOSE
CONTAINERS? ARE THEY FILLING ONE
OR THE OTHER? BUT WE KNOW AT
THIS POINT THAT THERE IS
ADDITIONAL CAPACITY CÁC CAN
START THAT WORK AS THEY DEVELOP
THE REGULATION TO GO REFINER BY
REFINER AND MAKE SURE IT'S
CORRECT. AND I DON'T THINK THAT
COMPLEXITY HERE, IS NECESSARILY
ALWAYS IN GOOD FAITH AROUND
MAKING THINGS MORE COMPLICATED.
WE KNOW THEY HAVE ADDITIONAL
STORAGE CAPACITY. AND YES, EACH
REFINER IS DIFFERENT, BUT THAT
CAN BE TAKEN INTO ACCOUNT. AND
IT'S AN URGENT NEED TO GET
STARTED. ALL RIGHT. THANK YOU. I
WOULD SAY ONE THING ON THE
THERE'S A REAL DIFFERENCE OF
OPINION ABOUT WHETHER IT'S GOING
TO E15 IS, IS BENEFICIAL BECAUSE
OF THE INTENSITY OF CARBON IN
PRODUCING IT. AND THERE'S A
DIFFERENCE AGREEMENT AMONG EJ
GROUPS AND OTHERS. AND THE
PEOPLE WHO MAKE E15. AND THERE
IS A TRANSITION WORKING GROUP
DISCUSSING THAT RIGHT NOW AND
TRYING TO SORT ALL THAT OUT. BUT
I WAS AT A DISCUSSION, AND A LOT
OF THESE ENVIRONMENTAL GROUPS
DON'T THINK IT'S BENEFICIAL FOR
THE ENVIRONMENT BECAUSE IT'S
CARBON INTENSIVE TO GET THE E15.
GOT IT. ALL RIGHT. AND I'LL PUT
A PIN THEN IN MY OWN QUESTION,
BECAUSE I KNOW WE ARE GOING TO
HAVE A LITTLE BIT OF TIME TO
DIVE INTO ALTERNATE PROPOSALS,
SO I WANT TO GIVE OTHER FOLKS A
CHANCE TO, TO ASK QUESTIONS. BUT
I THINK I WOULD LIKE US TO HAVE
A DEEPER CONVERSATION ABOUT THAT
AS PART OF THIS HEARING, SO THAT
WE CAN UNDERSTAND THOSE PROS AND
CONS AS WELL. BECAUSE, AGAIN,
JUST TO, I THINK, REMIND
EVERYONE OF THE PURPOSE FOR US
HAVING A SPECIAL SESSION. YES,
IT'S TO VET THE GOVERNOR'S
PROPOSAL, BUT I THINK MORE
IMPORTANTLY, IT'S FOR US TO
UNDERSTAND THE CHALLENGES THAT
WE FACE RIGHT NOW AND, I HOPE,
IDENTIFY ADDITIONAL
OPPORTUNITIES AND SUPPLEMENTAL
SOLUTIONS AS WELL, LET'S SEE,
ASSEMBLY MEMBER MURATSUCHI,
THANK YOU VERY MUCH, VICE CHAIR,
LET ME LET ME START OFF BY
SAYING THAT I HAVE TREMENDOUS
RESPECT FOR YOUR WORK, ALONG
WITH MANY OF MY COLLEAGUES, BUT
I'M NOT YET CONVINCED OF MY
SUPPORT FOR THE PROPOSAL, I WANT
TO HIGHLIGHT SOME SPECIFIC
QUESTIONS. I HAVE, SPECIFIC
CONCERNS. I HAVE, ONE IS, I'M
LOOKING AT THE COMMITTEE
ANALYSIS, BUT IT CITES THAT
ACCORDING TO THE CEC SPOT SPOT
MARKET PRICES ARE THE BIGGEST
DRIVER OF STATEWIDE GASOLINE
PRICES, EVEN THOUGH THEY
REPRESENT A SMALL PORTION OF
GASOLINE SALES EVERY DAY, THE
POINT WAS MADE EARLIER, BUT YOU
STILL, WOULD AGREE WITH THAT.
THAT STATEMENT? YES WE IN THE
MORNING SESSION, WE KIND OF
TALKED THROUGH HOW IT PLAYS OUT
IN THE ANATOMY OF THAT. OKAY.
AND AND SO, YOU KNOW, MY, MY
FIRST CONCERN IS IN YOUR
TRANSPORTATION FUELS ASSESSMENT
REPORT ON PAGE 60, AS WAS CITED
EARLIER. THE ISSUES TO RESOLVE
IN TERMS OF THE STORAGE
STRATEGY, THE DOWNSTREAM IMPACTS
COULD COULD IMPACT SPOT MARKETS,
PRICES IN UNCERTAIN WAYS.
ALTHOUGH A MARKET EQUILIBRIUM
MAY LIKELY EMERGE AT A HIGHER
PRICE LEVEL. SO, YOU KNOW, I I'M
SEEING UNCERTAINTY, YOU KNOW, IN
THE DOWNSTREAM IMPACTS COULD
IMPACT THE SPOT MARKET PRICES,
WHICH HAS THE BIGGEST INFLUENCE
ON GAS PRICES IN UNCERTAIN WAYS.
BUT YOU SEEM TO BE MORE CERTAIN
THAT THE ULTIMATE EFFECT OF THIS
STRATEGY IS GOING TO BE HIGHER
GAS PRICES. YEAH. THANK YOU,
ASSEMBLY MEMBER FOR THAT. AND
THANK YOU FOR YOUR GENEROUS
COMMENTS, THE DAYS OF SUPPLY
CHART THAT WE HAVE SHOWN HAS
BEEN THE WORK DONE AFTER THE
ASSESSMENT. THE ASSESSMENT WAS
COMPLETED MUCH PRIOR OVER THE
LAST 6 TO 7 MONTHS. WE ARE
CONTINUING TO STUDY THAT. SO WE
HAVE MORE EVIDENCE NOW IN TERMS
OF THE CORRELATION AND CERTAINTY
AROUND THAT. EARLIER BEFORE WE
HAD THE DAYS OF SUPPLY, IT WAS
REALLY HARD TO CORRELATE IT TO
JUST INVENTORY AND THE PAD VÆ.
BUT ONCE WE CREATED THE HOLISTIC
SYSTEM, WE HAVE MUCH BETTER
CORRELATIONS. OKAY SO, YOUR
POSITION HAS SINCE EVOLVED.
OKAY. ABSOLUTELY. ALL RIGHT,
NEXT, AN ISSUE THAT I FLAGGED
EARLIER, ONE OF MY PRIMARY
CONCERNS IS THE, THE, THE SAFETY
OF FRONTLINE COMMUNITIES. AND I
WANT TO, YOU KNOW, RECOGNIZE AND
AGREE WITH, MR. ROGERS, WITH THE
UNITED STEELWORKERS THAT, THAT
NOT ONLY THE WORKERS ARE A PART
OF THE COMMUNITY, BUT, YOU KNOW,
I WOULD AGREE THAT THEY ARE THE
FRONTLINE OF THE COMMUNITIES.
THEY ARE LITERALLY ON THE FRONT
LINE, WORKING IN THESE
REFINERIES, BUT HIS STATEMENT,
YOU KNOW, REINFORCED MY CONCERN,
WHICH IS THAT, AS I HEARD HIM
SAY, IT, INVENTORY CHECKS WILL
BE A DISINCENTIVE TO SCHEDULE
MAINTENANCE SHUTDOWNS. AGAIN,
THE TORRANCE EXPLOSION IN 2015,
THERE WAS EVIDENCE THAT THAT
OCCURRED BECAUSE OF A DELAYED,
YOU KNOW, MAINTENANCE SHUTDOWN.
AND SO I'M VERY CONCERNED ABOUT
ANY, STORAGE INVENTORY CHECK AS
A DISINCENTIVE FOR NECESSARY
MAINTENANCE WORK. COULD YOU
RESPOND TO THAT? YES,
ABSOLUTELY. AND I, YOU KNOW,
JUST WANT TO CALL BACK TO THE
LEGISLATIVE LANGUAGE RIGHT NOW.
ONE OF THE CRITICAL GUARDRAILS
YOU PUT IN THERE IS THE SAFETY
OF THE WORKERS. AND I THINK IT
COMES PARAMOUNT BEFORE ANYTHING
YOU KNOW, I THINK WE, DEPEND AND
WE OWE OUR THANKS TO MANY OF THE
WORKERS WHO POWER THE ECONOMY.
SO THAT WILL BE FRONT AND CENTER
IN THE WORK. AND WE ARE GOING TO
DEVELOP THE METRICS NECESSARY
FOR THAT. BUT I MEAN, I HEAR THE
EMPHASIS ON GIVING THE ENERGY
COMMISSION THE ABILITY TO BE
ABLE TO WORK WITH THE INDUSTRY
AND TO PLAN. BUT FUNDAMENTALLY,
IF YOU HAVE THE REQUIREMENT THAT
THE INVENTORY CHECK WILL BE
TRIGGERED WITH A MAINTENANCE
SHUTDOWN, I DON'T SEE HOW HOW
WOULD YOU CAN YOU GIVE CAN YOU
GIVE ME A YES? ABSOLUTELY. A
SCENARIO WHERE THAT WOULDN'T BE
A DISINCENTIVE FOR A MAINTENANCE
SHUTDOWN? YEAH, ABSOLUTELY. I
THINK I THINK THE, AS WE
DISCUSSED THIS IN THE EARLIER
PANEL, I THINK THERE'S TWO, TWO
DIFFERENT LEVELS OF DISCUSSION
THAT'S HAPPENING, WHICH IS THE
GLOBAL LEVEL. DO WE HAVE ENOUGH
SPACE? DO WE HAVE ENOUGH,
INVENTORY THAT WE COULD GAIN
SOME ENGINEERING EFFICIENCIES IN
THE PLANNING? ON THE OTHER SIDE
IS THE DETAILS OF ANY SINGLE
REFINERY AND THEIR OPERATIONS.
AND I THINK THAT'S THE
CONSIDERATION WE NEED TO THINK
ABOUT. IF THERE ARE PLANNED
OUTAGES, IF THERE ARE THINKING
AROUND THOSE LINES AT A SPECIFIC
REFINERY, THAT HAS TO BE
CONSIDERED IN THE PLANNING
PROCESS. AND I THINK THAT'S WHAT
WE'RE GOING TO DO. I THINK THE
STATEMENT THAT MR, THAT THE
PANELISTS KIND OF MENTIONED,
IT'S AGAIN, IT'S A GLOBAL
STATEMENT. RIGHT. BUT IT'S KIND
OF VERY REFINERY SPECIFIC ON HOW
YOU OPERATIONALIZE THAT. SO I
THINK THE DETAILS WILL WILL GET
TO THAT SPECIFIC REFINERY BY
REFINERY DETAILS. BUT I HEARD
YOU SAYING THAT IF THERE IS A
MAINTENANCE, SHUTDOWN PLAN, THEN
YOU WOULD WORK WITH THEM. MY
CONCERN IS THAT THE REFINERY IS
NOT GOING TO PLAN FOR A
MAINTENANCE SHUTDOWN BECAUSE
THEY WANT TO AVOID THESE
INVENTORY CHECKS. YES. THANK YOU
FOR CLARIFYING THE QUESTION.
SORRY, I KIND OF MISSED THAT. I
THINK THE YOU KNOW, TO YOUR
POINT, I THINK IN WHAT WHAT IT
CAN CONTINUES TO ENFORCE,
REINFORCE IS OUR OUR NEED TO
WORK WITH THE INDUSTRY TO BETTER
UNDERSTAND HOW THEIR PLANNING
CYCLES AND, AND WHAT ARE THE
WAYS TO SAFEGUARD AGAINST, YOU
KNOW, THE MINIMUM REQUIREMENT OR
SOME SORT OF VERSION OF THE
MINIMUM REQUIREMENT THAT WE
MIGHT ADOPT THAT GETS INTO THAT?
AND I THINK THAT'S A FAIR
QUESTION. WE'LL THINK IT THROUGH
AND COME BACK OKAY. BECAUSE
AGAIN, I, I DON'T THINK WE
SHOULD MOVE FORWARD WITH ANY
PROPOSAL THAT MAY PUT, YOU KNOW,
THE SAFETY OF REFINERIES, THE
SAFETY OF OUR WORKERS AND
COMMUNITIES AT RISK. AND SO I
WILL BE LOOKING FOR, SPECIFIC
PROPOSALS TO ADDRESS THAT ISSUE.
LAST BUT NOT LEAST, YOU KNOW,
IT'S MY UNDERSTANDING THAT THE
FUNDAMENTAL ISSUE, YOU KNOW,
THAT WE'RE TRYING TO ADDRESS
HERE IS TO AVOID THE VOLATILITY
OF THESE GAS PRICES. AND IF THE
FUNDAMENTAL PROBLEM IS THAT THE
SMALL NUMBER OF OIL REFINERS
ACCOUNT FOR OVER 90% OF, OF
CALIFORNIA'S GAS SUPPLY. AND
THAT, THAT IT'S THAT THE SPOT
MARKET AND THE MANIPULATION OF
THE SPOT MARKET IS THE CONCERN,
THE BIGGEST CONCERN, YOU KNOW,
IN TRYING TO AVOID THESE
VOLATILITIES, HOW EXACTLY? I
MEAN, IT SEEMS LIKE THE
FUNDAMENTAL PROBLEM IS THE LACK
OF COMPETITION AND THE
OPAQUENESS OF THE SPOT MARKET.
AND SO I STILL DON'T SEE YOU
KNOW, HOW STORAGE IS ADDRESSING
THE LACK OF COMPETITION OR THE
OPAQUENESS OF THE SPOT MARKET.
YEAH. I'M SORRY, I WAS TRYING TO
KIND OF RUSH THROUGH THE ANSWER.
I'M GOING TO JUST TAKE A MINUTE
TO ANSWER BOTH OF YOUR
QUESTIONS. A LITTLE BIT MORE
CLEARLY. SO THE LEGISLATION
CALLS FOR TWO FUNDAMENTAL
THINGS, RIGHT. RESUPPLY
OBLIGATIONS AND SOME SORT OF A
MINIMUM INVENTORY DOES NOT
DEFINE THE MINIMUM INVENTORY,
WHAT IT CAN BE OR WHAT IT
SHOULDN'T BE. SO I WANT TO NOW
STEP BY STEP BY STEP. SO WHAT WE
DISCUSSED KIND OF REFERRING BACK
TO WHAT WE DISCUSSED THIS
MORNING. IF YOU LOOK AT THE
INDUSTRY AS A WHOLE, IF THERE IS
LIQUIDITY IN THE MARKET AS AS WE
TALKED ABOUT THOSE THREE
VARIABLES, IT BASICALLY DOESN'T
HAVE A LOT OF SPOT MARKET
TRADES, RIGHT? SO THE RESULT,
THE REASON WHY DO YOU HAVE SPOT
MARKET TRADES IS BECAUSE OF THE
CRUNCH. THE INDUSTRY FEELS
DURING A STRESS PERIOD OF
UNPLANNED MAINTENANCE EVENTS.
RIGHT. SO THAT'S JUST KIND OF
THINKING THAT THROUGH. SO IF YOU
HAVE PLANNED OR UNPLANNED
MAINTENANCE AND YOU HAVE IF YOU
HAVEN'T ADEQUATELY PLANNED FOR
THOSE THINGS, THAT MAKES YOU
HAVE TO GO TO THE SPOT MARKET TO
GET THAT ADDITIONAL PROCUREMENT,
RIGHT. SO WHAT WE'RE TRYING TO
GET TO AND AGAIN, THAT'S A GOOD
FAITH ANSWER. AND I'LL WELCOME
DIRECTOR MILDER TO TALK ABOUT
THE MARKET POWER SIDE. SO IF
YOU'RE THINKING ABOUT OKAY IT'S
JUST AN ENGINEERING PROBLEM THEN
OUR QUESTION IS CAN YOU BY
ACTIVELY PLANNING PLAN FOR THAT
CONTINGENCY. RIGHT. SO IF YOU
PLAN FOR THAT CONTINGENCY OF
YES, MY HISTORICAL, YOU KNOW,
INFORMATION WITH THE INDUSTRY OR
ANY ONE SINGLE REFINERY MIGHT
SAY, WE GO IN, WE GO INTO
OUTAGES BECAUSE OF THESE
UNPLANNED EVENTS THAT HAPPEN AT
THE END OF THE SUMMER. IT'S HOT.
THINGS BREAK. RIGHT? SO THAT'S A
SIMPLE THING TO SAY. THEN, OKAY.
IF YOU'RE GOING TO HAVE SOME
SOME LEVEL OF PLANNED OUTAGES,
HOW CAN WE THINK ABOUT A CERTAIN
SLACK? AGAIN, IT COMPLETELY GOES
INTO THE OPERATIONAL LIMITATIONS
OF ANY SINGLE REFINERY. WE NEED
TO CONSIDER THAT. BUT THAT'S
WHAT WE ARE GETTING AT. HOW CAN
WE ACTIVELY PLAN TO REDUCE THE
REACTIVE BEHAVIOR AT THE SPOT
MARKET? THAT'S ONE. THE SECOND
KIND OF PIECE THAT YOU, I THINK
YOU WERE REACTING. SO LET ME
JUST PAUSE AND TAKE YOUR
QUESTION. YEAH. NO, I MEAN, I, I
GET THE POINT THAT THE INVENTORY
IS, IS, IS THE INTENT OF THE
INVENTORY IS TO PROVIDE THAT
SLACK SO THAT YOU DON'T HAVE TO
GO TO THE SPOT MARKET. BUT MY
QUESTION IS THAT IF THE
FUNDAMENTAL PROBLEM IS THAT THE
LACK OF COMPETITION ALLOWS BAD
ACTORS TO MANIPULATE THE SPOT
MARKET, WHAT YOU KNOW ARE IF
THERE IS AN INVENTORY, IS THAT
GOING TO PROHIBIT THEM FROM
BUYING ON THE SPOT MARKET?
ASSEMBLYMEMBER'S MAYBE I CAN
ADDRESS THAT, AND I WANT TO COME
BACK TO THE SAFETY ISSUE AS
WELL. SO FIRST ON THE SPOT
MARKET, IF THERE'S ENOUGH IN
STORAGE AND REFINERS ARE
PRODUCING, THEN THERE ARE ENOUGH
SELLERS ON THE SPOT MARKET. AND
IF THERE ARE A LOT OF SELLERS ON
THE SPOT MARKET AND LIQUIDITY, 1
OR 2 PURCHASES AREN'T GOING TO
SEND PRICES SKYROCKETING. WHAT
HAPPENS IS WHEN INVENTORIES ARE
LOW, WHEN PRODUCTION GOES
OFFLINE, YOU DON'T HAVE A THREE
OR 4 OR 5 SELLERS. YOU HAVE ONE
OR NONE REALLY, RIGHT? MAKING
OFFERS TO SELL AND THEN 1 OR 2
BIDS TO BUY DRIVE UP THAT SPOT
MARKET. SO THE KEY IS TO HAVE
ENOUGH LIQUIDITY. THERE'S EXTRA
IN THE SYSTEM THAT THERE'S
ALWAYS A SELLER THERE. IT MIGHT
BE A LITTLE BIT MORE THAN THE
NIMAX. WE HAVE TO ACCEPT THAT
CALIFORNIA'S SPECIFICATION IS A
LITTLE CLEANER. IT COSTS A
LITTLE BIT MORE TO MAKE, BUT YOU
DON'T HAVE TO SEE THESE THESE
HUGE DIFFERENCES. A DOLLAR,
$1.50 TO THE NIMAX. AND SO WHEN
YOU THINK ABOUT THAT DAYS OF
SUPPLY, THAT HOCKEY CHECK,
HOCKEY STICK CHART, IT'S SHOWING
YOU THE RELATIONSHIP BETWEEN
SPOT MARKET PRICES INVENTORIES
AND PRODUCTION. AND SO I THINK
THE RIGHT WAY TO THINK ABOUT IT
IS KEEP LIQUIDITY ON THE MARKET.
AND SO DPMO IS HERE TO WATCH
THAT MARKET LIKE A HAWK. AND SO
WE CAN, I THINK, USE OUR TOOLS
TO REALLY DETER AND DETECT
POTENTIAL MANIPULATION. BUT SOME
OF THE THINGS WE'RE TALKING
ABOUT ARE STRUCTURAL. IF THERE'S
NO ONE SELLING AND PEOPLE ARE
BUYING, THOSE PRICES ARE GOING
TO GO UP. IF THERE'S NO
LIQUIDITY, THAT MAY NOT BE
SOMETHING THAT WE CAN STOP OR
IMPEDE. THAT MIGHT JUST BE THE
MARKET, BECAUSE IT'S ILLIQUID. I
ALSO WANT TO TALK ABOUT SAFETY
FOR A SECOND, WHICH IS I THINK
INDUSTRY MAY BE SORT OF FORCING
US WITH A FALSE CHOICE. THERE'S
NO CHOICE BETWEEN PROTECTING
CONSUMERS AND PROTECTING
WORKERS. THE VICE CHAIR AND I
SEPARATELY, OFTEN SOMETIMES
TOGETHER, HAVE TALKED TO
INDUSTRY. THEY PLAN THESE
MAINTENANCE EVENTS YEARS IN
ADVANCE. THE QUESTION IS, ARE
THEY PLANNING TO PROTECT
CONSUMERS AS WELL? AND THIS LAW
DOESN'T GIVE CEC THE AUTHORITY
TO SAY, DO NOT DO THE
MAINTENANCE AT ALL. IT JUST SAYS
ALSO PLAN TO PROTECT CONSUMERS.
AND SO THERE'S ALREADY THE
DEPARTMENT OF INDUSTRIAL
RELATIONS. WE HAVE BEEN IN
CONTACT WITH THEM. THEY HAVE
SOMEONE WHO'S ESPECIALLY
FOCUSED, ESPECIALLY FOCUSED ON
ENFORCEMENT. THEY WERE AT THE
LAST WORKSHOP. WE CAN MEET WITH
DER AND WITH OUR LABOR
COLLEAGUES, AND I WOULD OFFER TO
MEET WITH YOU AND MR. ROGERS. IT
SOUNDS LIKE YOUR DISTRICT IS
GROUND ZERO WITH THREE MAJOR
REFINERIES. WE CAN TALK ABOUT
THESE ISSUES AND WALK THROUGH
SOME OF THE REFINERIES. THERE IS
NO TENSION BETWEEN PROTECTING
CONSUMERS AND PROTECTING
WORKERS. AND WE WOULD I DPMO
WOULD NOT BE IN FAVOR OF A TRADE
OFF OF EITHER OF THOSE. WE CAN
DO BOTH. OKAY. I LOOK FORWARD TO
THAT MEETING. THANK YOU VERY
MUCH. THANK YOU. AND I DO WANT
ACTUALLY JUST TO TAKE AN
OPPORTUNITY TO ASK MR. ROGERS
FOR A BIT MORE OF HIS
PERSPECTIVE. I KNOW THAT I
APPRECIATE MR. MURATSUCHI YOU
RAISING AND DIALING IN ON THE
SAFETY CONCERNS. MR. ROGERS, IF
YOU'RE STILL AVAILABLE, CAN YOU.
YES, I KNOW THAT YOU YOU RAISED
THE ISSUE THAT THE SUPPLY I
THINK THE CONCERN YOU RAISED IN
YOUR TESTIMONY WAS THAT THE
SUPPLY, REQUIREMENT COULD
PROVIDE SOME DISINCENTIVE FOR
PLANNING NECESSARY MAINTENANCE.
CAN YOU SAY A LITTLE BIT MORE
ABOUT THAT? AND ALSO, I THINK,
HELP US UNDERSTAND WHAT WE CAN
DO AND WHAT SAFEGUARDS WE CAN
BUILD IN TO ADDRESS THOSE
CONCERNS? OKAY. SO WHAT I WAS
SPEAKING TO, BASICALLY IT BOILS
DOWN TO PROFITS, IF THINGS ARE
RUNNING REALLY WELL, THE MARGINS
ARE HIGH. THERE IS NOT MUCH
INCENTIVE TO SHUT THINGS DOWN IF
NEED BE, FOR A TURNAROUND. AND
SO WE ARE CONCERNED THAT WE
DON'T HAVE THE OFF SITE STORAGE.
WE HAVEN'T MET THE 14 DAY MARK,
WHETHER THAT'S BEEN JUST BY
CHANCE OR THAT IT'S PURPOSELY
BEEN LEFT LOW. SO THAT WE DON'T
MEET THE STANDARD TO BE ABLE TO
SHUT DOWN. AND SO WE DIDN'T WANT
THAT. WE DON'T WANT THAT USED AS
A POTENTIAL, AS A POTENTIAL
AVENUE TO RUN THINGS LONGER THAN
THEY SHOULD HAVE OR SHOULD
SHOULD BE RUN, WHAT'S HAPPENED
HISTORICALLY, GOING BACK TO THE
CAR ANALOGY, WHERE WE STARTED UP
FIVE YEARS AGO AND THEN WE SHUT
IT DOWN, IT USED TO BE THAT WE
WOULD RUN A UNIT, SAY THREE
YEARS, AND THEN WE WOULD GO IN
AND WE'D DO A MORE INVASIVE
TURNAROUND THAN WHAT WE DO NOW.
THEN IT GOT PUSHED TO FOUR
YEARS. NOW IT'S FIVE YEARS IN
SOME CASES. IT'S EVEN SIX YEARS
NOW BEFORE A UNIT COMES DOWN AND
HAS WORK DONE. AND YOU KNOW,
THAT LAST YEAR AND A HALF OF
THAT UNIT RUNNING IS DICEY. IT'S
SCARY. AND SO THAT'S WHAT OUR
CONCERN IS THAT WE LOSE THAT
LEVER TO BE ABLE TO CALL A HALT
TO SOMETHING THAT'S AN UNSAFE
CONDITION. THANK YOU. THANK YOU.
ALL RIGHT. I'M GOING TO TURN NOW
TO ASSEMBLY MEMBER WOOD. THANK
YOU. THANK YOU, MADAM CHAIR,
I'VE GOT A FEW QUESTIONS THAT
ARE KIND OF, KIND OF ALL OVER
THE PLACE, BUT THAT'S SORT OF
THE WAY MY MIND WORKS SOMETIMES.
THE GOING TO THE EXPERT ADVISORY
COMMITTEE, AND I APPRECIATE
DOCTOR BERNSTEIN'S COMMENTS
ABOUT ABOUT THERE WAS A, THERE
WAS A COMMENTS EARLIER ABOUT WE
SHOULD EXPAND THIS TO INCLUDE
INDUSTRY AND A VARIETY OF
THINGS. AND I'M GOING TO GO BACK
TO THE ONLY THING I REALLY
CONSIDERED MYSELF TO BE SOMEWHAT
OF AN EXPERT ON IS HEALTHCARE,
AND WHEN THE OFFICE OF HEALTH
CARE AFFORDABILITY, THE
GOVERNOR'S OFFICE OF HEALTH CARE
AFFORDABILITY WAS BEING
DELIBERATED, ONE OF THE MOST
CONTENTIOUS PIECES OF THAT WAS
THE BOARD AND WHO WAS GOING TO
BE ON THE BOARD AND ULTIMATELY,
THE DECISION WAS MADE THAT IF
YOU HAVE A FINANCIAL INTEREST IN
THAT, YOU ARE PAID BY A
HEALTHCARE, BY A HEALTHCARE
ENTITY THAT YOU YOU COULD NOT BE
PART OF THE EXPERT BOARD MAKING
THE DECISIONS AROUND PRICE
TARGETS FOR THE INDUSTRY. THAT
DIDN'T PRECLUDE THOSE THOSE
PLAYERS FROM BEING PART OF
ADVISORY COMMITTEES, WHICH ARE
WERE REALLY, REALLY VALUABLE.
BUT I SO I WANT TO I WANT TO
SUPPORT WHAT WE HEARD FROM
DOCTOR BORNSTEIN. I THINK THAT'S
A REALLY IMPORTANT PIECE OF THE
PUZZLE THERE. I WANT TO GO TO
THE STORAGE AND MR. COURT LEFT,
OR IS HE. WHAT I HEARD WHAT I
HEARD FROM MR. COURT WAS HE
TALKED ABOUT IN HIS SLIDES. HE
TALKED ABOUT STORAGE LEVELS.
THAT BEING OR BEING HIGHER
THROUGH THROUGHOUT THE YEAR, AND
THAT WAS, THAT WAS NEW. THAT WAS
THAT THAT FELT NOVEL TO ME. THE
FACT THAT THAT INDUSTRY AND HE'S
HE'S COMING BACK HERE. SO I'LL,
I'LL GIVE HIM A, GIVE HIM A
CHANCE. BUT WE'LL COME BACK TO
THAT QUESTION IN A SECOND. LET
HIM SO HE DOESN'T HAVE TO RUN,
ONE OF THE THINGS THAT YESTERDAY
WE HEARD, E-15 CAME UP YESTERDAY
WE HAD SOMEONE FROM CARB HERE,
AND I THOUGHT I HEARD THAT THEY
ARE ACTUALLY GOING THROUGH A
PROCESS TO LOOK AT, LOOK AT
LOOKING AT THAT. SO IT WOULD BE
HELPFUL FOR US. I THINK, TO KNOW
WHERE THEY ARE IN THAT PROCESS
AND HOW LONG WE MIGHT,
ULTIMATELY MIGHT ULTIMATELY TAKE
TO GET TO APPROVAL FOR THAT. BUT
I WOULD NOTE WHAT I HEARD
YESTERDAY WAS THAT WE ARE THE
ONLY STATE IN THE COUNTRY THAT
DOESN'T ALLOW ALLOW THAT, BUT I
THINK IT'S VALUABLE FOR US TO
UNDERSTAND THAT THE PROS AND
CONS OF THAT, SOONER RATHER
SOONER RATHER THAN LATER, DOES
HE DO YOU HAVE AN ANSWER FOR
THAT? SEE IF WE CAN GET THIS MIC
TO WORK. THANK YOU. ASSEMBLY
MEMBER. WOULD MATTHEW O'TOOLE.
I'M THE DIVISION CHIEF OF THE
INDUSTRIAL STRATEGY DIVISION AT
THE CALIFORNIA AIR RESOURCES
BOARD. YOU ARE CORRECT. WE ARE
IN THE PROCESS OF EVALUATING THE
ABILITY TO MOVE FROM AN E10 TO
AN E15 BLEND IN THE CALIFORNIA
REFORMULATED GASOLINE SPECS, BY
STATUTE, IN ORDER TO ADJUST
THOSE FUEL SPECS, WE NEED TO
CONDUCT WHAT'S CONSIDERED A
MULTI-MEDIA EVALUATION OF THE
POTENTIAL AIR, WATER, SOIL
IMPACTS OF CHANGING THE FUEL
SPEC. THAT PROCESS IS UNDERWAY.
WE'VE CONDUCTED A NUMBER OF
STUDIES AND LITERATURE REVIEWS
TO UNDERSTAND IF THERE WOULD BE
ADDITIONAL ENVIRONMENTAL
IMPACTS, FROM MOVING FROM E10 TO
E15. THE STUDIES HAVE BEEN
DRAFTED. THEY'RE UNDER REVIEW
RIGHT NOW. THE NEXT STEP WOULD
BE TO GO TO AN ENVIRONMENTAL
POLICY COMMITTEE THAT IS ALSO
ESTABLISHED BY, STATUTE. AND
FROM THERE WE COULD CONSIDER
OPENING UP OUR REGULATIONS TO
ALLOW FOR E15 RESOURCE INTENSIVE
PROCESS. VICE CHAIR, YOU DID
MENTION EARLIER THAT THAT IS
SOMETHING THAT IS THAT IS
UNDERWAY, BUT IT DOES TAKE TIME
AND STAFF ON THE CARB SIDE,
ROUGHLY HOW MUCH TIME? SO IF WE
USE THE HISTORICAL GUIDE AS A
REFERENCE POINT FOR WHERE WE ARE
NOW, WE HAVE ANYWHERE BETWEEN 6
AND 12 MONTHS OF WORK ON THE,
ENVIRONMENTAL POLICY COMMITTEE
TO REVIEW THE INITIAL FINDINGS
OF THE STUDIES ON E15 AND FROM
THERE, WE WOULD NEED TO CONSIDER
INITIATING A RULEMAKING PROCESS
TO UPDATE THE REFORMULATED
GASOLINE REGULATIONS. AND THAT
IS SUBJECTED TO THE
ADMINISTRATIVE PROCEDURES ACT,
WHICH I ASSUME YOU'RE FAMILIAR
WITH. THE TIMING ON THAT. ALL
RIGHT. THANK YOU. THANK YOU. MR.
COURT, SORRY. NO, NO, DON'T
APOLOGIZE. SO IN YOUR IN YOUR
SLIDES, YOU YOU TALKED ABOUT
WHAT I THOUGHT I HEARD AND SAW.
I WANT YOU TO HELP CLARIFY THAT
FOR ME, STORAGE LEVELS OR THAT
EXISTING STORAGE LEVELS IN THE
INDUSTRY, AND THAT, THAT IT
TAKES THAT, THAT THEY WERE
ACTUALLY HIGHER, LIKE 20, 21
DAYS OR LONGER, IS THAT DID I
HEAR THAT RIGHT? OR CAN YOU, CAN
YOU TELL ME WHAT. NO, THAT WAS
JUST THE EXISTING STORAGE. OVER
TIME, IF YOU WANT TO BRING THE
SLIDE BACK UP, AND IT WAS A
SLIDE ACTUALLY TAKEN FROM THE
DPMO PRESENTATION SHOWING THAT,
THE, THE INVENTORIES HAVE
VACILLATED BETWEEN 65% AND 45%,
BUT ON AVERAGE, THE REFINERS ARE
USING 55% OF THEIR STORAGE
CAPACITY, TO PROVE THAT THEY
HAVE ADEQUATE ROOM TO, TO, TO
PROVIDE MORE INVENTORIES. AND
IT'S FROM THE EIA, THE ENERGY
INFORMATION ADMINISTRATION. AND
DO WE KNOW WHAT THAT TRANSLATES
TO IN THE AS FAR AS NUMBERS OF
AMOUNT OF TIME OR DAYS OF
STORAGE? WHAT IS THAT? WHAT IS A
55% CAPACITY TRANSLATE TO. DO WE
KNOW THAT? WELL, IT, I DON'T
KNOW THAT. I DO KNOW THAT WHEN
THERE, AND MAYBE, MR. MILDER CAN
TALK MORE TO THIS THAT WHEN
THEY'RE AT THE BEGINNING OF THE
YEAR AND THEY'RE AMPING UP
THEIR, THEIR, THEIR SUPPLIES
THAT THEIR SUPPLIES ARE
GENERALLY AT 20 TO 30% HIGHER
THAN THEY ARE WHEN THEY HIT
THEIR, THEIR, THEIR LOW AT A
PRICE SPIKE, SO, BUT IT'S THEIR
NUMBERS. SO MAYBE THEY CAN
ANSWER. THANK YOU. YEAH, THANK
YOU. ASSEMBLY MEMBER WOOD. I
THINK IF I JUST TAKE EVEN
CALIFORNIA REFINERIES, WE WERE
ABOUT 12 MILLION BARRELS, AND
NOW WE'RE ABOUT TEN OVER THE
LAST 8 OR 9 WEEKS. SO YOU'RE
LOOKING AT EACH ABOUT 800,000 IS
A DAY'S WORTH OF SUPPLY. AND SO
THAT WILL BE 2 TO 3 DAYS. YOU
KNOW WHAT THE SUPPLY JUST IN
CALIFORNIA, WHEN YOU LOOK AT PAD
FIVE, WHAT WE'VE SEEN IN TERMS
OF THE HIGHEST, WHICH WAS THIS
YEAR, WE WERE AT 31 MILLION. IF
I'M NOT WRONG, I'M JUST KIND OF
REMEMBERING MYSELF. AND THEN,
YOU KNOW, YOU COULD GO AS LOW AS
27. SO 31 TO 27, THAT'S ABOUT 4
MILLION. SO THAT COULD BE ABOUT
5 TO 6 DAYS WORTH OF SUPPLY.
OKAY. GREAT. WELL THANK YOU I
APPRECIATE THAT, AGAIN, GOING TO
MY COLLEAGUE MR. MURATSUCHI, I
THINK AND I'VE HEARD THIS, WE
HEAR THIS FROM PEOPLE WHO DON'T
SUPPORT THIS PROPOSAL. SO, AND
THAT IS THAT THIS WILL
ULTIMATELY RAISE THE BASELINE
PRICE FOR GASOLINE. AND KIND OF
ALLUDE TO THAT IN PAGE 60,
BECAUSE THERE WILL BE ADDITIONAL
COSTS TO, TO THE INDUSTRY THERE.
SO DO WE HAVE A HANDLE ON WHAT
THAT LOOKS LIKE? AND THEN I WANT
TO FRAME IT THE WAY I'M GOING TO
FRAME THIS IN A WAY SO THAT
WE'RE TRYING WHAT I'M TRYING TO
GET AT IS IF THE PRICE OF
GASOLINE GOES UP A SMALL AMOUNT,
WHATEVER THAT MIGHT BE, AND
PREVENTS THE SPIKES THAT WE HAVE
RIGHT THERE OR BLUNTS THEM, SO
TO SPEAK. HAS THERE BEEN AN
ANALYSIS OF WHAT A SMALL
INCREASE IN COST WOULD A
BASELINE COST WOULD BE, AND WHAT
THE CONSUMER WOULD BENEFIT FROM
NOT HAVING THE SPIKES SO THAT
WHAT IS WHAT WOULD BE THE
ULTIMATE CONSUMER BENEFIT? COST
SAVINGS OUT THERE, THAT BY
HAVING A SMALL INCREMENTAL
INCREASE VERSUS HAVING TO LIVE
THROUGH THE SPIKES, DO YOU SEE
WHERE I'M GOING? OKAY, SURE.
I'LL START HERE BECAUSE DPMO PUT
SOME NUMBERS OUT IN A IN A
PUBLIC WORKSHOP IN AUGUST. SO WE
NEED TO HAVE A TAILORED
CALIFORNIA SOLUTION. AND THE CDC
THROUGH, IF THIS LEGISLATION IS
ENACTED, HAS TO DO A COST
BENEFIT ANALYSIS. SO THEY'LL
COME UP WITH NUMBERS TO
APPROXIMATE THE IMPACT ON
CALIFORNIA. WHAT WE DID IS WE
LOOKED TO OTHER NATIONS. SO THE
INTERNATIONAL ENERGY AGENCY DID
A STUDY ACROSS THEIR DIFFERENT
MEMBER STATES AND FOUND THAT THE
BENEFITS GREATLY OUTWEIGHED THE
COSTS BY A FACTOR OF MAYBE EIGHT
OR 10 TO 1. THEY ALSO, WHEN WE
SPOKE TO THE AUSTRALIANS, WERE
ABLE TO COME UP WITH A COST
ESTIMATE FOR A PRIVATE SOME SOME
OF THESE ARE STATE RUN SYSTEMS
WHICH WILL COST MORE, AND SOME
OF THEM ARE INDUSTRY OBLIGATIONS
WHICH WILL COST LESS. AS
PROFESSOR BORNSTEIN EXPLAINED,
YOU'RE USING EXISTING TANKS.
IT'S NOT, YOU KNOW, A HUGE A
HUGE CHANGE IN AUSTRALIA. IT WAS
ESTIMATED AT A FRACTION OF A
PENNY PER GALLON. SO THEN
COMPARE THAT TO THE 2023 PRICE
SPIKE. IF WE REVERTED THE WHOLE
PRICE SPIKE, DPMO ANALYSIS IS
$2.19 BILLION. AND SO TAKE A
MAYBE A FRACTION OF A PENNY
VERSUS THE AMOUNT SAVED. AND
AGAIN, THE BENEFITS WOULD
GREATLY OUTWEIGH THE COST. I
DON'T WANT TO THOUGH. THESE ARE
SCENARIOS. I DON'T WANT TO TRY
AND GIVE A FALSE SENSE OF
PRECISION HERE. BUT I WOULD SAY
EVERY ANALYSIS DIRECTIONALLY
SAYS THE BENEFITS GREATLY
OUTWEIGH THE COSTS. BUT WE STILL
HAVE TO COME UP WITH A
CALIFORNIA SPECIFIC NUMBER
BEFORE MOVING FORWARD. AND I
THINK THAT'S THAT'S WHAT'S NOT
BEING THAT'S NOT WHAT'S NOT
BEING HEARD IN THE PUBLIC. WHAT
WE'RE HEARING IS IT'S GOING TO
CAUSE A BASELINE INCREASE IN THE
COST OF GASOLINE. SO WHY WOULD
WE DO THAT? SO, SO IF THERE IF
THERE IS AT SOME POINT A BACK OF
THE NAPKIN POTENTIAL FOR
CALIFORNIA, AS WE AS WE AS WE
LOOK AT THIS PROPOSAL, I THINK
THAT WOULD BE REALLY, REALLY
HELPFUL FOR OUR DELIBERATIONS.
AND ONE LAST POINT BEFORE I PASS
TO VICE CHAIR, THE OUR AVERAGE
COST ALREADY BAKES IN PRICE
SPIKES. SO IF WE CAN ELIMINATE
THE PRICE SPIKES, THE AVERAGE
COST WILL COME DOWN AND COME
DOWN SIGNIFICANTLY BECAUSE
UNFORTUNATELY, WE'RE
EXPERIENCING PRICE SPIKES JUST
ABOUT EVERY YEAR. SO WHEN WE
COMPARE THE COST OF THE PROGRAM,
WE SHOULD ALSO COMPARE IT TO THE
COST OF DOING NOTHING AND THE
STATUS QUO, AND HOW MUCH
HUNDREDS OF MILLIONS OR BILLIONS
OF DOLLARS THAT COSTS. AND
THAT'S AND THAT'S WHAT I'M
GETTING AT. SO JUST TO ADD TO
THAT, I THINK ONE KIND OF WAY TO
THINK ABOUT THAT, RIGHT? SO LIKE,
LET'S SAY, YOU KNOW, WE'VE KIND
OF DONE A FEW DIFFERENT
SCENARIOS AND WE PUT THIS
ANALYSIS OUT. AGAIN, THIS IS
WHERE I RESPECT THE BOUNDARY
BETWEEN DPMO AND THE CEC. YOU
KNOW, WE LOOK TO THE, SOME OF
THEIR INFORMATION, BUT WE HAVE
ALSO BEEN STARTING TO DO
ANALYSIS. YOU KNOW, WE HAVE
TAKEN A MORE CONSERVATIVE
POSITION ON LIKE, YOU KNOW, AS
DIRECTOR MILLER MENTIONED,
DIFFERENT LEVELS THAT YOU COULD
HAVE SAVED. SO WE LOOKED WE
LOOKED STATISTICALLY, JUST
GENERAL CONSERVATIVE ART OF THE
POSSIBLE. SO WHEN WE LOOK AT THE
GENERAL ART OF THE POSSIBLE, THE
SAVINGS COULD BE AT LEAST A
BILLION DOLLARS, RIGHT? JUST BY
ELIMINATING THE SPIKE LAST YEAR.
SO AGAIN, JUST PUTTING THAT IN
CONTEXT, THE CONSUMERS PAID
ABOUT 62 BILLION AT THE PUMP
LAST YEAR, AND WE'RE TALKING
ABOUT A BILLION OUT OF THAT
COULD BE SAVED. RIGHT, SO THEN
YOU KIND OF LIKE LOOK AT HOW
THAT BILLION TRANSLATES AT THE
PUMP. IF YOU LOOK AT AN AVERAGE,
IF YOU TAKE THE ENTIRE AREA
UNDER THE CURVE AND FLATTEN
THAT, RIGHT, AND THEN YOU START
TAKING THE BILLION, YOU WILL
REDUCE BY TENS AND $0.15 BY EACH
BILLION THAT YOU THAT YOU REMOVE
FROM THAT. SO IF YOU GO TO ALL
THE WAY TO 20 BILLION, THAT'S A
2 BILLION THAT DPMO KIND OF
SUGGESTED THAT COULD BE
POSSIBLE. YOU'RE TALKING ABOUT
SIGNIFICANT REDUCTION. SO THAT'S
KIND OF ON THE BENEFIT SIDE. ON
THE COST SIDE, YOU CAN DEVELOP A
LOT OF DIFFERENT SCENARIOS, BUT
LET'S JUST ASSUME THE WORST CASE
SCENARIO IS A REFINERY HAS TO
BUY HIGH AND SELL A SLIGHTLY
LOW. LET'S JUST ASSUME THAT. BUT
JUST WANT TO RECOGNIZE THAT JUST
BY MAINTAINING THIS HIGHER
LEVELS OF LIQUIDITY DOESN'T MEAN
THAT THEY'RE NOT GOING TO SELL
IT RIGHT AFTER THE SEASON'S
OVER. RIGHT? SO WE ARE TALKING
ABOUT ABOUT 100 MILLION GALLONS,
WHICH WILL GET YOU TO TWO, TWO
AND A HALF DAYS WORTH OF SUPPLY.
WE TOOK THAT AS AN ESTIMATE.
YOU'RE LOOKING AT ZERO TO
PROBABLY 25 MILLION. SO FOR
ABOUT 0 TO $25 MILLION WORTH OF
ADDITIONAL COST, IF YOU ASSUME
THAT IT'S ALL GOING TO BE SOLD
BACK AGAIN, YOU'RE TALKING ABOUT
SAVING $1 BILLION. GREAT. THAT'S
THAT'S HELPFUL. THANK YOU VERY
MUCH, AND THEN THE FINAL
QUESTION IS, AS WE TRANSITION TO
THE DIFFERENT FUEL TYPES,
OBVIOUSLY, IF I'M A REFINER, I
DON'T WANT TO KEEP A HUGE AMOUNT
OF THE SUMMER FUEL AROUND WHEN
I'M GOING TO BE CONVERTING TO
WINTER FUEL. SO, WHERE IS THE
WHERE IS THERE FLEXIBILITY
WITHIN A POTENTIAL, REGULATIONS
HERE THAT WILL NOT NOT FORCE A
REFINER TO, TO PRODUCE A LOT
MORE EXPENSIVE FUEL THAN, THAN
THAN THEY NEED TO, BASED ON,
BASED ON THE CHANGE THAT'S
COMING. THANKS FOR THAT
QUESTION. AND IT'S A VERY ASTUTE
ONE THAT GOES TO SOME VERY
SPECIFIC ELEMENTS OF, OF HOW WE
SWITCH FROM SUMMER TO WINTER, TO
TWO OBSERVATIONS. ONE IS SUMMER
BLEND GASOLINE IS MORE EXPENSIVE
TO MAKE, BUT YOU CAN BLEND IT
INTO WINTER BLEND BY ADDING THE
BUTANE BACK IN. SO IT'S NOT LIKE
YOU TAKE THE SUMMER. YOU HAVE TO
THROW IT AWAY AND PRODUCE NEW
WINTER BLEND. YOU CAN USE ALL OF
THAT STOCK AND BLEND IT INTO
WINTER BLEND. YOU CAN EVEN STILL
SELL IT IN THE WINTER WITHOUT
ADDING THE BUTANE BECAUSE IT
MEETS THE WINTER. SPECIFICATION
BUT YOU WOULDN'T WANT TO DO THAT
BECAUSE YOU CAN. YOU CAN
BASICALLY USE THE BUTANE TO MAKE
CHEAPER WINTER BLEND GASOLINE.
SO THE ISSUE I THINK FROM THE
SUMMER TO THE WINTER IS, IS
QUITE EASY TO ADDRESS IN TERMS
OF BLENDING. REFINERIES ALREADY
KNOW HOW TO DO THAT, IN TERMS OF
WINTER TO SUMMER, THAT'S A PLAN
THAT THEY ALREADY DO. AND IT
WILL TAKE SOME WORK WITH EACH
REFINER TO WALK THROUGH HOW THEY
WOULD HANDLE THAT TRANSITION
WITH A MINIMUM INVENTORY
REQUIREMENT. I'LL NOTE THAT'S
THE TIME THEY USUALLY HAVE THE
HIGHEST INVENTORIES, SO IT'S
LESS OF AN ISSUE. YEAH AND I
ONLY THING I WOULD ADD TO THAT
IS, YOU KNOW, THE LAST COUPLE OF
YEARS WE HAD TO MAKE AN
EXTRAORDINARY DECISION OF GOING
TO WINTER BLEND EARLY. AND THEN
YOU SAW THE PRICES DROP BECAUSE
THE WINTER, THE SUMMER BLEND WAS
READILY BE ABLE TO ADD IT WITH
BUTANE. THANK YOU. THANK YOU,
MADAM CHAIR. I JUST WANT TO ASK
A COUPLE FOLLOW UPS TO MAKE SURE
I UNDERSTOOD SOME OF THAT MATH.
SO YOU SAID THAT IF WE WERE TO
HAVE BLUNTED THE PRICE SPIKES OF
2023, THAT WOULD HAVE BEEN $1
BILLION BENEFIT TO CALIFORNIANS.
YOU SAID THE ESTIMATED COST IS
BETWEEN ZERO AND $25 MILLION. IS
THAT LIKE A MONTH? IS THAT WHAT
IS THAT? YEAH. I THINK THE WAY
YOU WANT TO THINK ABOUT THAT IS
IT'S A PASS THROUGH COST. RIGHT?
SO THE WAY THAT WE WANT TO THINK
IS ABOUT 2 OR 3 MONTHS. LET'S
ASSUME AGAIN I'M PUTTING THIS
TWO AND A HALF DAYS WORTH OF
SUPPLY AS A AS A VERY HIGH
ESTIMATE, BECAUSE AT THE END OF
THE DAY, WE MIGHT REALIZE
THROUGH THIS PROCESS THAT THAT
IS NOT FEASIBLE UNDER CERTAIN
REFINERY CONDITIONS OR WHATEVER.
SO LET'S JUST ASSUME THAT THE
WORST WE HAVE SEEN IN 2022 WAS
12.5 DAYS. AND THAT'S WHEN THE
SPIKES HAPPENED. AND SO WE'RE
TALKING ABOUT MAXIMUM THAT
ADDITIONAL TWO AND A HALF DAYS
WORTH OF SUPPLY THAT WE WANT TO
KEEP LIQUID. RIGHT. SO THAT TWO
AND A HALF DAYS OF SUPPLY
ROUGHLY TRANSLATES TO 100
MILLION GALLONS. SO THOSE 100
MILLION GALLONS, IF YOU'RE
BUYING AND YOU'RE KEEPING THE
SYSTEM LIQUID, YOU'RE SELLING
THEM AT THE END WHEN THE
REQUIREMENTS ARE GONE, BECAUSE
WE'RE NOT GOING TO KEEP THE
REQUIREMENTS DURING SEASONS, WE
DON'T NEED TO. SO IT'S CYCLED
THROUGH. SO AT THE TOP OF THE
SUMMER IN JUNE, JULY, AS YOU'RE
BUILDING UP INVENTORIES OR THE
REST OF THE SUMMER, YOU'RE KIND
OF MAKING SURE THAT SLIGHTLY
LIQUID RIGHT AT THE UPPER END
AND YOU'RE SELLING IT. SO LET'S
LET'S ASSUME THAT YOU'RE BUYING
AT THE IMPORT COST THAT WE
TALKED ABOUT THIS MORNING, WHICH
IS ABOUT $0.20 HIGHER. SO WE
BOUGHT IT AT $0.20 HIGHER.
THAT'S THE WORST CASE SCENARIO.
AND I'M SELLING IT OKAY. RIGHT.
SO THAT'S THE 20 CENT COST. SO
THE 100 MILLION ROUGHLY 100
MILLION GALLONS YOU'RE SELLING
IT BACK. IT'S ABOUT $25 MILLION
OKAY. RIGHT. ALL RIGHT. SO AGAIN
AN UNDERSTANDING THAT THIS IS
KIND OF BACK OF THE ENVELOPE AND
WOULD BE SUBJECT TO MORE
RIGOROUS ANALYSIS THAN ICE BACK
AT WHATEVER THIS NOTEPAD IS. I
THINK IT'S STILL IT'S USEFUL FOR
US TO ALL BE ABLE TO WRAP OUR
HEADS AROUND EVEN THE 30,000
FOOT VIEW OF THIS, TO DETERMINE
IF AND HOW WE SHOULD GO DOWN
THIS PATH. SO CLEARLY, IF WE'RE
TALKING ABOUT A BALLPARK $25
MILLION COST AND A $1 BILLION
BENEFIT, THAT'S PRETTY OBVIOUS.
GOOD THING TO DO, I WOULD LIKE
TO UNDERSTAND INDUSTRY'S
PERSPECTIVE ON THAT. I'M
GUESSING YOU DISAGREE WITH THAT
MATH, AND I GUESS HELP US
UNDERSTAND IF THAT'S IF THAT. DO
YOU AGREE WITH WHAT THE CEC,
ANALYSIS HAS CONCLUDED? AND IF
NOT, CAN YOU EXPLAIN TO US WHY
TWO THINGS. ONE IS, I THINK IT
WOULD BE PREMATURE TO AGREE OR
DISAGREE, BECAUSE I THINK WE
HAVE TO LOOK INTO THE ACTUAL
DETAILS. AND VICE CHAIR AND I
HAVE HAD THOSE DISCUSSIONS ABOUT
HOW WE WOULD DO THAT, THAT WAS
MY NO SHORTCUTS NOTATION EARLIER
ON. THE SECOND IS WHAT THE
WHISPER POSITION WOULD BE ON
THAT I WOULD HAVE TO DEFER TO
ELOY GARCIA, BECAUSE WE KIND OF
TAG TEAM PREPARED FOR THE
HEARINGS HERE. SO IF THAT'S OKAY.
SO I. I'M SORRY. I CAN'T SAY
THIS IS MY FIRST TIME
TESTIFYING. SO, SO, MADAM CHAIR,
MEMBERS GARCIA FOR THE WESTERN
STATES PETROLEUM ASSOCIATION,
FROM A WHISPER POSITION, WE
COMPLETELY AND CLEARLY DISAGREE
WITH THE ENTIRE NOTION WITH THE
APPROACH, THE IDEA THAT WE'RE
GOING TO MAKE EVEN MORE UNIQUE A
CALIFORNIA REFINING SECTOR. WE
HEARD A TAILORED CALIFORNIA
SOLUTION. WE'RE TAILORING ON TOP
OF TAILORING, ON TOP OF
TAILORING. SO IT'S NOT A IT'S
NOT A COMPLETE ANALYSIS TO SAY,
WELL, THIS WOULD ONLY COST A
FRACTION HERE, BUT SAVE US
BILLIONS THERE. WHAT IS IT GOING
TO DO TO THE REFINING SECTOR?
WHAT IS IT GOING TO DO TO WHAT
WE HEARD CONSISTENTLY HERE IS WE
NEED MORE COMPETITION. WE NEED
MORE PLAYERS. WE NEED FOLKS
WANTING TO INVEST IN CALIFORNIA.
WE ARE WALKING AND WALKING AND
INCHING OUR WAY TOWARDS YOU ALL.
OR THE ENERGY COMMISSION
RESPECTFULLY MANAGING THESE
REFINERIES. THEY'RE THEY'RE
ENGINEERING. WE HEARD THEY'RE
GOING TO HELP US ENGINEER THE
REFINERY. WE HEARD THEY'RE GOING
TO TELL US WHEN TO DO
MAINTENANCE. THEY'RE GOING TO
TELL US HOW MUCH SUPPLY, HOW TO
CONFIGURE OUR TANKS. YOU ARE
MICROMANAGING TO THE POINT WHERE
THAT'S THE BROADER 30,000 FOOT
PICTURE, IS WHAT IS THE EFFECT
OF THIS GOING TO BE ON THE
CONTINUATION OF OUR REFINING
CAPACITY? IT'S NOT SENSE TO
SENSE. IT IS OVERALL IMPACT ON
THE REFINERS MAINTAINING IN
CALIFORNIA. THAT'S THE LARGER
THREAT IS THE MORE WE'VE MADE IT
UNIQUE. AND WE SEE HERE
CONSISTENTLY WELL, THIS IS
WHAT'S HAPPENING IN THE US. THIS
IS WHAT'S HAPPENING IN
CALIFORNIA. APPLES AND ORANGES.
AND IT'S NOT ENOUGH TO SAY,
WELL, WE'VE FIGURED FOR TAXES.
WE FIGURED FOR THE ENVIRONMENTAL
POLICIES. WE HAVEN'T FIGURED FOR
WHAT THOSE POLICIES HAVE DONE
FOR COMPETITION IN CALIFORNIA.
CALIFORNIA IS TOO UNIQUE, MAYBE.
AND YOU MAY WANT TO BE THINKING
ABOUT WHETHER CONTINUING TO ADD
UNIQUENESS TO IT IN SPECIFIC
CALIFORNIA SPECIFICITY. I'VE
BEEN DOING THIS FOR 25 YEARS,
AND MR. COURT, I THINK YOU
MENTIONED THE ATTORNEY GENERAL'S
REPORT. I WAS THERE, YOU KNOW,
WHAT WAS ALSO, THERE WAS A MAJOR
INTEGRATED INTERNATIONAL
COMPANIES, SHELL, BP, ARCO,
EXXONMOBIL. LOOK AROUND. THOSE
COMPANIES AREN'T HERE IN
CALIFORNIA ANYMORE. THE
UNIQUENESS ON TOP OF UNIQUENESS
ON TOP OF UNIQUENESS HAS MADE
THIS NOT A THE KIND OF
ENVIRONMENT THAT REFINERS WANT
TO CONTINUE TO INVEST IN. SO WE
DISAGREE WITH THE ENTIRE NOTION.
I WOULD JUST WANT TO MAKE SURE
WE DON'T GO DOWN THE RABBIT HOLE
OF, YOU KNOW, COMPARING SENSE TO
SENSE AND OVERALL IT MAKES
SENSE. YOU ARE FURTHER AND
FURTHER MAKING THIS A UNIQUE
REFINING ENVIRONMENT WHEN YOU
NEED REFINERS TO STAY IN
CALIFORNIA. WHEN WE READ THE
ASSESSMENT REPORT, IT READS TO
US LIKE, HOLY COW, WE NEED TO BE
CAREFUL ABOUT PROTECTING OUR
REFINING SECTOR. OUR REMAINING
REFINING SECTOR. WE HAVE LARGELY
WE HAVE STILL ONE INTERNATIONAL
INTEGRATED COMPANY, BUT IT IS
LARGELY A REFINING SECTOR
DOMINATED BY INDEPENDENT
REFINERS. YOU NEED THEM TO
CONTINUE TO INVEST IN
CALIFORNIA. PBF, VALERO,
MARATHON, PHILLIPS, THEY'VE ALL
COME INTO CALIFORNIA. THEY HAVE
MADE LARGE INVESTMENTS. THEY
HAVE PARTICIPATED IN OUR
TRANSITION, WHICH IS A SUCCESS
FROM AN ENVIRONMENTAL
STANDPOINT. A CHALLENGE FROM A
SUPPLY STANDPOINT. THEY HAVE
INVESTED BILLIONS OF DOLLARS.
THEY HAVE BUILT POWER PLANTS.
THEY HAVE SECURED THEIR THEIR
ELECTRICITY SUPPLY. THAT WAS PBF
IN TORRANCE. THEY HAVE MADE
THESE INVESTMENTS. THEY'VE
INVESTED, THEY'VE EMPLOYED, AND
THEY'VE SUPPLIED THE CALIFORNIA
MARKETPLACE ALL IN AN
ENVIRONMENT WHERE WE KEEP HERE
BILL BY BILL, REGULATION, BY
REGULATION, MICROMANAGING AND
MAKING IT UNIQUE AND MAKING IT
SPECIFIC. THAT'S THE LARGER
POINT THAT WE SHOULD BE LOOKING
AT. WE ARE FOREGOING LOW HANGING
FRUIT LIKE E15. WE'RE WE'RE
FOREGOING THE COLLABORATIVE
OPTIONS AND GOING RIGHT TO THE
MOST COMPLICATED OPTIONS. THAT'S
WHAT YOU SHOULD HAVE BEEN
HEARING HERE TODAY IS THIS IS
COMPLICATED. THIS IS DETAILED.
AND I HEARD SOMEONE OVERSIMPLIFY
IT. THIS IS SIMPLE. IT'S SUPPLY
AND DEMAND. NO HARM, NO FOUL.
BUT THAT'S FAR FROM THE TRUTH
BECAUSE YOU'VE HEARD THAT THERE
ARE SO MANY ISSUES TO BE
ADDRESSED HERE. AND JUST A WORD
OF CAUTION AGAIN, FROM SOMEONE
WHO'S BEEN NOT IN THIS ROOM, BUT
IN IN THESE BUILDINGS FOR ALMOST
30 YEARS, WE HAD AN ELECTRICITY
CRISIS 25 YEARS AGO. WE HAD A
SENSE OF WHAT YOU'RE HEARING.
YOU KNOW, I THINK WHAT YOU'RE
FEELING TODAY IS WE GOT TO DO
SOMETHING. WELL, WORD OF
CAUTION. BE CAREFUL. WHAT IT IS
THAT YOU DO BECAUSE YOUR
CONSTITUENTS IN CALIFORNIA ARE
RATEPAYERS PAID FOR 25 YEARS
BECAUSE OF A SENSE OF WE NEED TO
RUSH INTO SOMETHING. ENERGY
MARKETS ARE COMPLEX. THEY'RE
COMPLICATED. WE NEED TO BE
DELIBERATIVE AND DO THE RIGHT
THING. WE ARE HERE AS AN
ASSOCIATION TO WORK WITH YOU. WE
WOULD LIKE TO BE IN THE
COLLABORATIVE SIDE AND NOT THE
COMBATIVE SIDE. THIS IS AN
EXAMPLE THAT COMES FROM THE
COMBATIVE SIDE. WE ARE YOU ARE
HEARING US. YOU'RE HEARING LABOR
TELL YOU WE DON'T THINK THIS
WORKS. WE THINK THERE ARE OTHER
THINGS THAT WE CAN BE WORKING
ON, AND WE COULD RUSH TO, AND WE
WILL COMMIT TO LOOKING AT THOSE
OPTIONS AND WORKING WITH YOU.
BUT THIS ONE DOESN'T WORK. AND
THAT IS A LONG WAY TO GET TO
YOUR QUESTION, MADAM CHAIR. NO,
WE DON'T AGREE. OKAY, BUT HAPPY
TO ANSWER ANY FURTHER QUESTIONS.
YOU GAVE ME A LOT TO WORK WITH
THERE, SO, I'D SAY TWO THINGS.
NUMBER ONE, WE ARE LOOKING AT
THE LARGER BIG PICTURE. THAT'S
LITERALLY WHY WE'RE HERE, WE ARE
ALSO LOOKING FOR LOW HANGING
FRUIT ONCE AGAIN, WHY WE'RE
HERE. WE ARE ALSO HERE TO
EVALUATE A PROPOSAL THAT IS ON
THE TABLE. AND SO IF YOU DON'T
THINK THIS WORKS, THEN YOU NEED
TO EXPLAIN TO THIS COMMITTEE WHY
IT DOESN'T WORK, NOT WHY THE
MARKET IS A PROBLEM. NOT NOT ALL
THAT OTHER STUFF. NOT ALL THE
RUN UP LIKE VERY SPECIFICALLY,
WHAT ARE THE SPECIFIC ISSUES
WITH THIS PROPOSAL IN THE
CONTEXT OF WHAT IT'S GOING TO DO
TO CALIFORNIANS? SO, SO TWO
THINGS YOU YOU'VE HEARD
FUNDAMENTAL DISAGREEMENT ABOUT
WHETHER REFINERS DO OR DO NOT
HAVE STORAGE CAPACITY. WE
DISAGREE. WE HEARD FROM THE WE
HEARD FROM THE ENERGY
COMMISSION. WELL, IT'S SYSTEM
WIDE. AND WE'LL WORK IT OUT.
THERE'LL BE SOME IN. PROFESSOR
BORNSTEIN SAID. WE MIGHT HAVE TO
ADD A TRADING MECHANISM AGAIN,
ADDING MORE AND MORE COMPLEXITY.
IF REFINER A FULLY PLANS FOR HIS
TURNAROUNDS. BUT REFINER B HAS
AN UPSET. IS REFINER A GOING TO
SUPPLY REFINER B ARE WE TRADING.
HOW DOES ALL THIS WORK. WE DON'T
KNOW. AND WE THINK ADDING MORE
AND MORE COMPLEXITY AGAIN UNIQUE
TO CALIFORNIA IS NOT THE
SOLUTION. SO WE SHOULD START
WITH THE FUNDAMENTAL POINT. IS
THERE OR IS THERE NOT ENOUGH
STORAGE CAPACITY YEAR ROUND? AND
ESPECIALLY DURING TIMES OF, LOW
LIQUIDITY IN TIMES OF HIGH
DEMAND? SO LOOKING AT THE FACT
THAT WE MIGHT HAVE STORAGE
CAPACITY IN FEBRUARY, BECAUSE
WE'RE IN A WINTER MONTH AND A
LOW DRIVING DEMAND MONTH IS NOT
INDICATIVE OF WHETHER WE CAN
HAVE IT IN THE SUMMERTIME FOR
SUMMER BLEND FUELS IN A HIGH
DEMAND. SO WE NEED TO BE CAREFUL
ABOUT GENERALITIES. WE
FUNDAMENTALLY DON'T BELIEVE THAT
WE HAVE THE STORAGE CAPACITY. WE
FUNDAMENTALLY BELIEVE THAT WE
ARE BEING SET UP FOR FAILURE.
AND TO MR. MURATSUCHI ISN'T
HERE. AND MAYBE THAT'S A GOOD
THING, BECAUSE HE WOULD PROBABLY
BE SHOCKED TO SAY THAT I AGREE
WITH HIM. EXTENSIVELY. I THINK
THE SAFETY ISSUE IS BEING JOINED
HERE. IT'S NOT THAT WE ARE USING
IT ONE AGAINST THE OTHER.
THEY'RE BEING JOINED HERE FOR
THE FIRST TIME IN THIS PROPOSED
STATUTE, THE ABILITY TO MOVE
FORWARD ON A ON A TURNAROUND OR
A SAFETY PROGRAM IS TIED TO OUR
ABILITY TO DEMONSTRATE WHAT WE
TELL YOU RIGHT NOW. WE DON'T
THINK WE CAN DEMONSTRATE THAT IS
A X NUMBER OF DAYS OF INVENTORY.
SO THEY'RE BEING JOINED IN 20
2012, 2013. WE WERE IN SOME OF
THESE HEARINGS WHERE WE WERE
BEING ACCUSED OF DELAYING
MAINTENANCE, RUNNING TOO MUCH.
SO WE PUT IN PLACE AN ENTIRE
SAFETY REGIME. TEN YEARS LATER,
WE'RE BEING ACCUSED OF DOING TOO
MUCH MAINTENANCE BECAUSE MAYBE
THERE'S A MARKET OPPORTUNITY
THERE. SO THERE IS A LOT OF
ACCUSATIONS, A LOT OF
MICROMANAGING. BUT HERE YOU'RE
JUST TO BE CLEAR, YOU'RE JOINING
THE TWO ISSUES TOGETHER. SO THAT
MAY BE WHY OUR FRIENDS AND LABOR
ARE CONCERNED, WHY COMMUNITIES
MIGHT BE CONCERNED IS THAT YOU
ARE JOINING AN ABILITY TO DO ONE
THING THAT A REFINER AND OUR
LABOR FRIENDS TELL YOU IS
ABSOLUTELY NECESSARY, AND THEN
HAVING THE ENERGY COMMISSION
SAY, WELL, WE DON'T SEE THAT
THERE'S ENOUGH INVENTORY, SO
WE'LL WORK WITH YOU. WE'LL
FIGURE IT OUT. THAT IS ADDING
EVEN MORE AND MORE MANAGEMENT
COMPLEXITY AND UNIQUENESS TO THE
CALIFORNIA REFINING MARKET. SO
HOPEFULLY THAT ANSWERED THAT
RIGHT. GOT IT. UNDERSTOOD, ALL
RIGHT, TURNING TO MR. FLORES.
THANK YOU, MADAM CHAIR. AND I
WOULD ACTUALLY ASK A MEMBER OF
CARB TO COME UP TO THE MIC, IF
YOU DON'T MIND. I APPRECIATE IT.
CÁC. YESTERDAY FLAGGED THAT I'M
GOING BACK TO LOW HANGING FRUIT
THAT WE'VE ALL TALKED ABOUT,
THAT E15 IS A POTENTIAL
SOLUTION. AND YOU SAID THAT
YOU'RE CURRENTLY GOING THROUGH
THE PROCESS OF LOOKING INTO
THAT, RIGHT? DO YOU KNOW WHEN
CARB ORIGINALLY LOOKED INTO OR
STARTED LOOKING INTO E15? YES.
SO WE DID INITIATE SOME WORK
WITH UC RIVERSIDE AND CCERT TO
LOOK AT THE EMISSIONS ASSOCIATED
WITH E15. WE NEEDED TO COMPARE
IT TO THE EMISSIONS FROM E10
THAT WORK WITH UC RIVERSIDE WAS
COMPLETED IN 2022. IT DOES TAKE
TIME TO TEST VEHICLE BLENDING
FUELS. SO WHEN DID YOU START
THAT PROCESS THOUGH? THE PROCESS
STARTED, I BELIEVE IN, 2019
BECAUSE THE UNDER STATUTE,
THERE'S A REQUIREMENT THAT WE DO
A MULTI-TIER PROCESS. THE FIRST
TIER INCLUDES LOOKING AT
LITERATURE TO IDENTIFY ANY GAPS
IN ENVIRONMENTAL ANALYSIS
ASSOCIATED WITH CHANGING THE
FUEL SPEC. WE DID THAT FIRST,
THEN WE WORKED TO ESTABLISH,
BASED ON THE LITERATURE REVIEW,
THE EMISSIONS TESTING, BECAUSE
THAT WAS A GAP IN THE LITERATURE
OF COURSE, TESTING FUELS TAKES
TIME. SO IN 2022, WHICH YOU
MENTIONED, JUNE OF 2022, YOU
FINALIZED THE REPORT, CORRECT?
WE PUT THE REPORT OUT FOR,
PUBLICLY ON OUR WEBSITE. YEP.
AND THEN THAT MOVES TO THE PHASE
THREE OF THE MULTI-MEDIA
EVALUATION. THAT'S THE PROCESS
THAT WE'RE CURRENTLY IN. AND YOU
DO NOT HAVE THE MULTI-MEDIA
EVALUATIONS IN HAND. CURRENTLY
NO, WE DO NOT PUBLISH THE PHASE
THREE REPORT PUBLISHED. DO YOU
HAVE THEM IN HAND. IT'S UNDER
DRAFT REVIEW RIGHT NOW. SO YOU
HAVE THEM IN HAND. YOU HAVE THE
REPORTS BACK AND THEY'RE UNDER
DRAFT REVIEW OKAY. ALL RIGHT,
DOES CARB HAVE THE ABILITY TO DO
EMERGENCY RULEMAKING. DOES CARB
HAVE THE ABILITY TO DO AN
EMERGENCY RULEMAKING? I'M NOT A
LAWYER, WE HAVE A REQUIREMENT
UNDER THE APA WHEN WE ADOPT
REGULATIONS TO FOLLOW THE EPA
PROCESS. IT'S MY UNDERSTANDING
THAT CARB DOES HAVE THE ABILITY
TO CALL AN EMERGENCY SESSION
WITHIN FIVE DAYS FOR EMERGENCY
RULEMAKING. OKAY. OREGON, WHICH
IS NOT NECESSARILY A
PARTICULARLY RED STATE, A NUMBER
OF YEARS AGO SKIPPED THE
REGULATORY PROCESS, AND THE
LEGISLATORS DEEMED E15 APPROVED.
OKAY. AND I SAY THAT BECAUSE 49
OTHER STATES HAVE ALLOWED THIS.
OKAY. AND IT'S MY UNDERSTANDING
AND THESE DATES COULD BE WRONG.
BUT FROM WHAT THE RESEARCH THAT
I HAVE DONE, CARB STARTED
LOOKING INTO E15 IN 1998, OKAY.
AND IN 2022, THIS CAME OUT, IT
IS ALSO MY UNDERSTANDING
MULTIMEDIA STUDIES HAVE BEEN YOU
GUYS HAVE THE DATA, YOU JUST
HAVEN'T PUBLISHED IT YET BECAUSE
IT'S UNDER DRAFT REVIEW. I JUST
THINK, COLLEAGUES, WHEN WE'RE
TALKING ABOUT LOW HANGING FRUIT
AND WE'RE TALKING ABOUT ACTUALLY
DOING SOMETHING, WE NEED TO DO
OUR JOBS BECAUSE WE ACTUALLY DO
HAVE THE ABILITY AS A
LEGISLATIVE BODY TO MANDATE CARB
TO DO SOMETHING. WE CAN DIRECT
YOU TO FINALIZE THESE RULES AND
NOT ALLOW IT ON CARB'S TIME
FRAME. AND WE'VE HEARD THIS TIME
AND TIME AGAIN, THE FRUSTRATIONS
WITH ALL OF US ACROSS THE ENTIRE
STATE OF CALIFORNIA, WHOSE JOB
IS TO REPRESENT 40 MILLION
PEOPLE WHEN WE WAIT ON
BUREAUCRACIES FOR WHATEVER
REASON AND JUST BECAUSE DATA
COMES BACK, THAT MAY NOT FIT AN
IDEOLOGY JUST BECAUSE IT'S NOT
PERFECT, JUST BECAUSE IT MAY BE
THE ENEMY OF GOOD, LIKE WE CAN'T
ALLOW THAT ANYMORE. IF E15 IS A
POTENTIAL SOLUTION, NOT THE FIX.
OKAY, A POTENTIAL SOLUTION. AND
ACCORDING TO THE CEC, IT COULD
PRODUCE UP TO 10% IMMEDIATELY
INTO THE SUPPLY STREAM. OKAY,
THAT'S A WIN. THAT'S A WIN. AND
IT'S SOMETHING THAT I WOULD LOVE.
OUR COLLEAGUES, ALL OF US WHO
CARE ABOUT THIS TO UNDERSTAND
THAT NOBODY IS SAYING THAT E15
IS THE SILVER BULLET. OKAY,
THERE'S CLEARLY 100 LITTLE
BULLETS THAT WE HAVE TO FIRE AT
THE SAME TIME TO ACTUALLY FIX
THIS PROBLEM. E15 IS A VERY
SMALL PART OF THAT SOLUTION. AND
AS WE'RE TRYING TO ADDRESS THE
BIGGER CONCERNS THAT ARE
SIGNIFICANTLY MORE COMPLICATED
TO HOLD UP A TYPE OF FUEL THAT
IN 49 OTHER STATES IS ACCEPTED
IN CALIFORNIA, WE TRY TO BE TOO
CUTE IS UNACCEPTABLE TO ME. AND
SO I YIELD BACK TO THE CHAIR.
THANK YOU. THANK YOU, MR. FLORES.
AND I WOULD, I THINK, SHARE YOUR
ASSESSMENT THAT FOR CALIFORNIANS
WATCHING AT HOME, THOSE
TIMELINES SEEM WHOLLY
INCOMPATIBLE WITH THE SENSE OF
URGENCY. I THINK MANY OF US AND
MANY OF OUR CONSTITUENTS FEEL
EVERY TIME THEY'RE TRYING TO
DECIDE WHETHER TO FILL UP THEIR
GAS TANK OR BUY THAT EXTRA LOAD
OF GROCERIES, IT'S ALSO
INCOMPATIBLE WITH THE FACT THAT
THIS IS AN URGENT ENOUGH ISSUE
THAT WE HAVE CONVENED A SPECIAL
SESSION TO FOCUS UPON IT, SO, I
APPRECIATE YOU AND OTHERS AND
THE CEC, IN FACT, FOR
HIGHLIGHTING THAT AS AN
OPPORTUNITY AS PART OF THIS
REPORT, ALL RIGHT. MOVING TO
ASSEMBLY MEMBER ZUBER, I THINK
YOU HAD QUESTIONS AS WELL. MR.
GIBSON HAD TO LEAVE, BUT HAD A
COUPLE OF QUESTIONS. YEAH,
THEY'RE NOT MY QUESTIONS, MR.
GIBSON ACTUALLY HAD TO LEAVE,
AND HE ASKED ME TO ASK ONE
QUESTION ON HIS BEHALF, IS MR.
JEFFRIES WHO REPRESENTS THE
BOILERMAKERS HERE? IF YOU COULD
SORT OF COME UP, MR. GIBSON
WANTED ME TO ASK THAT AS A
BOILERMAKER. THE UNION THAT'S
TASKED WITH BUILDING AND
MAINTAINING THE BLENDING
COMPONENT AND STORAGE TANKS ON
CALIFORNIA'S REFINERIES. IF YOU
HAVE ANY, IF YOU'VE SEEN ANY
EVIDENCE THAT REFINERIES ARE
SLOWING PRODUCTION OR EXTENDING
MAINTENANCE OR ARE NOT FULLY
UTILIZING THEIR EQUIPMENT IN
ORDER TO CREATE A SHORT
ARTIFICIAL SHORTAGES, IF YOU
COULD ANSWER THAT. THAT WAS WHAT
MR. GIBSON HAD WANTED TO ASK, IF
HE HAD HE BEEN HERE. SO THERE,
REAL QUICK. TIMOTHY JEFFRIES,
INTERNATIONAL BROTHERHOOD OF
BOILERMAKERS, REPRESENTING THE
BOILERMAKERS HERE IN NORTHERN
CALIFORNIA. THE REAL QUICK SHORT
ANSWER IS NO TURNAROUNDS ARE 12
HOURS, AT LEAST A 12 HOURS.
STARTING OUT, TEN HOURS A DAY,
12 12 HOURS A DAY. ALMOST EVERY
TURNAROUND, 30 DAYS IF
EVERYTHING GOES WELL, SOMETIMES
40 DAYS IF YOU RUN SOME THINGS
THAT YOU DIDN'T EXPECT TO SEE.
SO NO, IT'S ALWAYS, I CAN'T USE
THE TERM WE USE IN THE FIELD,
BUT IT'S NÓ. IT'S ELBOWS, WE'RE
THROWING ELBOWS. WE'RE WE'RE THE
BOILERMAKERS WRITTEN THERE NEXT
TO THOSE CRAFTS AND NEXT TO US.
AND WE'RE DOING THE WORK AND
IT'S EVERYBODY'S NOT, THERE'S NO
THERE'S NO SLOWDOWN IN THE
REFINERIES WHEN IT'S WHEN IT'S
TURNAROUND TIME. EVERY WORKER IN
THE FIELD THE BOILERMAKERS
DEFINITELY OUT IN THE FIELD
UNDERSTAND THAT YOU'RE GOING TO
WORK A LOT OF LONG HOURS, IT'S
GOING TO BE SOME TIME FOR SOME
OVERTIME. AND WHEN IT'S DONE,
IT'S DONE. SO IT'S NOT THERE'S
NO LAID BACK CASUAL KICKING IT
FROM THE VERY MOMENT THAT THE
CONTRACTOR CALLS THE FIRST SET
OF GROUP OUT, THEY'RE GOING TO
BE BURNING THEIR BUTTS OFF NIGHT
AND DAY UNTIL THE NEXT GROUP
COMES IN TO TILL THAT JOB IS
FULLY STAFFED. SO IT'S, THERE'S
DEFINITELY NO, NO LAY AROUND
TIME ON TURNAROUNDS. ABSOLUTELY
NOT. THANK YOU VERY MUCH. ALL
RIGHT, MR. LEE. AND THEN, MR.
BENNETT. ALL RIGHT. THANK YOU,
MADAM CHAIR. I HAVE A COUPLE
QUESTIONS FOR OUR INDUSTRY
REPRESENTATIVE WHO JUST SPOKE,
YOU SAID THAT, YOU ASSERT THAT
THE INDUSTRY DOES NOT HAVE THE
CAPACITY FOR THAT INVENTORY, AND
WE HAVE AMPLE PROOF RIGHT NOW
FROM THE CEC RIGHT NOW THAT THEY
DO HAVE THE CAPACITY. SO CAN YOU
PROVE TO US THAT YOU DON'T HAVE
THE CAPACITY? CAN I CAN I PROVE
THAT TO YOU RIGHT NOW? SURE,
WHAT WE HEAR FROM OUR REFINERS,
REFINER BY REFINER. AND I THINK
YOU HEARD IT FROM THE ENERGY
COMMISSION AS WELL. NO, EACH
REFINER DOES NOT HAVE THE
CAPACITY. BUT DOES THE STATE AS
A WHOLE. THAT'S THE WRONG
QUESTION, SIR. AND THAT'S WHAT
I'M ASKING. I'M ASKING, DOES THE
STATE HAVE A WHOLE AS A WHOLE
HAVE THEY CAN'T. AND I CANNOT
SPEAK FOR THE STATE OR THE
SYSTEM THAT WE DO NOT REPRESENT
THE SYSTEM. WE REPRESENT
REFINERS, REFINERS WHO OPERATE
IN CALIFORNIA COMMUNITIES. AND
THE REQUIREMENT IN THE STATUTE
IS PER REFINER, NOT SYSTEM WIDE.
SO I THINK WE MIGHT WANT TO ASK
THE RIGHT QUESTIONS. WELL MY
QUESTION WAS WHETHER OR NOT YOU
CAN PROVE IT. AND DEMONSTRATE
THAT BECAUSE THE EVIDENCE THAT
THE CEC IS USING IS FROM THE
DATA THAT WE HAVE BEEN ABLE TO
EMPOWER THE SEC TO COLLECT IN
THE FIRST PLACE, WORKING WITH
THE INDUSTRY. SO WHAT I WOULD
APPRECIATE AND FOR THIS
COMMITTEE IS IF YOU CAN APPROVE
IN THE SAME MANNER, WHETHER OR
NOT USING THE SAME DATA POINTS,
USING SIMILAR FACTS, THAT'S WHAT
WE'RE ASKING FOR IS REAL FACTS.
AND I UNDERSTAND ANECDOTALLY
IT'S WHAT YOU'RE HEARING. THE
ANECDOTE IS NOT THE DIFFERENT.
IT'S NOT THE SAME AS DATA
POINTS. SO THANK YOU FOR THAT. I
HAVE OTHER QUESTIONS THAT I WANT
TO ASK THE CEC AS WELL. I DON'T
KNOW IF WE SHOULD DELVE INTO
NITTY GRITTY OF THE BILL DETAIL
ITSELF AT THIS MOMENT, BUT YES.
OKAY. YEAH. I JUST WANTED TO
THANK YOU. I JUST KNOW THIS
TOPIC CAME UP ABOUT THE ADVISORY
COMMITTEES. SO I JUST WANTED TO
ASK THE CEC AND ADMINISTRATION
WHAT THE THINKING WAS FOR MOVING
AWAY FROM THE ADVISORY COMMITTEE
TOWARDS THE EXPERT COMMITTEE. IF
YOU CAN SHED SOME LIGHT ON THAT,
I THINK I WOULD WE WOULD WE
WOULD WELCOME FURTHER DISCUSSION
ON THAT ONE. I THINK THE, THE
IDEA WOULD BE TO CONTINUE TO
WORK WITH THE LEGISLATURE AND
COORDINATE ON WHAT THE BEST
COMPOSITION SHOULD BE. OKAY
YEAH, I WAS JUST CURIOUS ABOUT
THAT. IF THERE WAS A,
IMPLEMENTATION ISSUE OR PROBLEM
WITH THAT, BECAUSE WHEN WE
WORKED ON THE FIRST SPECIAL
LEGISLATION, WE DID CREATE THAT
ADVISORY COMMITTEE, AND I DO
AGREE THAT GENERALLY, IF WE WANT
THE INPUT OF STAKEHOLDERS, IT
SHOULD BE A SEPARATE STAKEHOLDER
ADVISORY COMMITTEE THAN THE
EXPERT COMMITTEE, BECAUSE I DO
KNOW, I KNOW, IN THE DRAFTING OF
THE LEGISLATION AS IT IS TODAY,
THE EXPERT COMMITTEE WOULD
ACTUALLY BE ADVISING THE CEC ON
LOOKING AT EACH REFINERY AND
LOOKING AT THE INVENTORIES. AND
I THINK THERE IS A VERY STRONG
RATIONALE FOR NOT TO HAVE
SOMEONE CURRENTLY IN THE
EMPLOYEE OR RECENT EMPLOYEE OR
GOING TO BE THE EMPLOYEE OF THE
OIL INDUSTRY, BECAUSE THAT COULD
UNFAIRLY DISADVANTAGE ANOTHER
INDUSTRY. IF YOU HAVE INSIDER
INFORMATION, AND THAT IS
ACTUALLY PARTLY WHY WHEN WE
CONSTRUCTED THE ADVISORY
COMMITTEE, THE FIRST TIME THE
INDUSTRY EXPERT, WE DIDN'T WANT
THEM TO HAVE 12 MONTHS PREVIOUS
OR 12 MONTHS IN THE FUTURE
EMPLOYMENT BECAUSE THEIR
PRIVILEGE IS SO MUCH
CONFIDENTIAL INFORMATION OF THE
INDUSTRY THAT COULD BENEFIT A
COMPETITOR. SO WE WANT TO MAKE
SURE THAT I JUST WANT TO STRESS
THAT POINT. IT IS IMPORTANT TO
PROTECT ACTUALLY THE PLAYERS IN
THIS INDUSTRY. SO THAT THERE
ISN'T SOMEONE, YOU KNOW, THAT
WAS RECENTLY ON THIS COMMITTEE
AND YOU HIRE THEM AND THEY KNOW
EVERYTHING ABOUT ALL THE
COMPETITORS. I THINK THAT IS AN
IMPORTANT ASPECT TO PROTECT THE
INDUSTRY ITSELF AND TO PROTECT
COMPETITION. AND THEN MY LAST
QUESTION IS JUST, YOU KNOW,
WE'VE TALKED A LOT ABOUT THE
SPOT MARKET AND HOW IT'S AN
OUTSIZED INFLUENCE ON THE ENTIRE
MARKET. I DON'T SEE ANY
PROPOSALS RIGHT NOW ABOUT
SHEDDING MORE LIGHT IN THE SPOT
MARKET RIGHT NOW, OR CREATING
TRANSPARENCY. DO YOU HAVE ANY
SUGGESTIONS ABOUT WHAT CAN BE
DONE IN THAT LIGHT AND WHAT
MAYBE LOW HANGING FRUIT OR JUST
SOLUTIONS THERE ARE TO SHED MORE
TRANSPARENCY SO THAT AT LEAST
MORE ACTORS OR MORE, CONSUMERS
ARE UNDERSTANDING OF THE SPOT
MARKET. YEAH. THANK YOU. I THINK
THE AS DIRECTOR MILLER MENTIONED
THIS MORNING, WE NOW HAVE THE
TRADES WE ARE COMBING THROUGH
HOW BEST TO MAKE THE DATA
PUBLIC. THE CURRENT INTENTION OF
THE ENERGY COMMISSION IS TO
PROVIDE THAT PUBLICLY, SO I
THINK WHAT WE'RE TRYING TO DO,
AS YOU KNOW, MISTER CORT
MENTIONED TODAY, YOU KNOW, WE
ARE PROBABLY OVER DELIBERATING,
BUT THAT'S THE PART OF THE
PROCESS IS TO MAKE SURE BY DOING
ANY OF THIS INFORMATION
PUBLICLY, WE ARE NOT BREAKING
ANY CONFIDENTIALITY, REQUIREMENT
THAT'S PLACED UPON US, BUT
THAT'S THE CURRENT THINKING IS
TO MAKE THAT PUBLIC. WELL, THANK
YOU, I APPRECIATE THAT. AND AS
YOU COMB THROUGH THE
INFORMATION, I THINK A LOT OF MY
COLLEAGUES ARE EAGER TO SEE WHAT
KIND OF ACTION WE CAN TAKE UPON
THAT DATA, BECAUSE, YOU KNOW,
WITH A SMALL FRACTION OF THE
TRANSACTIONS HAVING SUCH
OUTSIZED INFLUENCE, WE
DEFINITELY WANT TO SEE WHAT CAN
BE DONE OVER THERE, BECAUSE
RIGHT NOW IT'S A TOTALLY
UNREGULATED ASPECT OF THE OIL
INDUSTRY. AND SO WHATEVER YOU
COME OUT OF THAT, THAT'S
IMPORTANT FOR US TO KNOW AS
WELL. THANK YOU. THANK YOU. SO
ALL RIGHT. THANK YOU. ASSEMBLY
MEMBER BENNETT. THANK YOU VERY
MUCH, CHAIR, HERE WE GO AGAIN
WITH THE FUNDAMENTAL QUESTION.
RIGHT. IS THERE ENOUGH, CURRENT
STORAGE CAPACITY TO SET THESE
MINIMUM STANDARDS UP WITHOUT A
SIGNIFICANT INVESTMENT IN NEW
STORAGE TANKS? IT KEEPS COMING
UP OVER AND OVER AND OVER AGAIN.
AND HERE WE ARE AT THIS POINT IN
TIME, IN THE HEARING AFTER ALL
OF THIS EVIDENCE WITH JUST A
STATEMENT THAT NOBODY'S SAYING
EVERY REFINERY HAS TO HAVE 15
DAYS, WHAT WE HAVE TO SAY IS
JUST LIKE THEY DO IN AUSTRALIA,
JUST LIKE THEY DO IN GERMANY.
THEY SAY, HEY, THE STATE NEEDS A
CERTAIN AMOUNT OF STORAGE. AND
IT JUST MAKES COMMON SENSE THAT
AS WE BECOME AT A MORE RISKY
ENVIRONMENT BECAUSE OF THIS
CLOSENESS THAT WE HAVE, THAT WE
HAVE THAT STORAGE NUMBER ONE.
NUMBER TWO IS THE CEC OR ANY
CALIFORNIA STATE AGENCY ACCUSING
THE REFINERIES OF DOING TOO MUCH
MAINTENANCE, I'LL START WITH
TWO. NO THANK YOU. ALL RIGHT.
AND THAT ALLEGATION THAT WE'RE
DOING THAT THE CLAIM THAT THE
ENERGY MARKETS WAS WHEN THE
ALLEGE THAT WHAT HAPPENED IN THE
ENERGY MARKETS WITH ENRON, ALL
THAT TIME AGO THAT WE SHOULD BE
REALLY CAREFUL. YES, WE SHOULD
BE REALLY CAREFUL. BUT WHAT WE
DID THEN WAS WE DEREGULATED THE
MARKET. WE DID NOT DO SOMETHING
LIKE THIS WHERE THE
REPRESENTATIVES OF THE 39
MILLION PEOPLE IN CALIFORNIA GOT
TOGETHER AND SAID, WE NEED TO DO
SOMETHING IN THE GAS MARKET
HERE. WE NEED TO MAKE SURE THAT
IT'S NOT JUST THE PEOPLE WHO ARE
MAKING THE PRICING DECISIONS FOR
PROFIT THAT ARE INVOLVED IN THIS.
RIGHT. AND WE HAVE TO REALIZE
THERE'S A TREMENDOUS INCENTIVE
TO MAKE SURE THAT THESE
INVENTORY DECISIONS AND THESE
PRICING DECISIONS REMAIN IN THE
HANDS OF INDUSTRY, AND WE DON'T
GET INVOLVED AT ALL TO MAKE SURE
THAT THE PUBLIC'S BENEFIT IS
ALSO CONSIDERED. THAT'S ALL
WE'RE ALL WE'RE SUGGESTING WITH
THIS. WE'RE SUGGESTING THAT THE
PUBLIC'S BENEFIT NEEDS TO BE
APPROPRIATELY INTRODUCED INTO
THIS, AND APPROPRIATELY IS HOW
WE EXPECT YOU TO FIGURE THIS
OUT. SO AS A RESULT, BECAUSE
THERE'S A LOT OF INCENTIVE TO
KEEP US FROM HAVING THE PUBLIC
GET INVOLVED AND KEEP THIS
SOLELY IN THE INDUSTRY'S
CONDITION. WHAT WHAT WE'VE SEEN
FOR THE LAST FOUR WEEKS IS A
TREMENDOUS AMOUNT OF CONFUSION,
MISREPRESENTATION TO TRY TO
BLOCK OR WEAKEN THIS
LEGISLATION. AND ONE OF THE
CLASSIC EXAMPLES IS THE SAFETY
OF WORKERS IS GOING TO BE AT
RISK. EVERY ONE OF US UP HERE
WOULD BEND OVER BACKWARDS TO
MAKE SURE THE SAFETY OF WORKERS
IS NOT AT RISK, AND THERE ARE SO
MANY THINGS THAT THE CEC CAN DO
AND PUT INTO THIS TO MAKE SURE
THAT MINIMUM INVENTORY LEVELS IN
NO WAY CAUSE WORKERS TO BE AT
MORE RISK BECAUSE OF
MAINTENANCE, NOT BEING ENGAGED
IN. MEANWHILE, WORKERS ARE AT
RISK OF HAVING HIGHER GASOLINE
PRICES BECAUSE THEY'RE AT RISK.
LIKE ALL OF US. IF THIS SHAKY
MARKET DOES NOT HAVE AN
INVENTORY CUSHION TO TRY TO
AVOID PRICE SPIKES. SO IT'S A
RED HERRING THAT IS BEING THROWN
OUT THERE. AND THE FINAL THING I
WANT TO SAY IS I THINK THIS MOST
RECENT TESTIMONY IS GREATER
EVIDENCE OF WHY WE SHOULD HAVE
AN EXPERT PANEL THAT IS NOT,
THAT DOES NOT HAVE COMBATANTS
WHO ARE FUNDAMENTALLY OPPOSED TO
THE CONCEPT OF THIS. THEY'RE
TRYING TO DISTORT AND DISRUPT
THAT. AND WHY WE NEED AN EXPERT
PANEL, AND THEN WE CAN HAVE A
STAKEHOLDER PANEL, BOTH OF THEM
GIVING ADVICE. BUT THE
FUNDAMENTAL ISSUE THAT SHOULD
COME BACK IS A RECOMMENDATION
FROM THE TWO AGENCIES, THEIR
BEST RECOMMENDATION AFTER THEY
GATHER THAT INPUT. THANK YOU
VERY MUCH. THANK YOU. CHAIR.
THANK YOU. ASSEMBLY MEMBER
RUBIO. THANK YOU. I WANT TO USE
AN ANALOGY ABOUT, I THINK, THE
QUESTION THAT WAS ASKED ABOUT
DIFFERENT REFINERIES. YOU STATED
THAT THEY CAN'T COLLABORATE AND
SAY, HEY, YOU DO THIS. YOU DO
THAT BECAUSE OF ANTITRUST
ISSUES. I'LL GIVE YOU AN
EXAMPLE. I WAS A TEACHER, AND BY
CTA STANDARDS, WE SHOULDN'T HAVE
X AMOUNT OF STUDENTS. I THINK IT
WAS AT THE TIME IT WAS 34. I HAD
37 STUDENTS, AND MY PARTNER
TEACHER HAD 34. AND THEY SAID,
OH, THAT'S OKAY, YOU KNOW, 34.5
STUDENTS IN YOUR CLASSROOM AND
34.5 STUDENTS WOULD MAKE IT
EASIER. AND I WAS LIKE, THEIR
KIDS, WHICH ONE DO YOU CUT UP?
YOU KNOW, ON PAPER IT MAKES
SENSE. THE YOU KNOW, THE BALANCE
SHEET MAKES SENSE. BUT IN
REALITY, IT DOESN'T. AND SO TO
TRY TO UNDERSTAND THAT YOU KEEP
USING WORDS LIKE AGGREGATE,
AGGREGATE TO ME MEANS EVERYBODY
PUT TOGETHER. BUT IF THEY CAN'T
COLLABORATE AND TALK ABOUT IT,
THEN HOW CAN THEY? YOU KNOW, DO
WHAT YOU WANT THEM TO DO. IF
THEY CAN'T, YOU KNOW,
COLLABORATE. THAT'S THE FIRST
QUESTION. THE SECOND QUESTION IS
I'VE HEARD THE CONVERSATION
ABOUT AUSTRALIA. AUSTRALIA DOES
THIS, AUSTRALIA DOES THAT. WELL,
I'VE SEEN, DOCUMENTS OR
INFORMATION ABOUT AUSTRALIA THAT
IT'S NOT NECESSARILY WORKING IN
AUSTRALIA. WE KEEP THROWING
AUSTRALIA AS AN EXAMPLE OF THIS
IS WORKING. BUT I'VE SEEN
INFORMATION THAT SAYS IT'S NOT
WORKING. SO THE FIRST QUESTION
IS, YOU KNOW, IN TERMS OF
AGGREGATE, CAN THEY COLLABORATE
AND SAY, HEY, WE HAVE THIS. AND
THAT'S NUMBER ONE. AND NUMBER
TWO, CAN YOU TALK ABOUT
AUSTRALIA. AND THEN I WOULD LIKE
AN OPPORTUNITY FOR MR. GARCIA TO
ALSO RESPOND TO THAT. THANK YOU.
ASSEMBLYMEMBERS RUBIO. SO JUST
KIND OF WANTED TO THE FIRST
QUESTION. RIGHT. SO WE ALWAYS
TAKE THE POSITION OF THE CEC.
THE STARTING POSITION IS LET'S
WE'RE ALL WORKING IN GOOD FAITH,
RIGHT? AND IF IT'S TRUE THAT
NOBODY REALLY KNOWS WHAT THE
OTHER PERSON'S OPERATIONS ARE,
HOW DO WE CREATE EFFICIENCY
WITHOUT SOME CENTRAL PLANNING?
AND THAT'S THE ROLE OF CSA. SO
WE HAVE AN OPPORTUNITY TO SAY,
OKAY, YOU'RE DOING THIS, YOU'RE
DOING THIS. YOU CAN TALK TO EACH
OTHER, BUT WE COULD ANONYMOUSLY
WORK WITH ALL OF THEM. RIGHT?
LIKE AN ANONYMOUS DATA TO FIGURE
OUT CONDITIONS BASED ON THEIR
OWN INPUT AND THEIR FUNCTIONING
REQUIREMENTS. AND I'LL GO BACK
TO WHAT MR. GARCIA SAID. WE ARE
LOOKING AT DATA FROM BOTH THE
TOP AND WE HAVE DATA PER
REFINERY. IT'S JUST THAT WE
CAN'T PUT IT OUT BECAUSE WE ARE
NOT NOT ALLOWED TO. SO BASED ON
THAT REFINERY BY REFINERY, WE
ABSOLUTELY SEE SLACK AND SOME OF
THEM WE DON'T. SO THE IDEA WOULD
BE HOW DO YOU LIKE GET THAT
INFORMATION FURTHER? AND AS
DIRECTOR BYLER MENTIONED, THE
TOP LEVEL ANALYSIS NOW HAS TO BE
DUG INTO DETAILS OF
IMPLEMENTATION. AND THAT'S WHAT
THE NEXT, NEXT STEP WOULD BE
UNDER A RULE MAKING PROCESS. SO
I THINK IT ONLY REDUCES THE
INFORMATION ASYMMETRY AND THE
CENTRAL ABILITY TO PLAN. AND I
DON'T NECESSARILY SEE THAT AS
MICROMANAGING. IT'S AN
OPPORTUNITY FOR US TO WORK
TOGETHER AT A DIFFERENT VANTAGE
POINT TO ANSWER THE AUSTRALIA.
YEAH. SO AS I MENTIONED EARLIER,
ASSEMBLYWOMAN, IT'S IMPORTANT TO
LOOK TO AUSTRALIA AS AN EXAMPLE
OF A PACIFIC RIM COUNTRY THAT'S
AN ACTUAL ISLAND AND IS DEALING
WITH SOME OF THEIR UNIQUE
ISSUES. SWITZERLAND IS
SURROUNDED BY MOUNTAINS. THEY
HAVE A DIFFERENT REFINED FUEL
STANDARD. GERMANY HAS THEIR OWN.
THE COMMON COMMONALITY THERE IS
MAKING DECISIONS TO HAVE A
BIGGER BUFFER OF REFINED
PRODUCTS. AND SO I DON'T KNOW
THAT WE'RE LOOKING TO AUSTRALIA
TO MIMIC THEM, BUT TO LEARN FROM
WHAT THEY'VE DONE. AND MY
UNDERSTANDING IS THEY THEY HAVE
A MECHANISM TO SUPPORT THEIR
INDUSTRY, BUT THEY'VE ONLY SPENT
A FEW MILLION DOLLARS VERY
SMALL, MAYBE MORE COMPARATIVE TO
POTENTIAL COSTS THAT WE'RE
TALKING ABOUT, ALTHOUGH THEY'RE
PREPARED TO SPEND MORE IF
NECESSARY. WE DON'T FACE THEIR
ISSUES. WE HAVE A MUCH LARGER,
LARGER REFINING SECTOR HERE. I
THINK I WOULD LIKE TO REMEMBER
AS AS WE HEAR FROM THE INDUSTRY,
I WOULD LIKE TO REFLECT BACK.
WE'VE HAD MUCH MORE PRODUCTIVE
DISCUSSIONS WITH THE REFINERS
THEMSELVES THAN THEIR TRADE
ASSOCIATION. AND THE THINGS THAT
THE TRADE ASSOCIATION SAYS THAT
ARE A BIT MORE ROBUST, AND, A
FEW FACTS THAT THAT I DON'T
THINK THE TRADE ASSOCIATION CAN
DISPUTE IS THAT CALIFORNIA IS
THE MOST PROFITABLE REGION OF
REFINING IN THE COUNTRY. AND I
HEARD BOTH CORPORATIONS DO
INVEST OR THEY DON'T INVEST.
THERE'S BEEN CONSOLIDATION
THROUGH A LOT OF ACQUISITIONS
FOR HUGE PRICE TAGS TO BUY THESE
REFINERIES. AND SO I THINK THAT
THE REALITY IS THERE IS ROOM TO
HAVE GOOD FAITH DISCUSSION WITH
INDUSTRY AND TO WORK THROUGH
SOME OF THESE ISSUES. IF WE DO
AVOID SOME OF THE MORE HYPERBOLE
IN THE ANSWERS, FIND COMMON
GROUND, INCLUDING WAYS THAT THIS
INDUSTRY CAN CONTINUE TO BE
PROFITABLE, BUT MAYBE JUST NOT
AT THESE EXTREME PRICE SPIKE
LEVELS, THANK YOU, SENATOR
RUBIO, AND CERTAINLY APPRECIATE
THE WORK. JUST TO BE CLEAR THAT
THE ENERGY COMMISSION HAS BEEN
TASKED WITH THE DILIGENCE THAT
THEY HAVE TAKEN TO TAKE THIS
WORK ON. BUT AGAIN, THIS WAS ONE
OF A NUMBER OF IDEAS THAT WAS
PRESENTED IN THIS FIELDS
ASSESSMENT. BUT IT'S THE ONE
THAT IS THAT WE HAVE HERE TODAY
IN A VERY NARROW, NARROW SPECIAL
SESSION WITH A NARROW APPROACH.
SO WE DISAGREE ON THIS IDEA. WE
HAVE PROVIDED DATA AND WOULD
CONTINUE TO WORK ON OTHER IDEAS.
THIS IS ONE WHERE WE DISAGREE.
IT IS INCREDIBLY COMPLEX. WE
HAVE HEARD HERE NOT EVERY
REFINER HAS THIS CAPACITY. SO
WHAT WILL BE REQUIRED IS WHAT I
JUST HEARD IS CENTRAL PLANNING.
I JUST HEARD WHAT WE'RE GOING TO
HAVE A CENTRAL PLANNING APPROACH
HERE. AND AGAIN, YOU HAD A
CONVERSATION EARLIER ABOUT WHY
DON'T WE HAVE COMPETITION IN
THIS MARKET. YOU ARE CENTRAL
PLANNING. MICROMANAGING SOUNDS
VERY SIMILAR, BUT IT'S COMPLEX,
COMPLEX, CENTRAL PLANNING. IN
ORDER FOR ALL OF THIS TO HANG
TOGETHER. SO THAT'S A CONCERN.
AGAIN, THERE ARE OTHER THINGS
THAT WE CAN DO THAT ARE MUCH
QUICKER, MUCH EASIER, MUCH MORE
COLLABORATIVE. WE'VE SELECTED
HERE THE ONE THAT IS, WE THINK
THE MOST COMPLEX AND LIKELY TO
BE THE MOST PUNITIVE. SO WE'D
LIKE TO GET ON TO WORKING ON
SOMETHING ELSE. WHEN YOU'RE
READY TO DO THAT, WE'RE READY
FOR IT. AS WELL, IN TERMS OF
AUSTRALIA, AGAIN, FUNDAMENTALLY
DIFFERENT FOR DEFENSE PURPOSES,
NOT FOR MARKET STABILIZATION
PURPOSES, I BELIEVE THAT THIS
COMES WITH SOME SUBSIDIES TO
REFINERS TO KEEP THEM IN
OPERATION. WE HAVE WE HAVE
EXAMPLES MUCH CLOSER TO HOME IN
THE NORTHEAST. I UNDERSTAND THAT
WE HAD THIS TYPE OF INVENTORY
PROPOSAL THAT HAS SUBSEQUENTLY
BEEN SHUT DOWN BECAUSE IT DIDN'T
WORK. SO I DO WANT TO MAKE SURE
THAT WE'RE THOUGHTFUL ABOUT
WHERE WE CHOOSE TO, TO LOOK TO
FOR ANALOGIES. I MEAN, WE
AUSTRALIA IS AN ISLAND. WE'RE
MAKING OURSELVES AN ISLAND. AND
PROPOSALS LIKE THIS CONTINUE
DOWN THAT LINE OF MAKING US MORE
AND MORE AND MORE UNIQUE. UNIQUE
IS GREAT. SOMETIMES SOMETIMES IT
CREATES A CHALLENGE. THANK YOU.
CAN I WEIGH IN FOR JUST A MOMENT
ON IF I, VIRTUAL? VIRTUALLY
EVERY. SO YOU CAN COME OR STEP
BACK A LITTLE BIT FROM YOUR
MICROPHONE. IT'S LIKE VIRTUALLY
EVERY REGULATION OF,
TECHNOLOGIES THAT WE HAVE IN THE
ENVIRONMENTAL AND ENERGY SECTOR
IS ACCOMPANIED BY A TRADABLE
COMPLIANCE MECHANISM, WHETHER
IT'S RENEWABLE PORTFOLIO
STANDARDS, FUEL ECONOMY
STANDARDS, CAP AND TRADE, THE
LOW CARBON FUEL STANDARD. SO
THIS IS NOT A NEW IDEA THAT
FIRMS WOULD TRADE THEIR
COMPLIANCE WITH THIS. SECONDLY,
WE FIRMS ARE TRADING THE
REFINERIES ARE TRADING ALL THE
TIME. THEY ARE TRADING FUELS.
THEY ARE TRADING, BLENDING
COMPONENTS, THEY ARE TRADING
DELIVERY IN SOME CASES. SO I
JUST DON'T WANT TO LEAVE THIS
WITH THE IMPRESSION THAT THIS IS
SOME FAR OUT IDEA THAT WE DO
THIS IN WHAT IS ALMOST ALWAYS A
MORE EFFICIENT WAY, BY ALLOWING
FIRMS THE FLEXIBILITY TO COMPLY
DIRECTLY OR TO COOPERATE WITH
ANOTHER FIRM THAT DOES HAVE THE
RESOURCES. THANK YOU. THE OTHER
ISSUE THAT I WANTED TO ADDRESS,
USING MY ANALOGY AS A TEACHER,
IS THE WORKERS THERE CLEARLY
STATING THAT THAT THAT
IMPLEMENTING SOME OF THESE
POLICIES ARE DIFFERENT. AS I
STATED, 34.5 KIDS AND 34.5 KIDS
IN ONE, YOU KNOW, CLASSROOM,
JUST TO MAKE IT EVEN SOUNDS
GREAT ON PAPER, BUT IT DOESN'T
WORK ON THE GROUND. AND I THINK
TO THE WORKERS AND TO THE, YOU
KNOW, THE TRADES THAT ARE HERE,
I WANT TO MAKE SURE THAT PART OF
WHAT, WHATEVER WE DO HERE IS
TAKING THEIR COMMENTS INTO
ACCOUNT, NOT ON PAPER, BUT
ACTUALLY WHAT THEY DO. THEY
STATED THAT ON THE GROUND IS
VERY DIFFERENT THAN OUR, YOU
KNOW, BEAUTIFUL PAPER, POLICIES
THAT WE GIVE THEM IF THEY HAVE
TO HAVE AN OPPORTUNITY TO
ACTUALLY TELL YOU WHAT IT IS
LIKE ON THE GROUND. I'M AGAIN,
AS A TEACHER, IT SOUNDS GREAT ON
PAPER, BUT 34.5 KIDS IN ONE
CLASSROOM AND ANOTHER ONE
DOESN'T WORK. AND SO WE NEED TO
LOOK TO THEM SPECIFICALLY AND
TAKE THEM INTO ACCOUNT, NOT JUST
SAY, WELL, IT'S JUST GOING TO
WORK BECAUSE WE WROTE THIS
POLICY AND I THINK THE, THE,
CLIMATE, IF YOU WILL, HERE IS WE
WANT TO FIND SOLUTIONS, BUT TO
MAKE SURE THAT WE DON'T HARM,
FIRST AND FOREMOST, OUR, OUR,
OUR CONSTITUENTS, BUT SECONDLY,
THE WORKERS THAT ARE DOING THE
WORK ON A DAILY BASIS, THIS IS A
DANGEROUS FROM WHAT I KNOW OR
FROM WHAT I UNDERSTAND, IT'S
VERY DANGEROUS. BUT IF WE DON'T
TAKE THEIR, THEIR, SUGGESTIONS
UNDER ACCOUNT, THEN THEN WE'RE
JUST WRITING BEAUTIFUL PAPERS
FOR OUR SAKE AND SO THAT WE CAN
PROVE THAT WE DID SOMETHING AS
OPPOSED TO THE FOLKS THAT ARE ON
THE GROUND TELLING US HOW IT
REALLY IS. SO AGAIN, I, YOU
KNOW, AGREE WITH, THE
CONVERSATION ABOUT IF WE'RE
GOING TO DO SOMETHING LIKE THIS,
IT CAN'T BE JUST THE CÁC PASSING
DOWN REGULATIONS OR IN THIS
CASE, US PASSING, YOU KNOW, SOME
BILL THAT SAYS THIS IS WHAT YOU
HAVE TO DO WITHOUT TAKING INTO
ACCOUNT, YOU KNOW, THE ACTUAL ON
THE GROUND, YOU KNOW, BOOTS ON
THE GROUND, FOLKS. I'M REALLY
RESPECT THAT COMMENT, I THINK
THAT IS KIND OF THE GUARDRAILS
DISCUSSIONS WE HAD. YOU KNOW, I
THINK AS, AS A PROCESS, YOU
KNOW, CDC WOULD ALWAYS ENGAGE IN
MAKING SURE ALL PERSPECTIVES ARE
REPRESENTED. BUT, YOU KNOW, AS
YOU KNOW, THE ASSEMBLY AS YOU
THINK THROUGH THIS AND
DELIBERATE THROUGH THIS, IF YOU
THINK THOSE ADDITIONAL
GUARDRAILS SHOULD BE CLEARLY
ARTICULATED, WE ABSOLUTELY
WELCOME THE DISCUSSION. THANK
YOU. AND IF I COULD ADD,
ASSEMBLY MEMBER, I THINK IT'S A
REALLY CRITICAL COMPONENT TO
REALLY MAKE SURE THAT WE'RE
HEARING THE LABOR VOICES. AND I
THINK IN PROGRAM DESIGN, I WANT
TO CALL BACK TO WHAT ASSEMBLY
MEMBER BENNETT WAS TALKING ABOUT.
IF YOU HAVE A NEW STANDARD FOR
RESUPPLY DURING MAINTENANCE AND
INVENTORIES, THEN MAINTENANCE IS
NO LONGER A BUSINESS DECISION
ABOUT RAISING PRICES.
MAINTENANCE IS ABOUT SAFETY
ONLY. AND IT'S, YOU KNOW, IF WE
HAVE A BASELINE, YOU HAVE TO
MEET THESE RESUPPLY OBLIGATIONS.
YOU HAVE TO HAVE THESE MINIMUM
INVENTORIES. THAT'S NOT GOING TO
CHANGE ALL THAT MUCH. THE
REGULATIONS HAVE TO BE
PROMULGATED. YES. TO MEET
SEASONAL DYNAMICS AND THE LIKE.
BUT IF THERE'S MORE SUPPLY IN
THE SYSTEM, THEN IT'S ACTUALLY
EASIER TO DO MAINTENANCE ANY
TIME OF YEAR AS NEEDED, BECAUSE
THERE'S NO TRADE OFF THAT
CONSUMERS ARE FACING. IF WE
RAISE THAT BASELINE, THEN IT
MAKES SORT OF THE LABOR SAFETY
ISSUE A FALSE CHOICE. WE SHOULD
ABSOLUTELY BE DOING THAT. AND I
WANT TO REALLY REINFORCE NOTHING
IN THE LAW GIVES NEW AUTHORITY
TO CEC THAT IS CURRENTLY WITH
DIR OR ELSEWHERE ABOUT WORKER
SAFETY. THIS IS ABOUT PROTECTING
CONSUMERS. AND WE SHOULDN'T HAVE
TO PIT CONSUMERS AGAINST LABOR.
WE CAN PROTECT BOTH. THANK YOU.
AND THEN JUST ONE ADDITIONAL
COMMENT. IF I CAN, CHAIRWOMAN,
I, WE TALKED ABOUT E15 AND I,
THESE ARE THE ONLY TWO DAYS THAT
WE GET TO HAVE THESE
CONVERSATIONS. AND I WANT I
DON'T KNOW WHAT THE NEXT STEP
IS. AND SO I WOULD LIKE US TO
REALLY EXPLORE THE E15 FUEL AND,
AGAIN, I DON'T KNOW WHAT THE
PROCESS IS GOING TO BE,
ASSEMBLYWOMAN PETRIE-NORRIS, BUT
BUT THERE'S A STUDY THAT THE E15
FUEL BLEND COULD SAVE CALIFORNIA
DRIVERS $2.7 BILLION AT THE
PUMP. CAN WE AGAIN, I DON'T KNOW
WHAT THE PROCESS IS, BUT CAN
THIS BE PART OF THAT
CONVERSATION SO THAT, AGAIN,
IT'S NOT JUST ONE I'VE HEARD
FROM. I THINK ALL OF MY
COLLEAGUES AND FROM, YOU KNOW,
QUITE FRANKLY, THE PANELISTS
THAT IT CAN'T BE JUST ONE THING
THAT WE'RE LOOKING AT THAT WE
NEED TO LOOK AT ALL OF THE
DIFFERENT, SOLUTIONS. AND I
THINK I ASKED EARLIER, THAT WE
NEED TO HAVE A COMPREHENSIVE,
STRATEGY, NOT A ONE SIZE, JUST
BECAUSE OF THE OUTSIDE SOURCES.
AND WE WON'T TALK ABOUT THOSE,
BUT THE OUTSIDE, PRESSURE TO DO
SOMETHING. LET US NOT JUST DO
SOMETHING FOR THE SAKE OF DOING
SOMETHING. CAN WE INCLUDE THE
E15? CAN WE INCLUDE ALL OF THE
CONVERSATIONS THAT WE'RE HAVING
HERE AS PART OF A PACKAGE, IF
YOU WILL, OR A COMPREHENSIVE
BILL IF THIS IS WHERE WE'RE
GOING, WE CAN'T JUST SAY, THIS
IS THE MAGIC FORMULA. I THINK AS
MY COLLEAGUE, FROM THE CENTRAL
VALLEY STATED, IT'S ONE BULLET
IN AN ARSENAL. I GUESS. I DON'T
KNOW IF I LIKE THAT ANALOGY, BUT
BUT, YOU KNOW, ANYWAY. BUT THE
POINT IS THAT WE HAVE TO TAKE
EVERYTHING. YEAH. AND TAKE
EVERYTHING INTO CONSIDERATION. I
THINK MY BIGGEST FEAR IS THAT WE
SAY THIS AS A TEACHER EVERY,
EVERY, EVERY MONTH WAS LIKE, OH,
THIS PROGRAM IS GOING TO TEACH
EVERYBODY TO READ. AND THEN I
CALLED IT PROGRAM DU JOUR THE
FOLLOWING MONTH. OH, WELL, THIS
ONE'S GOING TO SOLVE ALL THE
PROBLEMS. AND THEN, YOU KNOW, 16
YEARS THAT I WAS A TEACHER, I AT
LEAST HAD 16 DIFFERENT
STRATEGIES THAT WAS GOING TO
SOLVE ALL OF OUR PROBLEMS. AND I
CAN TELL YOU THAT IT HASN'T
SOLVED IT. AND SO I DON'T WANT
TO GET INTO THIS IS GOING TO
SOLVE EVERYTHING. AND THIS IS
GOING TO, YOU KNOW, WE HAVE TO
REALLY BE THOUGHTFUL ABOUT HOW
WE'RE GOING TO DO THIS AND
INCLUDE ALL OF THE TOOLS. IF YOU
WILL, TO MAKE SURE THAT WE USE
EVERYTHING AND EVEN AND I THINK
I STATED BEFORE, IF THERE ARE
SOME REGULATIONS THAT WE'VE
PASSED THAT ARE NOT WORKING, CAN
WE REVISIT AND CHANGE THOSE SO
THAT WE GIVE THE OPPORTUNITY TO
THE, THE, THE INDUSTRY, THE
REFINERS, WHOEVER IT IS TO GO
BACK TO SOME OF THE SOME OF THE
POLICIES THAT ARE NOT WORKING,
THAT CAN HELP US THROUGH THIS
CRISIS OR THROUGH THE ISSUE. ALL
RIGHT. THANK YOU SO MUCH.
ASSEMBLY MEMBER RUBIO, THANK YOU
SO MUCH TO EVERYONE ON THE
COMMITTEE, AND THANK YOU TO OUR,
OUR WITNESSES WHO HAVE PROVIDED
TESTIMONY, WE REALLY APPRECIATE
YOUR TIME BEING PART OF THIS
CONVERSATION. SO I THINK WE SAID
AT THE TOP AND MANY TIMES SINCE,
THIS IS CERTAINLY A DENSE AND
COMPLICATED ISSUE, IT'S ALSO ONE
THAT IS OF UTMOST IMPORTANCE TO
40 MILLION CALIFORNIANS. AND SO
HAVE APPRECIATED THIS
OPPORTUNITY REALLY TO THOROUGHLY
DELVE IN BOTH TO THE MARKET AS A
WHOLE AND INTO THE PROPOSAL
BEFORE US AS WELL, SO I THINK
WE'RE GOING TO WRAP UP THIS
PANEL NOW, WHAT WE ARE GOING TO
DO IS PAUSE. I THINK LET'S JUST
PAUSE FOR FIVE MINUTES AND MOVE
TO OUR FINAL PANEL, WHICH IS
FOCUSED ON ADDITIONAL AND
SUPPLEMENTAL PROPOSALS TO
ADDRESS SUPPLY. I KNOW SEVERAL
OF THEM HAVE ALREADY BEEN
DISCUSSED, THAT PANEL WILL
CONSIST OF MR. GARCIA, I THINK
MR. CORTE HAD TO LEAVE. WE'LL
ALSO BE JOINED BY MARTIN
RODRIGUEZ FROM THE TRI COUNTY'S
BUILDING TRADES COUNCIL AND
JEREMY MARTIN FROM THE UNION OF
CONCERNED SCIENTISTS, WHO WILL
BE JOINING US REMOTELY, LET'S DO
A LET'S DO, LIKE A FIVE MINUTE
BREAK AND THEN REGROUP FOR OUR
FINAL PANEL. THANK YOU ALL. SO
MUCH FOR PARTICIPATING.
AND AGAIN, JUST TO SET CONTEXT
FOR THIS CONVERSATION, AND
THERE'S BEEN SOME THREADS THAT
HAVE BEEN WOVEN THROUGHOUT
THROUGHOUT THE DAY RELATED TO
ADDITIONAL PROPOSALS OR
SUPPLEMENTAL PROPOSALS THAT
COULD HELP TO ADDRESS THE SUPPLY
CONSTRAINTS AND SUPPLY
CHALLENGES THAT WE FACE. SO WE
WANTED TO DIVE INTO SOME OF
THOSE SOLUTIONS AS PART OF THIS
PANEL, AND WE'LL GO AHEAD AND
BEGIN. I THINK, MR. RODRIGUEZ,
IF YOU WANT TO KICK US OFF. THIS
AGENT. OH, THERE YOU ARE. GOOD
MORNING OR GOOD AFTERNOON,
CHAIR. MY NAME IS MARTIN
RODRIGUEZ. I'M THE BUILDING
TRADES PRESIDENT FOR THE TRI
COUNTIES, AND I'M THE BUSINESS
AGENT FOR THE IRONWORKERS LOCAL
433, AS WELL AS THE BOARD ON THE
STATE BUILDING AND CONSTRUCTION
TRADES, THIS IS A BILL THAT'S
PROBLEMATIC FOR US AND FOR
MYSELF AND MY MEMBERS, WE FEEL
THIS IS SOMETHING THAT COULD BE
FIXED MORE COLLABORATIVELY WITH
THE INDUSTRY WITHIN THE INDUSTRY
VERSUS LEGISLATION, YOU KNOW,
IT'S, WELL INTENTIONED
LEGISLATION THAT HAS KIND OF GOT
US TO THIS POINT IN THE FIRST
PLACE. IF YOU GO THROUGH THE
DIFFERENT HISTORY OF THE LAST 15
YEARS. SO I'M NOT IN FAVOR OF
THIS, NOR IS THE BUILDING
TRADES, WE, WE FEEL THAT, YOU
KNOW, WITH THE RESTRICTIONS THAT
HAVE PUT IN PRODUCTION, THE
DRILLING PERMITS, THE
RESTRICTIONS THAT HAVE PUT IN IN
PLACE FOR THE INDUSTRY AS A
WHOLE, IT IS A COST. THERE IS A
DOLLAR AMOUNT THAT COMES UP WITH
THIS, AND WE'RE PAYING FOR IT AT
THE PUMP, YOU KNOW, WE GET A LOT
OF IFS AND, BUTS IN, IN, MR.
GUPTA HAD SOME GOOD POINTS. HE
HAD A GOOD CHART, A VERY GOOD
PRESENTATION, A LOT OF LOT OF
INFORMATION, BUT IT'S A LOT OF
MAYBES. BUT I CAN TELL YOU WHAT,
WHEN I GO TO THAT GAS STATION OR
ANY OF MY CONSTITUENTS GO TO
THAT GAS STATION. THE VERY REAL
REALITY IS THAT THEY'RE PAYING A
LOT MORE FOR GAS. SINCE 2015,
FUEL COSTS HAVE RISEN
EXPONENTIALLY, AND WE FEEL THAT
THIS ADDED LEGISLATION IS JUST
SOMETHING ELSE THAT'S GOING TO
COST MORE MONEY, GETTING BEHIND
SOMETHING LIKE THIS WOULD BE
VERY HARD, I'VE SEEN BUREAUCRACY
WORK. I DEAL WITH IT EVERY DAY.
AND THE COUNTIES THAT I
REPRESENT AND, YOU KNOW, TEN
YEARS TO GET A PROJECT PUSHED
THROUGH FOR SOMETHING THAT THE
COMMUNITY WANTS IS UNACCEPTABLE.
AND IT'S BECAUSE OVERLAYING
BUREAUCRACY AND THIS IS WHAT I
SEE. WE DON'T HAVE TO HAVE A
LEGISLATION OR A BILL FOR EVERY
FIX. I'M I'M FIRMLY, A FIRM
BELIEVER IN HUMANKIND AND THAT
WE CAN SIT DOWN AND COME UP WITH
AN EQUITABLE SOLUTION TO THIS
PROBLEM, ESPECIALLY WITHIN THE
INDUSTRY, I MEAN, IF IT'S
CAPACITY WE NEED AND WE DON'T
HAVE THIS, CAPACITY OF THE
TANKS, WELL, IT'S GOING TO BE A
COST TO THAT CONSTRUCTOR. NO
ONE'S BUYING NEW PROPERTIES
GOING THROUGH THE PERMIT PROCESS
ALL TAKES TIME. TIME IS MONEY.
AND THERE YOU GO AGAIN WITH THAT
BUREAUCRACY. EVERY STEP YOU ADD
TO THIS SYSTEM IS GOING TO COST
MONEY. IT'S. AND THAT'S WHAT IT
BOILS DOWN TO. YOU KNOW, WHEN
YOU THINK ABOUT CAPACITY AS WELL,
YOU KNOW, WE'RE TALKING ABOUT,
OH, WE'LL JUST ORDER A TANKER
OKAY. REALLY. I MEAN, A TANKER
FROM A COUNTRY THAT HAS NO
ENVIRONMENTAL STANDARDS, A
COUNTRY THAT HAS NO LABOR
STANDARDS WHATSOEVER, OR, YOU
KNOW, WHERE'S THE MORALITY IN
THAT? IT'S NOT, IT'S JUST
PUSHING THE CAN TO SOMEONE ELSE.
IT'S MAKING IT SOMEONE ELSE'S
PROBLEM. SO WE COULD LIVE IN A
GLASS HOUSE AND SAYING HOW GOOD
WE'RE DOING IT HERE IN
CALIFORNIA. THAT SHOULDN'T BE
THE CASE, YOU KNOW, IT'S, WE DO
OWE IT TO THE, NOT ONLY THE
BUILDING TRADES AND WORKING MEN
AND WOMEN, WHETHER THEY BE A
UNION OR NOT, BUT TO THE
POPULATION OF CALIFORNIA TO COME
UP WITH A SOLUTION, IF THAT'S
WHAT IT IS. AS FAR AS, SITTING
DOWN AT THE TABLE, THEN THESE
INDIVIDUAL, REFINERS CAN I'M
FIRMLY, BELIEVE THAT THEY CAN DO
IT. IT DOESN'T TAKE MORE
LEGISLATION, YOU KNOW, TO
ACCOMPLISH THIS. Ã, YOU KNOW, I
THINK, LIKE, RIGHT NOW, YOU CAN
LOOK OUT OF THE PORT OF LONG
BEACH. THERE'S 100 TANKERS OUT
THERE IDLING 24 OVER SEVEN FOR
UP TO SIX WEEKS. OKAY NOW WE'RE
GOING TO TRY TO BRING IN MORE
SHIPS TO COVER OUR, BACKSIDE, IN
OUR FUEL NEEDS WHEN THESE
INTERNATIONAL, FLEETS, THEY'RE
NOT EVEN EQUIPPED TO DO THAT, SO
THEY'RE GOING TO PAY PENALTIES
FOR BRINGING THAT OIL IN HERE
FOR REDUCED EMISSIONS. AS OF
JANUARY FIRST. THAT'S GOING TO
ADD A COST. NOW, THINK ABOUT
THIS. THOSE SAME SHIPS, THAT,
THAT ARE GOING TO BE CHARGED
MORE. WELL, AND THEY'RE COMING
TO A, LET'S JUST SAY IT'S, IT'S
A TANKER THAT'S REGISTERED HERE
BECAUSE IT'S GOING TO BE UNDER
THE JONES ACT AS WELL. OKAY. AND
THIS IS GOING FROM PORT TO PORT.
OKAY. IF THAT PORT'S NOT
EQUIPPED FOR, REDUCING
EMISSIONS, HOW MANY PORTS ARE
THERE THAT ARE DOING THAT? THE
ONLY ONE I KNOW OF THAT'S SUPER
GREEN LIKE THAT IS PORT OF
HUENEME, MY HOME PORT. IT'S A
VERY GREEN PORT, BUT EVERYWHERE
ELSE IS LEFT HOLDING THE BAG.
SO, YOU KNOW, THIS IS THIS IS A
COMPLEX QUESTION, BUT AT THE END
OF THE DAY, IT'S A LOT OF COMMON
SENSE INVOLVED IN THIS. ALSO AND
I FIRMLY BELIEVE IN OUR
LEGISLATURE, DOES POSSESS THAT,
THE COMPLEXITIES OF IT SHOULD BE
WORKED OUT WITHIN THE INDUSTRY.
AND THAT'S PRETTY MUCH ALL I GOT
TO SAY ON IT. THANK YOU FOR YOUR
COMMENTS AND FOR JOINING US
TODAY, WE'LL GO AHEAD AND TURN
TO MR. MARTIN, WHO'S JOINING US
REMOTELY FROM THE UNION OF
CONCERNED SCIENTISTS. YES. THANK
YOU VERY MUCH. THANK YOU. THANKS
FOR YOUR PATIENCE. THANKS FOR
BEING HERE. IT'S MY PLEASURE. MY
NAME IS JEREMY MARTIN. I'M THE
DIRECTOR OF FUELS POLICY AND A
SENIOR SCIENTIST IN THE CLEAN
TRANSPORTATION PROGRAM AT THE
UNION OF CONCERNED SCIENTISTS.
THANKS FOR THE OPPORTUNITY TO
SHARE OUR VIEWS ON THIS
IMPORTANT TOPIC. CALIFORNIA HAS
SET ITS SIGHTS ON PHASING OUT
FOSSIL FUELS, AND IT'S MAKING
PROGRESS. GASOLINE DEMAND HAS
PEAKED AND IS IN DECLINE AS MORE
DRIVERS CHOOSE ELECTRIC VEHICLES
AND GASOLINE VEHICLE EFFICIENCY
IMPROVES. PHASING OUT PETROLEUM
REQUIRES SCALING UP ELECTRIC
VEHICLES AND RENEWABLE ENERGY
AND INVESTMENTS TO HELP PEOPLE
GET AROUND WITHOUT ALWAYS
NEEDING TO DRIVE. BUT THE FLIP
SIDE OF SCALING UP CLEAN ENERGY
SOLUTIONS IS PHASING OUT
POLLUTING FOSSIL FUELS IN A
CLEAN, SAFE AND FAIR MANNER. ONE
THING WE KNOW ABOUT PHASING OUT
FOSSIL FUELS IS THAT WE CAN'T
TRUST OIL COMPANIES TO
RESPONSIBLY CLEAN UP THEIR OWN
MESS. HAS COMMISSIONED A CASE
STUDY OF THE CLOSURE OF THE
LARGEST REFINERY ON THE EAST
COAST IN PHILADELPHIA. WE
LEARNED THAT OIL COMPANY EXIT
STRATEGIES PROTECT THEIR OWN
INTERESTS, OFTEN AT THE EXPENSE
OF THE HEALTH, SAFETY AND
WELL-BEING OF THEIR WORKERS AND
THE COMMUNITIES IN WHICH THEY
OPERATE. THE HIGHLY CONCENTRATED
MARKET POWER OF CALIFORNIA
REFINERS, WHICH WE'VE HEARD A
LOT ABOUT IN THE LAST PANEL, IS
ALSO HARMFUL TO CONSUMERS. IN
THIS CONTEXT, THE ASSERTION
WITHOUT EVIDENCE THAT FUEL
REGULATIONS HARM CONSUMERS MAKES
NO SENSE, AS WE'VE JUST HEARD,
THE DATA SHOWS THAT THE AMOUNT
OF FUEL STORAGE THAT PROTECTS
CONSUMERS IS MORE THAN THE
AMOUNT THAT MAXIMIZES RETURNS.
FOR OIL COMPANIES, THESE
DIVERGENT INTERESTS BETWEEN THE
OIL INDUSTRY AND THE PEOPLE OF
CALIFORNIA MEAN THE STATE MUST
INTERVENE TO PROTECT CONSUMERS,
WORKERS AND COMMUNITIES FROM
HARM AT THE HANDS OF THE OIL
INDUSTRY. THESE REGULATIONS
SHOULD ALSO AVOID THE CREATION
OF UNNECESSARY FOSSIL FUEL
INFRASTRUCTURE, WHICH WOULD NOT
SERVE THE BROADER AIM OF PHASING
OUT PETROLEUM. THE
TRANSPORTATION FUELS ASSESSMENT.
TRANSPORTATION FUEL ASSESSMENT,
PUBLISHED RECENTLY BY THE
CALIFORNIA ENERGY COMMISSION,
CONSIDERS MANY STRATEGIES TO
ADDRESS BOTH THE DEMAND FOR
FUELS AND THE SUPPLY OF
PETROLEUM FUELS. REDUCING DEMAND
IS ALWAYS THE PREFERRED
APPROACH, BUT STRATEGIES ARE
ALSO NEEDED TO MANAGE THE FUEL
SUPPLY. SEVERAL OF THE SUPPLY
STRATEGIES PROPOSED WOULD CHANGE
FUEL SPECIFICATIONS IN
CALIFORNIA AND OR NEARBY STATES,
TO INCREASE THE FLEXIBILITY OF
THE SYSTEM. THESE ARE SEVERAL OF
THESE PROPOSALS. THEY ARE QUITE
COMPLEX, AND THEY NEED TO BE
EVALUATED MUCH MORE THOROUGHLY
BEFORE THEY'RE ADVANCED. WE NEED
MORE ANALYSIS AND BETTER
ANALYSIS, AND WE NEED TO
CONSIDER NOT ONLY THE GASOLINE
MARKET IMPACTS, BUT ALSO AIR
POLLUTION AND PEOPLE'S HEALTH.
THE HEALTH IMPACT OF CHANGES TO
FUELS DEPENDS NOT ONLY ON THE
FUEL, BUT ON THE VEHICLES, AND
AN OLDER CAR IS LIKELY TO HAVE A
MUCH BIGGER INCREASE IN
POLLUTION FROM A FUEL CHANGE
THAN A NEWER ONE. AND A POORLY
IMPLEMENTED CHANGE TO FUELS
COULD INCREASE POLLUTION AND
DISPROPORTIONATELY
DISPROPORTIONATELY HARM PEOPLE
LIVING IN COMMUNITIES WITH A
HIGHER CONCENTRATION OF OLDER
CARS. GETTING THESE MOST
POLLUTING CARS OFF THE ROAD
SOONER CAN REDUCE POLLUTION AND
IMPROVE HEALTH OUTCOMES. SO
SHORT TERM MEASURES LIKE THE
GASOLINE STORAGE REQUIREMENTS
ARE IMPORTANT, BUT THEY'RE JUST
THE FIRST STEP OF A PROCESS THAT
WILL BE AN ONGOING PROCESS, AND
WE NEED THAT PROCESS TO BE BASED
ON STRONG ANALYSIS AND INFORMED
BY ROBUST ENGAGEMENT WITH
AFFECTED COMMUNITIES. TO PLAN
FOR AND IMPLEMENT A PETROLEUM
PHASEOUT THAT PUTS THE NEEDS OF
WORKERS, COMMUNITIES AND
CONSUMERS AHEAD OF OIL INDUSTRY
PROFITS. THANKS. LOOK FORWARD TO
ANY QUESTIONS. THANK YOU, MR.
MARTIN. AND AS MR. MARTIN,
HIGHLIGHTED AS PART OF THE
TRANSPORTATION FUELS ASSESSMENT,
THE CEC DID TALK ABOUT THE
OPPORTUNITIES ASSOCIATED WITH,
ALTERNATIVE OR DIFFERENT FUEL
BLENDS, ONE OF WHICH HAS GOTTEN
QUITE A BIT OF AIRTIME TODAY,
WHICH IS E15. AND SO WE ARE
JOINED NOW BY MR. NEIL KOHLER.
TELL US A LITTLE BIT MORE ABOUT
ABOUT E15 AND WHY THIS IS AN
OPPORTUNITY FOR CALIFORNIA
WITHIN THE CONTEXT OF THE
CONSTRAINTS THAT WE ARE HAPPY TO
DO. SO. AND CHAIRMAN SCOTT,
THANK YOU VERY MUCH FOR HAVING
ME. OTHER MEMBERS OF THE OF THE
COMMITTEE. MY NAME IS NEIL
CURLER. I'M WITH THE RENEWABLE
FUELS ASSOCIATION. WE'RE THE
TRADE ASSOCIATION FOR ETHANOL
PRODUCERS IN THE UNITED STATES.
I'VE SPENT MY ENTIRE
PROFESSIONAL CAREER 40 PLUS
YEARS PRODUCING AND MARKETING
ETHANOL IN THE GREAT STATE OF
CALIFORNIA. SO VERY, VERY
KNOWLEDGEABLE, ON THE ON THE
SUBJECT MATTER AND APPRECIATE
THE, THE, THE ATTENTION THAT E15
GOT TODAY. I, I THINK, CHAIR
MEMBER K¾T USED THE WORD NO, NO
BRAINER, IT REALLY IS. WE'VE
DONE ALL THE STUDY, WE'VE DONE
THE ANALYSIS, ALL OTHER 49
STATES HAVE APPROVED E15. WE
KNOW THAT IT INCREASES SUPPLY. A
LOT OF TALK ABOUT THAT TODAY. WE
KNOW THAT IT INCREASES
COMPETITION. WE'RE TALKING
ABOUT, YOU KNOW, SINGLE DIGIT
NUMBER OF REFINERIES IN
CALIFORNIA. WE HAVE WE HAVE FIVE
ETHANOL PLANTS IN THE STATE OF
CALIFORNIA. AND WE HAVE 210 IN
THE UNITED STATES. THERE'S AN
ETHANOL PLANT IN STOCKTON TODAY
THAT'S SHUT DOWN. THAT WOULD BE
RUNNING TODAY IF WE HAD E15. SO
HERE WE'RE WORRIED ABOUT A LACK
OF SUPPLY, AND WE'RE OVER
SUPPLYING THE MARKET IN
CALIFORNIA FOR THAT 10% OF THE,
THE GASOLINE TANK THAT'S
CURRENTLY ALLOWED WHEN E15 AND
FRANKLY, EVEN HIGHER BLENDS OVER
TIME WOULD REALLY HELP DISPLACE
THAT PETROLEUM AND PROVIDE
INCREMENTAL BENEFITS. AND IT
REDUCES COSTS, YOU MISS RUBIO
REFERRED TO THE STUDY THAT WAS
BY A AG ECONOMIST AT UC BERKELEY
AND ANOTHER ECONOMIST FROM THE
US NAVAL ACADEMY THAT JUST CAME
OUT SEVERAL WEEKS AGO, THAT DID
CONCLUDE THAT IT WOULD SAVE
CONSUMERS E15 IN CALIFORNIA
$0.20 PER GALLON, OR $2.7
BILLION PER YEAR, DIFFICULT TO
GET THAT KIND OF BENEFIT BY SUCH
A SIMPLE, STRAIGHTFORWARD MOVE,
YOU KNOW, WE'VE HEARD ABOUT THE
FRONTLINE COMMUNITIES, E15 JUST
COMPARED TO E10. AND THIS GOES
TO THE, THE STUDY, THE
COMPARATIVE STUDY THAT MATT
BATTELLE FROM CARB REFERRED TO
THAT WAS CONDUCTED JUST LOOKING
AT THE DIFFERENCE BETWEEN E10
AND E15. IT REDUCES VIRTUALLY
ALL TAILPIPE EMISSIONS. WHAT WAS
REALLY STAND OUT, GREATER THAN
WE EVEN EXPECTED TO SEE WAS A
18% REDUCTION IN PM EMISSIONS,
JUST GOING FROM A 10 TO 15%
BLEND. AND SO WITH GREAT
IMMEDIATE BENEFIT, NOT ONLY IN
THE POCKETBOOK BUT INTO THE
PUBLIC HEALTH OF CALIFORNIA
CITIZENS. AND IT CREATES JOBS.
LET'S GET THAT ETHANOL PLANT
RUNNING IN STOCKTON AGAIN. LET'S
BUILD SOME ADDITIONAL ETHANOL
PLANTS. LET'S LOOK AT FORESTRY
RESIDUES AS A AS A FEEDSTOCK AND
TRY TO LOOK AT SOLVING SOME
OTHER ENVIRONMENTAL PROBLEMS AT
THE SAME TIME AND, AND CREATE
THOSE JOBS, THE MULTIMEDIA
PROCESS WAS REFERRED TO
YESTERDAY. AND TODAY, I CAN TELL
YOU, BECAUSE, YOU KNOW, OUR
INDUSTRY WAS VERY INTIMATELY
INVOLVED IN THAT PROCESS. AND
CO-FUNDED THE EMISSION TESTING.
WE SPENT OVER $1 MILLION AS AN
INDUSTRY WITH THE STATE OF
CALIFORNIA TO CONDUCT THAT WORK.
AND THE MULTIMEDIA ANALYSIS IS
DONE. IT HAS BEEN DONE FOR
MONTHS. IT TOOK LONGER THAN IT
SHOULD HAVE. COVID CERTAINLY
HELPED DELAY THINGS, BUT THAT
IT'S JUST IT NEEDS TO BE
COMPLETED. IT NEEDS TO GET TO
THE ENVIRONMENTAL POLICY
COMMITTEE AND BE APPROVED
BECAUSE THE WORK IS DONE, THE
FUEL PASSES WITH FLYING COLORS
IN TERMS OF ITS ENVIRONMENTAL
AND ECONOMIC BENEFITS. AND THE
TIME TO ACT IS NOW. AND WITH ALL
DUE RESPECT TO CARB, THERE'S FOR
WHATEVER REASON, BEEN A LACK OF
A SENSE OF URGENCY ON SUCH AN
OBVIOUS OPPORTUNITY TO YOU KNOW,
SIMULTANEOUSLY MITIGATE
POLLUTION AND LOWER PRICE AND
INCREASE SUPPLY. SO, SOME, SOME,
SOME PRODDING, SOME ASSISTANCE
FROM THE LEGISLATURE, I, I THINK
IS TIMELY AND APPROPRIATE AND I
AGREE WITH WHAT MANY HAVE SAID,
WHICH THIS ISN'T JUST A, A ONE
SOLUTION PROBLEM. WE NEED TO
EMPLOY AS MANY, OPPORTUNITIES AS
THERE ARE IN POLICY MEASURES.
AND CERTAINLY E15 IS. AND, YOU
KNOW, IN THAT ENERGY COMMISSION
ASSESSMENT REPORT, RIGHT AFTER
TALKING ABOUT STORAGE, THEY
TURNED TO E15 AND OTHER
PRODUCTION ENHANCING
OPPORTUNITIES. THIS AGAIN, TIME
TO ACT IS NOW. AND REALLY,
REALLY APPRECIATE THE ATTENTION
YOU'RE GIVING E15. AND HAPPY TO
ANSWER ANY FOLLOW UP QUESTIONS.
THANK YOU, QUESTIONS FROM
COMMITTEE MEMBERS FOR ANY OF OUR
PANELISTS, I JUST HAD A LITTLE
COMMENT, I MEAN, IF E15 IS OUR
SOLUTION, I MEAN, NOBODY'S
BROUGHT UP THE ENVIRONMENTAL,
INTO THAT E15. IT'S HIGHLY
DAMAGING TO THE ENVIRONMENT. I
MEAN, I'M JUST LOOKING AT A
STUDY, AND I'M NOT DENIGRATING
WHAT YOU'RE SAYING, BUT I'M JUST
SAYING IF WE'RE GOING TO BE
LOOKING FOR E15. HEY, SOME OF
YOU GUYS NEED TO LOOK AT THE
ENVIRONMENTAL IMPACT ON THAT.
WHAT IT DOES, IT'S HIGHLY
CORROSIVE TO METALS. CERTAIN
TYPES OF RUBBERS TO RETROFIT A
REFINERY TO GO TO ETHANOL, E15
SPECIFICALLY. THAT'S GOING TO BE
QUITE COSTLY. AND TIME
CONSUMING. MORE TIME DOWN, AND
LIKE I SAY, I'M NOT HERE TO
KNOCK, THE E15, BUT, THE
CONVERSATIONS OUT THERE, LET'S,
LET'S DIG, DIG A LITTLE DEEPER
IN THAT THAT E15 IS I MEAN, COME
ON. YES. AND THANK YOU FOR
FLAGGING THAT. AND JUST I THINK
TO LEVEL SET CONTEXT, BOTH FOR
THOSE IN THE ROOM AND ANYONE ONE
LISTENING, I'LL BUILD A REFINERY
THOUGH. NO CARB, CARB IS IN THE
MIDDLE OF CONDUCTING THAT EXACT
ANALYSIS. SO THE TRANSPORTATION
FUELS ASSESSMENT THAT WAS
PREPARED BY THE CEC ON PAGE 48,
TALKS ABOUT THE STUDY, AND IT
DOES SAY THAT E15 FUEL
EVALUATION IS REQUIRED TO
DETERMINE WHETHER IT WOULD
CREATE ANY SIGNIFICANT NEW
ENVIRONMENTAL OR PUBLIC HEALTH
IMPACTS AS PART OF AN EVALUATION
PROCESS FROM CARB. RECENT
RESEARCH ON E15 INDICATES THAT
IT MAY REPRESENT A LOWER
ENVIRONMENTAL HARM COMPARED TO
E10, AND SO THE I THINK THE
QUESTION BEFORE THIS COMMITTEE
AND THE QUESTION THAT WAS RAISED
IN OUR PREVIOUS PANEL WAS
RELATED TO THE FACT THAT THIS
STUDY HAS BEEN TAKING,
APPARENTLY 25 YEARS OR SOMETHING
LIKE THAT. SO COULD I RESPOND TO
EXTENSIVE. YES. WE'RE EAGER TO
GET THAT CONCLUDED AND GET THOSE
CONCLUSIONS SO THAT WE CAN ACT
ON THEM APPROPRIATELY? YES. JUST
A QUICK RESPONSE. AND WE BUILT
OUR ETHANOL PLANTS HERE IN
CALIFORNIA WITH WITH TRADE
UNION. SO, SO WE'LL BUILD BUILD
AN EXCELLENT THE, THE, AND WITH
DUE RESPECT TO YOUR COMMENTS, I
MEAN, ETHANOL HAS HAS BEEN
PROVEN TO BE ENVIRONMENTALLY
SUPERIOR TO GASOLINE CARB BY
THEIR OWN LOW CARBON FUEL
STANDARD, WHERE EVERY FUEL IS
SCORED, THE AVERAGE ETHANOL,
THERE'S SOME ETHANOL THAT GOES
SIGNIFICANTLY EVEN BETTER THAN
THIS IS 50% BETTER THAN GASOLINE
ON A GREENHOUSE GAS EMISSIONS,
AND MUCH BETTER ON ALL OF THE
OTHER POLLUTANTS. AND THAT'S
TAKEN IN THE FULL LIFE CYCLE
ANALYSIS FROM GROWING IT IN
TERMS OF INFRASTRUCTURE.
INFRASTRUCTURE EXISTS. WE DON'T
BLEND ETHANOL ACTUALLY AT THE
REFINERY. IT'S BLENDED, AS WE
HEARD IN OUR LITTLE 101
YESTERDAY, DOWNSTREAM. AND SO
THE TANKS THERE TO BLEND ETHANOL,
WHETHER IT'S 10%, WHETHER IT'S
15%, AND IF THERE'S A SHIFT TO
LESS GASOLINE, THEN YOU'LL SHIFT
A TANK INTO ETHANOL. SO YOU
KNOW, THE TANKS ARE THERE, THE
CARS ARE THERE. THE
INFRASTRUCTURE IS THERE. THE
ENVIRONMENTAL GRADE IS IN. IT'S
A PLUS. WE NEED TO GET GOING
NOW. THANK YOU. ASSEMBLY MEMBER
RUBIO. THIS IS EXACTLY THE
POINT. WE HAVEN'T BEEN HAVING
THESE CONVERSATIONS WHERE, YOU
KNOW, WE'RE ENGAGING AND, YOU
KNOW, DATA AND INFORMATION ABOUT
WHAT OTHER, STRATEGIES WE CAN
USE TO BUILD THIS. AND THAT'S
THIS IS EXACTLY WHAT WE WANT. WE
NEED THE CONVERSATIONS BETWEEN
ALL OF THESE DIFFERENT GROUPS TO
MAKE SURE THAT WE'RE TAKING
EVERYTHING INTO ACCOUNT, NOT
JUST ONE ISSUE. AND THAT'S THANK
YOU FOR BRINGING THAT UP.
BECAUSE AGAIN, THIS IS EXACTLY
THE POINT. AND YOU KNOW, FOR
CARB I APPRECIATE THAT THEY'RE
WORKING ON IT. BUT IT'S BEEN
FIVE YEARS OR FIVE WHATEVER THE
AMOUNT, AT LEAST FROM 2019 TO
NOW IT'S BEEN FIVE YEARS. AND SO
IF THIS IS PART OF THE
INFORMATION OR THE STRATEGIES
THAT WE NEED TO USE TO BE
BETTER, THEN WE NEED TO GET ON
IT INSTEAD OF YOU KNOW, SITTING
BACK AND HOPING AND PRAYING. AND
I USUALLY SAY THAT HOPE IS NOT A
STRATEGY. HOPING AND PRAYING
THAT SOMEBODY FIXES IT. WELL,
THAT SOMEBODY IS NOT HAPPENING
YET. SO LET'S SEE. THESE ARE THE
CONVERSATIONS WE NEED TO BE
HAVING. THAT'S WHAT HAPPENS. AND
THEN WE THINK WE NEED TO
LEGISLATE SOMETHING. IT'S
COLLABORATION CONVERSATION.
LET'S GET IT DONE. ALL RIGHT.
AND THEN AGAIN JUST ALL RIGHT
SEEING NO NO QUESTIONS. NO
FURTHER QUESTIONS FOR OUR
PANELISTS OR MR. LEE, ONE OF OUR
PANELISTS SEEM TO HAVE ASKED THE
QUESTION I WAS GOING TO ASK,
BUT, I JUST WANTED TO ASK AGAIN,
JUST ON THE TOPIC OF E15. YOU
KNOW, WE HEARD FROM SOME PRIOR
FOLKS AND I OPEN MINDED, BUT
SKEPTICAL TOO, IS THAT THERE
WERE SOME CONCERNS ABOUT THE
PRODUCTION OF E15 BEING SUPER
CARBON INTENSIVE. CAN YOU TALK
US? YOU MENTIONED IT A BIT IN
YOUR TALK, BUT CAN YOU TALK US
THROUGH WHAT IS THE DIFFERENCE
IN PRODUCTION VERSUS E10 AND IF
IT'S MORE INTENSIVE? WELL, IT'S
THE ETHANOL ITSELF THAT YOU
WOULD HAVE TO LOOK AT AND SO
THERE'S NOTHING THAT E10 DOESN'T
DO THAT E15 AND FRANKLY HIGHER
BLENDS DOESN'T DO BETTER. SO IN
TERMS OF CARBON INTENSITY, YOU
KNOW, CALIFORNIA IS THE YOU
KNOW, IS THE EXPERT IN THAT
BECAUSE THEY HAVE DONE THE FULL
LIFE CYCLE ANALYSIS AS PART OF
THE LOW CARBON FUEL STANDARD ON
ALL FUELS, INCLUDING ETHANOL.
AND THAT'S WHERE MY COMMENT
COMES FROM. CARB'S OAN SCORING,
WHICH HONESTLY, FROM OUR POINT
OF VIEW THERE, THERE ARE SOME
QUESTIONABLE ASSUMPTIONS THAT A
DEBIT THE FULL LIFE CYCLE FROM
THE PRODUCTION OF THE FEEDSTOCK
TO THE TRANSPORTATION TO THE
CONVERSION INTO ETHANOL. IT PUTS
ETHANOL AT A SCORE THAT'S
ROUGHLY HALF OF GASOLINE.
THERE'S QUITE A BIT OF ETHANOL
THAT'S SOLD IN CALIFORNIA.
THAT'S 75% LESS CARBON INTENSIVE
THAN, CONVENTIONAL GASOLINE
REFORM. CALIFORNIA'S
REFORMULATED GASOLINE. SO IT'S,
YOU KNOW, IT'S WHY, IN SPITE OF
A LOT OF MISUNDERSTANDING, IF
YOU LOOK AT WHERE THE CREDIT HAS
BEEN GENERATED UNDER THE LOW
CARBON FUEL STANDARD PROGRAM TO
DATE, ETHANOL HAS GENERATED MORE
CREDIT THAN ANY SINGLE OTHER
FUEL. AND WE'RE NOT DONE WITH
CARBON INTENSITY THROUGH THROUGH
CARBON CAPTURE, THROUGH SOLAR
POWER IN THE CONVERSION PROCESS,
WE HAVE MADE A COMMITMENT AS AN
INDUSTRY BY NO LATER THAN 2045
TO BE CARBON ZERO. AS AN
INDUSTRY. SO AND, YOU KNOW,
CERTAINLY HAVING THE MARKET THAT
E15 IN CALIFORNIA WOULD, WOULD
PROVIDE GIVES US THAT MUCH MORE
INCENTIVE TO CREATE EVEN BETTER
FUEL. THANK YOU, WELL, AND THANK
YOU AGAIN TO ALL OF OUR
PANELISTS FOR YOUR PARTICIPATION
IN THIS CONVERSATION. AND I
GUESS I WOULD SAY I THINK WE'VE
SAID SEVERAL TIMES THROUGHOUT
THE COURSE OF THIS HEARING THAT
THERE'S NOT GOING TO BE A SINGLE
STRATEGY OR A SINGLE SILVER
BULLET THAT IS GOING TO ADDRESS
WHAT IS A REALLY PROFOUND
CHALLENGE AS CALIFORNIA
TRANSITIONS FROM A FOSSIL FUEL
ECONOMY TO A CLEAN ENERGY
ECONOMY OVER THE NEXT DECADES.
AND SO IN THE COURSE OF OUR
HEARINGS, JUST TO SORT OF
SUMMARIZE FOR EVERYONE, THERE'S
BEEN A NUMBER OF, IN ADDITION TO
THE GOVERNOR'S PROPOSAL RELATED
TO STORAGE REQUIREMENTS, THERE'S
BEEN A NUMBER OF POTENTIAL
OPPORTUNITIES THAT HAVE BEEN
HIGHLIGHTED. THE BIRTH
REGULATION THAT WAS DISCUSSED
EARLIER, TOPIC OF E15, A
CONVERSATION AROUND REGIONAL
BLENDS, WHICH WAS ALSO RAISED IN
THE TRANSPORTATION FUELS
ASSESSMENT, AS WELL AS, THE,
OPAQUENESS OF THE SPOT SPOT
MARKET, WHICH I THINK REALLY HAS
GOTTEN A LOT OF ATTENTION FOR
MANY OF US AS THE RESULT OF
THESE INFORMATIONAL HEARINGS.
SO, FOR ALL OF THOSE TOPICS, IN
SOME CASES, THERE ARE ACTUALLY
LEGISLATIVE PROPOSALS BEFORE US
THAT MAY BE CONSIDERED AS PART
OF THIS SPECIAL SESSION OR
CONSIDERED IN JANUARY. AND IN
OTHER CASES, I THINK IT'S
OPPORTUNITIES FOR US AND OUR
TEAMS TO WORK WITH AGENCIES TO
DIG INTO SOME OF THOSE QUESTIONS
A BIT MORE. BUT ONCE AGAIN,
THANK YOU TO EVERYONE WHO JOINED
US TODAY. I WANT TO THANK ALL OF
OUR PANELISTS WHO HAVE
PARTICIPATED IN OUR, IN OUR
MARATHON HEARING TODAY. AND I
THINK WE'RE READY TO OPEN IT UP
FOR PUBLIC COMMENT AT THIS POINT.
IF YOU'D LIKE TO, PROVIDE PUBLIC
COMMENT, PLEASE APPROACH THE
MICROPHONE. THANK YOU. I HAD TO
BE FIRST, MADAM CHAIR, BECAUSE
YOU CHALLENGED US THAT IF WE HAD
A PROBLEM WITH THIS PROPOSAL, TO
BE VERY PUBLIC ABOUT IT, AND
HERE WE ARE. SO MY NAME IS PETE
MONTGOMERY. I REPRESENT KERN
ENERGY. I'VE WAITED TWO DAYS TO
BE UP HERE BECAUSE I'VE BEEN
FIDDLING IN MY SEAT WHILE WE
TALKED ABOUT THE NINE REFINERS
IN CALIFORNIA. KERN ENERGY IS
THE LAST, SMALL REFINERY LEFT IN
CALIFORNIA. FAMILY OWNED,
OPERATED CONTINUOUSLY FOR 90
YEARS, LOCATED JUST OUTSIDE OF
BAKERSFIELD IN THE TOWN OF
LAMONT, WE CURRENTLY HAVE ABOUT
A DAY AND A HALF OF INVENTORY.
WE HAVE THREE 10,000 BARREL
TANKS FOR FINISHED GASOLINE,
THERE'S NO PIPELINE SYSTEM IN
BAKERSFIELD, SO THERE'S NO
OPPORTUNITY FOR RESUPPLY. SO THE
OPTIONS WOULD BE FOR KERN TO, I
GUESS, TAKE PENALTIES UNDER THE
BILL FOR KERN TO GO OUT OF
BUSINESS, OR FOR THIS
LEGISLATURE TO CONSIDER A SMALL
REFINERY EXEMPTION, WHICH IS
WHAT WE'RE LOOKING FOR, KERN, AS
I SAID, WE HAVE THREE TANKS.
IT'S REALLY ABOUT A DAY AND A
HALF SUPPLY. ONE TANK IS ALWAYS
BEING DRAINED. ONE TANK IS BEING
FILLED, AND ONE TANK IS BEING
CERTIFIED. I THINK YOU LEARNED
ABOUT THAT YESTERDAY, I GUESS
THE FOURTH OPTION IS WE COULD
BUILD 10 TO 12 NEW 10,000 BARREL
STORAGE TANKS IN THE COMMUNITY
OF LAMONT, WHO, I GUARANTEE YOU,
DOES NOT WANT US TO BUILD AND
STORE 120,000 BARRELS OF
HYDROCARBONS IN THEIR COMMUNITY.
SO, MR. BENNETT, YOU ASKED A
QUESTION MANY TIMES. THE
FUNDAMENTAL QUESTION IS, IS
THERE THE CAPACITY? I CAN'T
SPEAK FOR THE OTHER EIGHT
REFINERS AND THEIR REFINING
DISTRICTS, BUT IN KERN COUNTY,
FOR CURRENT ENERGY, NO CHANCE.
SO THANK YOU, MADAM CHAIR. MAY I
RESPOND VERY QUICKLY? JUST YOU
KNOW EXACTLY WHAT YOU'RE TALKING
ABOUT IN TERMS OF PERHAPS AN
EXEMPTION FOR SMALL REFINERIES.
NOBODY WANTS AN UNWORKABLE
SOLUTION HERE. WE JUST WANT TO
TALK ABOUT THE CONCEPT
STATEWIDE. RIGHT. AND THERE MAY
BE VARIOUS, YOU KNOW, VERY LOTS
OF VARIABILITY IN TERMS OF HOW
IT'S APPLIED TO A SITUATION LIKE
YOURS. BUT I THINK AND THE I
USED TO I WORKED FOR BP FOR FIVE
YEARS WHO OWNED THE CARSON
REFINERY AT THE TIME. SO I
UNDERSTAND HOW AND I'M JUST I'M
IN A I'M IN A PAUSE. SO I THINK
IF YOU I THINK IT'S WONDERFUL IF
YOU WANT TO HAVE AN OFFLINE
CONVERSATION WITH WITH ANY OF
THIS, THE ASSEMBLY MEMBERS. BUT,
IF YOU WANT TO JUST FINISH THE
PUBLIC COMMENT PORTION, THAT'S
PROBABLY BETTER. OKAY. THANK
YOU, SURE, SO AND I GUESS THE
LAST QUESTION WOULD BE, WHY
WOULD YOU SEEK AN EXEMPTION FROM
A REGULATORY PROCESS? AND JUST
LET ME GIVE YOU A QUICK EXAMPLE
AROUND XB ONE TWO. SO AGAIN,
CURRENT ENERGY 1% OF THE
GASOLINE PRODUCED IN CALIFORNIA,
3% OF THE DIESEL, WE'VE HAD
COMMISSIONER GUNDA TO OUR
FACILITY. WE'VE HAD THE CHAIR.
THEY'VE ALL SAID YOU'RE NOT THE
TARGET. YOU'RE NOT THE FOCUS. WE
DON'T REALLY WE KNOW YOU DON'T
MOVE MARKETS OR SET PRICES, BUT
LANGUAGE MATTERS. AND BECAUSE
THE LANGUAGE IN X12 DOES NOT
ALLOW THEM ANY EXEMPTIONS FOR
ANY MARKET PARTICIPANT, CURRENT
ENERGY SPENDS MILLIONS OF
DOLLARS, THOUSANDS OF HOURS
COMPLYING WITH CDC DATA REQUESTS
THAT DO CÁC NO GOOD. THAT
DOESN'T HELP THEM AT ALL. OUR
SMALL VOLUMES DON'T MOVE MARKETS
OR SET PRICES. SO AND I TALKED
TO COMMISSIONER GUNDY IN
BETWEEN. HE SAID IT'S FINE FOR
YOU TO ASK FOR THAT AND WE'RE
OKAY WITH IT. I MEAN, NOT
PUTTING WORDS IN HIS MOUTH. SO,
ANYWAY, THANK YOU ALL RIGHT.
THANK YOU. APPRECIATE YOU BEING
HERE. ANYONE ELSE WISHING TO
PROVIDE PUBLIC COMMENT AT THIS
POINT? YES, MADAM CHAIR, MY NAME
IS PAUL FIELDS. I'M A UNION
BOILERMAKER. I'M THE ACTUAL VICE
PRESIDENT OF LOCAL 549, WHAT I'D
JUST LIKE TO MENTION, AND I'M
NOT SPEAKING FOR MY UNION WHEN I
SAY THIS, THERE'S BEEN A LOT OF
TALK VERY RECENTLY ABOUT E15,
NOW, I'VE HEARD ABOUT IT FOR A
LONG TIME. I'VE STUDIED IT A
LITTLE BIT MYSELF. I'D JUST LIKE
TO LET THIS PANEL KNOW, BECAUSE
IT SEEMS LIKE YOU'RE THINKING
E15 WOULD BE A COMPLETE TOTAL
REPLACEMENT FOR E10. I'M JUST
ASKING THAT EVERYBODY KNOWS
THIS. IF I COULD BRIEFLY, I'D
LIKE TO JUST READ AN EXCERPT
THAT IS ON THE DEPARTMENT OF
ENERGY'S GOVERNMENT WEB PAGE. IT
DOES SPECIFICALLY SAY THAT
VEHICLES APPROVED FOR TEN USE
FLEX FUEL VEHICLES AND
CONVENTIONAL VEHICLES OF MODEL
YEAR 2001, AND NEWER VEHICLES
PROHIBITED FROM E15 USE ALL
MOTORCYCLES, ALL VEHICLES AND
HEAVY ENGINES SUCH AS SCHOOL
BUSSES AND DELIVERY TRUCKS, ALL
OFF ROAD VEHICLES, INCLUDING
BOATS AND SNOWMOBILES. ALL
ENGINES IN OFF ROAD EQUIPMENT
SUCH AS CHAINSAWS, GENERATORS,
GASOLINE POWERED LAWNMOWERS, AND
OTHER SMALL ENGINES, AND ALL
CONVENTIONAL VEHICLES OLDER THAN
THE MODEL YEAR 2001. I'M JUST
ASKING AND HOPING THAT THE PANEL
UNDERSTANDS THAT E15 IS AN
AWESOME OPTION, JUST LIKE E85
IS, BUT NOT A DIRECT REPLACEMENT
FOR E10, WHICH IS TRULY THE
MAXIMUM FOR SOME VEHICLES OUT
THERE. THANK YOU, THANK YOU. HI.
THANK YOU CHAIR AND MEMBERS,
THANKS FOR THE OPPORTUNITY TO
PROVIDE COMMENT. MY NAME IS
RAQUEL MASON. I'M WITH THE
CALIFORNIA ENVIRONMENTAL JUSTICE
ALLIANCE, ALSO SPEAKING ON
BEHALF OF THE COMMUNITIES FOR
BETTER ENVIRONMENT IN THE ASIAN
PACIFIC ENVIRONMENTAL NETWORK
AND SHARING A CONCERN OF THE
SPEAKER BEFORE FROM KERN ENERGY
ABOUT LIKE WHAT THIS COULD MEAN
FOR BUILD OUT OF REFINERIES AND
ENVIRONMENTAL JUSTICE
COMMUNITIES. WE DO HAVE A LOT OF
CONCERNS ABOUT THAT, WE HAVE
BROAD SUPPORT FOR THE SEC'S
AUTHORITY TO CONDUCT A
RULEMAKING AND ESTABLISH MINIMUM
GASOLINE INVENTORIES WITHOUT
EXPANDING FOSSIL FUEL
INFRASTRUCTURE. THE CDC AND THE
LEGISLATURE MUST CONTINUE TO
MAKE EXPLICIT THAT THIS POLICY
OPTION SHOULD MAXIMIZE THE
UTILIZATION OF EXISTING STORAGE
AND MINIMIZE CUMULATIVE
CUMULATIVE POLLUTION BURDENS,
AND ALWAYS CONDUCT A FULL
ANALYSIS OF THE TOTAL REFINERY
IMPORT EXPORT PICTURE TO ENSURE
TOTAL EMISSIONS AND REFINERY
COMMUNITIES ARE ALWAYS BEING
CONSIDERED EXORBITANT. GAS
PRICES IMPACT COMMUNITIES ACROSS
CALIFORNIA, ESPECIALLY THOSE IN
LOWER INCOME ENVIRONMENTAL
JUSTICE COMMUNITIES, WHO ARE
ALREADY ALSO PAYING FOR THE
ADDICTION TO FOSSIL FUELS. WITH
OUR HEALTH AND SAFETY, WE
SUPPORT ACTION TO TACKLE PRICE
SPIKES BASED ON THE DEVELOPMENT
OF THIS POLICY OPTION AND THE
XBOX ONE TWO RULEMAKING AT THE
CDC, THE TESTIMONY OF CEC
LEADERSHIP YESTERDAY AND TODAY,
REFINERY CRUDE OIL IMPORTS AND
FOREIGN EXPORTS DATA, AND
REGIONAL AIR DISTRICT STORAGE
TANK DATA. THERE ARE CURRENTLY
THOUSANDS OF MASSIVE PETROLEUM
STORAGE TANKS ACROSS THE STATE
OF CALIFORNIA. THE EVIDENCE
SHOWS THERE IS NO NEED TO EXPAND
STORAGE TANK INFRASTRUCTURE,
WHICH ARE IMPORTANT TO A POTENT
SOURCE OF POLLUTIONS. AS MISS
CHO FROM APPEN EXPLAINED
YESTERDAY IN THE WILMINGTON
CARSON WEST LONG BEACH AREA.
THERE IS A LARGE THERE IS THE
LARGEST CONCENTRATION OF
REFINERIES ON THE WEST COAST.
OIL REFINERIES ARE THE LEADING
CAUSE OF VOCS IN STORAGE. TANKS
ARE THE LEADING SOURCE OF VOCS
AT REFINERIES. IT IS ESSENTIAL
THAT ANY LEGISLATION SUPPORTS
THIS POLICY OPTION AND CLARIFIES
THAT IT PRECLUDES ANY LOOPHOLE
FOR INDUSTRY TO EXPAND THE
INFRASTRUCTURE. YEAH, WE THANK
THE ENERGY COMMITTEE FOR THE
LEADERSHIP AND STRONGLY SUPPORT
THE CONTINUED REGULATORY
AUTHORITY TO COUNTER INDUSTRY,
INDUSTRY, MARKET MANIPULATION
AND PRICE SPIKES AND HOLD
REFINERIES ACCOUNTABLE. THANK
YOU SO MUCH. THANK YOU. GOOD
AFTERNOON. GOOD AFTERNOON.
REBECCA MARCUS, ON BEHALF OF THE
UNION OF CONCERNED SCIENTISTS,
WE WOULD JUST LIKE TO ECHO THE
COMMENTS MADE BY OUR COLLEAGUE
FROM SAU AND ON BEHALF OF
CONSUMER WATCHDOG JAMIE COURT
LAID OUT ALL THE REASONS WE
SUPPORT THE BILL. THANK YOU. THE
PROPOSAL BY THE GOVERNOR. THANK
YOU. THANK YOU. GOOD AFTERNOON.
CHAIR, COMMITTEE MEMBERS AND
STAFF CASSANDRA MÀ WITH NIMALA
PAPPAS AND ASSOCIATES, ON BEHALF
OF THE CAMPAIGN. EXCUSE ME FOR A
SAFE AND HEALTHY CALIFORNIA, I
THINK WE'RE ENCOURAGED BY TODAY
AND YESTERDAY'S HEARINGS. THE
NEED FOR TRANSPARENCY AND
ACCOUNTABILITY WITHIN THE
CALIFORNIA FUELS MARKET. AND
WE'RE LOOKING FORWARD TO
CONTINUED CONVERSATIONS AND
GETTING TO A GOOD ENDING POINT
WITH THIS PROPOSAL. SO THANK YOU
SO MUCH. THANK YOU. GOOD
AFTERNOON, MADAM CHAIRMAN. MANDY
LEE WITH THE CALIFORNIA CHAMBER
OF COMMERCE. WE REALLY
APPRECIATE YESTERDAY AND TODAY'S
CONVERSATION AND THE ABILITY TO
COMMENT ON TODAY'S HEARING, CAL
CHAMBER REMAINS OPPOSED TO AB
2-1. WE ARE VERY CONCERNED THAT
GIVING THE CC BROAD AUTHORITY TO
REQUIRE REFINERIES TO MAINTAIN
MINIMUM LEVELS OF FUEL
INVENTORIES COULD HAVE
UNINTENDED CONSEQUENCES AND
COULD LEAD TO FUEL SHORTAGES AND
INCREASE AVERAGE FUEL PRICES FOR
ALL CALIFORNIANS, CONSUMERS AND
BUSINESSES ALIKE. IT COULD ALSO
BE TECHNICALLY INFEASIBLE FOR
SOME SMALL REFINERIES TO MEET
THESE STORAGE REQUIREMENTS, AND
WE ALIGN OURSELVES VERY MUCH
WITH THE PREVIOUS SPEAKER FROM
KERN. FOR EXAMPLE, FOR SMALL
REFINERIES, A MINIMUM INVENTORY
REQUIREMENT COULD BE PHYSICALLY
AND LOGISTICALLY IMPOSSIBLE TO
COMPLY WITH. SOME SMALL
REFINERIES HAVE AT MOST THREE
DAYS OF STORAGE AND SUPPLY, SO
IN ORDER TO MEET A 15 DAY
INVENTORY MANDATE, FOR EXAMPLE,
THEY WOULD HAVE TO ADD MORE THAN
FIVE TIMES THEIR CURRENT STORAGE
CAPACITY, WHICH WOULD BE
IMPOSSIBLE FINANCIALLY AS WELL
AS TAKE YEARS TO BOTH PERMIT AND
BUILD THE ADDITIONAL STORAGE. WE
APPRECIATE THE LINE OF
QUESTIONING TODAY FROM SOME OF
THE MEMBERS OF THE OF THE
COMMITTEE, ESPECIALLY MR. ZABIR,
AND CERTAINLY VICE CHAIRMAN.
GUNDY'S COMMENTS ABOUT
COLLABORATING WITH INDUSTRY AND
WORKING WITH THEM TO MAXIMIZE
THEIR EXISTING CAPACITY. BUT
THAT IS NOT CURRENTLY IN THE IN
THE LANGUAGE OF THE PROPOSAL.
AND I ALSO CAN'T GUARANTEE YOU
THAT THAT COMPLETELY REMOVES
HARDSHIPS FROM THE SMALL
REFINERIES. LASTLY, WE BELIEVE
THE PENALTIES IMPOSED BY AB 2-1
ARE OVERLY PUNITIVE. $1 MILLION
PER DAY, UP TO $1 MILLION PER
DAY. PENALTY STRUCTURE LIKE THIS
WOULD MAKE IT ECONOMICALLY
INFEASIBLE TO OPERATE A REFINERY
IN CALIFORNIA, LEADING TO MORE
DETRIMENTAL DOWNSTREAM IMPACTS,
AND FOR THESE REASONS, WE
RESPECTFULLY OPPOSE. THANK YOU.
EXCUSE ME. GOOD AFTERNOON.
CHRISTINA SCARINGE WITH THE
CENTER FOR BIOLOGICAL DIVERSITY.
WITH THANKS TO THE AUTHOR, THE
COMMITTEE AND THE GOVERNOR FOR
ACTING TO PROTECT CALIFORNIANS
AGAINST BIG OIL MARKET
MANIPULATION. WE WOULD ALIGN OUR
COMMENTS WITH THOSE PREVIOUSLY
MADE BY CEJA AND APPEN
YESTERDAY. THE CLEAN ENERGY
TRANSITION IS WELL UNDERWAY AS
OUR STATE RESPONDS TO THE
CLIMATE CRISIS. OIL CONSUMPTION,
AS WE'VE HEARD, IS DECLINING IN
CALIFORNIA AND OIL REFINERS
CONTINUE TO EXPORT ONE QUARTER
OF REFINED FUELS, RAKING IN
BILLIONS IN PROFIT WHILE FORCING
CALIFORNIANS TO PAY MORE AT THE
PUMP. SO INTERVENTION IS
URGENTLY NEEDED TO PREVENT BIG
OIL FROM RESTRICTING GAS. EXCUSE
ME? GAS SUPPLY DRIVING UP PRICES
FOR CALIFORNIANS WHILE REAPING
IN MASSIVE PROFITS. ACTION HERE
COULD SAVE CALIFORNIA WORKING
FAMILIES HUNDREDS OF MILLIONS OF
DOLLARS PER YEAR BY CONTROLLING
BIG OIL'S PRICE AND PROFIT
SPIKES. SO WE SUPPORT CRITICAL
ACTION TO HELP PROTECT
CALIFORNIANS FROM OIL INDUSTRY
PRICING, MANIPULATION AND FOSSIL
POLLUTION. THANK YOU. THANK YOU.
GOOD AFTERNOON. LIZZIE HUDSON
HERE ON BEHALF OF THE BOARD OF
SUPERVISORS OF KERN COUNTY,
APPRECIATE THE CONVERSATION.
TODAY, I'D FIRST LIKE TO MENTION
THAT THE COUNTY NOT ONLY
PRODUCES THE MAJORITY OF OIL IN
THE STATE, BUT ALSO SENDS OVER
60% OF THE ALTERNATIVE ENERGY
THROUGH THE GRID THAT IS
PRODUCED IN CALIFORNIA. THE KERN
COUNTY BOARD BELIEVES THAT AS
ONE OF THE LARGEST OIL PRODUCING
STATES, CALIFORNIA RESIDENTS
SHOULD ENJOY LOW PRICES. WE ARE
CONCERNED THAT SOME OF THE
PROPOSED MANDATES WILL FORCE THE
STATE TO RELY ON IMPORTS WHICH
BURN NEARLY FOUR TONS OF FUEL
EVERY DAY. APPRECIATE YOUR TIME.
THANK YOU. THANK YOU. HELLO,
MADAM CHAIR, THANK YOU FOR THE
OPPORTUNITY FOR US TO SPEAK. MY
NAME IS RANDY THOMAS. I'M THE
BUSINESS MANAGER OF BOILERMAKERS
LOCAL 549, NORTHERN CALIFORNIA.
HERE IN PITTSBURGH, WHERE WE, WE
SERVICE FIVE OF THE BAY AREA
REFINERIES, THREE THAT DO
PETROLEUM AND TWO THAT ARE NOW
ON TO THE BIOFUELS, OUR JOB IS
TO MAINTAIN THE BEAST. WE HAVE A
STATE ACCREDITED APPRENTICESHIP
PROGRAM. AND AS A BOILERMAKER,
WE WORK ON THE VESSELS. SO
ANYTHING THAT YOU CAN SEE FROM
THE ROAD AS YOU DRIVE BY THE
TANKS, WE BUILD THE TANKS, THE
COLUMNS, THE REGION THAT WE GOT
TO LEARN YESTERDAY'S
PRESENTATION ON THE THEORY,
THAT'S EXACTLY WHAT WE TEACH IN
OUR APPRENTICESHIP PROGRAM. SO
I'M GLAD YOU GOT AN OPPORTUNITY
TO SEE WHAT WE DEAL WITH ALL THE
TIME. MOST OF OUR WORK IS
ALREADY MANDATED ON WHEN THESE
THINGS NEED TO BE REPAIRED. SO
THE STATE ALREADY HAS A
COMMISSION AND THE VESSELS NEED
TO BE INSPECTED AND REPAIRED ON
ON A CERTAIN BASIS. AND THIS IS
HOW THE REFINERIES BUILD THEIR
TURNAROUNDS. THEY HAVE
TURNAROUNDS THAT COULD BE SHORT
TERM. THEY HAVE PIT STOPS. IT
COULD BE SEVEN DAYS. THERE'S
MAINTENANCE THAT HAPPENS ALL THE
TIME. THERE'S MAINTENANCE THAT
HAPPENS ON OUR VEHICLES ALL THE
TIME TOO. BUT YOU WOULD NEVER
THINK OF TELLING AN EMPLOYEE
THAT THEY DON'T GET TO FIX THEIR
BREAKS AND THEY HAVE TO COME TO
WORK. NO MATTER WHAT. BECAUSE WE
REALLY NEED YOU TO BE HERE.
RIGHT? AND I THINK THAT THAT'S
SOMETHING TO THINK ABOUT AS FAR
AS THIS IS CONCERNED. IS, IS THE
MAINTENANCE SIDE OF THINGS IS A
VERY DIFFICULT THING TO BE ABLE
TO REGULATE. I DEFINITELY
APPRECIATE THE COLLABORATION,
BUT I CAN'T SUPPORT THE BILL.
THANK YOU. ALL RIGHT. SEEING NO
ONE IN THE ROOM WISHING TO
PROVIDE PUBLIC AND NO ONE ELSE
IN THE ROOM WISHING TO PROVIDE
PUBLIC COMMENT. THAT DOES
CONCLUDE THE BUSINESS OF TODAY'S
HEARING. AND JUST TO SET
EXPECTATIONS FOR COMMITTEE
MEMBERS AND FOR THE PUBLIC. THE
COMMITTEE WILL BE RECONVENING ON
THIS IS IT. IT'S THURSDAY, THE
26TH, ONE WEEK FROM TODAY FOR A
BILL HEARING WHERE WE WILL BE
CONSIDERING, ONE OR MORE BILLS
AS PART OF THAT HEARING SO THAT
INFORMATION WILL BE DISTRIBUTED
TO COMMITTEE MEMBERS AS SOON AS
IT'S AVAILABLE. AND WITH THAT,
WE ARE ADJOURNED. MR.