California governor Gavin Newsom is facing a dilemma when it comes to energy policy — satisfying his traditional Democratic base with strong environmental policies while also working to keep US oil refiners from leaving the state. Finding that balance comes at a time when Newsom's star is rising as a likely US presidential candidate in 2028, and as the state is in the process of losing 17pc of its refining capacity, raising fears of spiking fuel prices that could play poorly in a future general election, when "affordability" is likely to be top of voters' minds.
California's gasoline and diesel prices are frequently among the highest in the US, in part because of strict air emission rules and limited refining capacity. Independent Phillips 66 shut its 139,000 b/d Los Angeles refining complex last year and Valero is working on idling its 145,000 b/d refinery in Benicia by April. The Valero shutdown came after nothing materialised from talks with state officials. The state effort to delay the refinery's closure included California Energy Commission (CEC) vice-chair Siva Gunda travelling to Texas several times to meet Valero officials last year after Newsom instructed the agency to work with refiners to secure fuel supply.
The CEC subsequently delayed for five years rulemaking on a refiner profit cap that was strongly opposed by the industry. In another concession to refiners, Newsom signed a bill last year that expedited permitting of onshore oil and gas wells, allowing some new wells to bypass exhaustive state environmental reviews.
But California is fighting plans from President Donald Trump's administration to reopen the state to offshore leasing after a 30-year hiatus. Increases to Californian offshore production would not result in near-term reductions in fuel prices, California's attorney general, Rob Bonta, wrote in a letter to the US Bureau of Ocean Energy Management (BOEM) last month, because the state's refineries are already running at full tilt. Oil companies have shown "very little interest" in leasing offshore California because of political resistance in the state, Bonta wrote.
BOEM has asked for expressions of interest in acquiring oil and gas leases off California over 104mn acres — an area roughly the same area as California's entire landmass. The state also filed a lawsuit last month challenging a federal decision claiming authority over two pipelines that could allow independent producer Sable Offshore to start selling crude produced off its southern coast. California argues that under a legal settlement, the state rather than the US Pipeline and Hazardous Materials Safety Administration has regulatory control over the lines, which ruptured and spilled oil into the ocean in 2015.
California role
Newsom has enjoyed strong support from environmental groups that see him as an ally and leading voice of opposition to the Trump administration's rollback of environmental regulations. In a high-profile appearance at the UN Cop 30 climate summit in Belem, Brazil, in November, Newsom said states such as California are filling the void left by Trump's antagonism toward climate change policy. Newsom cited his state's "cap and invest" and Low Carbon Fuel Standard programmes.
As Newsom's star rises, refiners weigh their future. Decades of "poor energy policy making" in California have made it difficult to invest, Chevron chief executive Mike Wirth said on 30 January. "The irony is we have places...like Venezuela, that are trying to become more attractive to investment, as places like California enact policies to become less attractive." Chevron operates two big refineries in California — the 285,000 b/d El Segundo and 245,000 b/d Richmond plants. Valero plans to decide the fate of its other California plant — the 85,000 b/d Wilmington — around the end of the decade, saying operating in the state "is still a challenge".
