28/07/26
California refinery closures spur fuel plan debate
Houston, 28 July (Argus) — California officials face mounting pressure to
maintain fuel reliability as planned refinery closures tighten supplies and
increase reliance on imports, even as the state pursues its climate and
transportation electrification goals. The California Air Resources Board (CARB)
and the California Energy Commission (CEC) released a draft transportation
transition plan in May. While the plan outlines recommendations, California
still needs a more detailed roadmap to balance fuel supply demand with the
state's climate goals, according to panelists who spoke during a 23 July webinar
hosted by the Climate Center, an environmental non-profit. A key question for
the state is to reexamine what to electrify and when, and which sectors should
switch next to biofuels to make the best use of limited renewable power and fuel
supplies under current conditions in California, said Jeremy Martin, director of
fuels policy for the Union of Concerned Scientists. Transportation is the
largest emitting sector in California's economy, accounting for 133.7mn metric
tonnes (t), or 37.1pc, of emissions in 2023, data show from the latest state
greenhouse gas inventory. The lion's share of these emissions is from passenger
vehicles with 101.9mn t, or 28.3pc. California aims to electrify its vehicle
fleet, targeting 100pc of in-state sales of zero-emission passenger vehicles and
trucks by 2035. "The market is pretty solidly in the direction of
battery-electric vehicles, and we don't see any change in that direction at this
point," Quentin Gee, CEC energy assessment division manager, said during the
panel. But some sectors may be more difficult to electrify because of cost
constraints and the time required to add renewable power capacity. Sustainable
aviation fuel (SAF) could help reduce emissions from aviation while directing
limited renewable electricity supply toward passenger vehicles and trucks,
Martin said. "If you only have so much renewable energy that you can scale up,
it is a lot more important to convert the cars and trucks to electric vehicles
than it is to shift the planes," he said. California has done similar fuel
pivots with the adoption of renewable diesel which serves as a "drop-in"
replacement for conventional diesel. While gasoline demand is expected to
continue falling over time in the state, jet fuel demand is not projected to
follow the same course, Gee said. The closures of two refineries in the state in
the past year cut 17pc of California's refining capacity, leaving the state
increasingly reliant on imports to meet demand. This need to maintain fuel
supply availability has lead the CEC to eye the potential for alternative fuels
like SAF and ethanol fuel blends to maintain availability for different
transportation sectors which use less fossil fuel, Gee said. But if in-state
production of these fuels does not scale quickly, it could again leave
California reliant on the availability of imports, according to the CEC draft.
California will also have to weigh any transition against the interplay of
available biofuel feedstocks, the state's low-carbon fuel standard and federal
programs and incentives. Federal biofuel tax incentives, such as the 45Z credit,
which prioritizes North American feedstocks, have prompted producers to shift
from global to domestic supply chains where possible to capture the credit in
their 2026 filings. While advocates argue the state must quickly decide its
future plans, this likely will happen under a new governor, with governor Gavin
Newsom (D) termed-out after this year. The CEC closed public comment on the
transportation fuels transition plan earlier this month, though agency staff
could not confirm when it would release a final report. The plan is one of
several state policy documents used to shape California's path toward its
climate and energy goals. Another is the scoping plan prepared by CARB, which
outlines how the state aims to achieve net-zero emissions by 2045. CARB released
its current scoping plan in 2022, but will not release the next update until
2027. The CEC also plans to release its transportation fuels assessment later
this year. The report will examine conditions in California's fuel markets and
evaluate policy options to improve fuel reliability and market stability during
the transition away from fossil-based fuels. By Denise Cathey Send comments and
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