SB 2 X1
Page 1
(Without Reference to File)
SENATE THIRD READING
SB 2 X1 (Skinner)
As Amended March 20, 2023
Majority vote
SUMMARY
Mandates extensive data reporting to the California Energy Commission (CEC) from various
specified entities along California's oil and gasoline supply chain. Authorizes the CEC to
establish a maximum gross gasoline refining margin (max margin) and penalty on gasoline sold
by refiners in the state, pursuant to certain findings. Establishes a new division and advisory
committee at the CEC, and requires various reports and assessments by the CEC to be submitted
to the Legislature regarding the current status and future managed decline of transportation fuels.
Major Provisions
1) Expands and significantly updates both the Petroleum Industry Information Reporting Act of
1980 (PIIRA) and the California Oil Refinery Cost Disclosure Act of 2022, which include
reporting requirements to the CEC for all participants in the oil production supply chain,
including refiners, marketers, importers, oil transporters, oil storers, oil producers, pipeline
and port operators, and destination facilities. These reports are mandated to be generated
annually, monthly, weekly, and daily, depending on the market participant and the specific
data requested. Specifies reporting from processes in the oil production supply chain that use
renewable feedstock and fuels shall be included.
2) Increases the civil penalty the CEC can levy against a person that fails to supply the specified
data from $500-$2,000 per day to $5,000-$20,000 per day, up to a maximum of $500,000 per
submission. Additionally allows the CEC to petition a court for an order compelling the
person to provide the information.
3) Requires the CEC, upon request, to share confidential information to the Assembly Speaker,
Senate Rules Committee, and the appropriate policy committees in the Assembly or the
Senate and their staff members, so long as the information is provided in aggregated or other
anonymized form, and each person receiving the information agrees in writing to keep the
information confidential. Requires that aggregated or otherwise anonymized information
disclosed to the Legislature shall be made available to the public no more than quarterly, if
requested by the Legislature.
4) Authorizes the CEC to establish a max margin, which is the maximum amount of the gross
gasoline refining margin. The gross gasoline refining margin is defined as the average
wholesale rack price of gasoline minus the low carbon fuel standard and cap-at-the-rack
program costs minus the refiner's crude oil acquisition costs and refined gasoline import
costs; simplistically, it's a measure of the refiner's profit. The max margin would then be the
maximum amount a California refiner could earn without incurring the penalty.
5) Requires if the CEC sets a max margin, it must set a penalty for any refiner exceeding that
max margin. Establishes three tiers of penalty depending on how egregiously the refiner
exceeds the max margin.
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6) Prohibits the CEC from establishing a max margin and penalty, unless the CEC finds that
"the likely benefits to consumers outweigh the potential costs to consumers." Requires the
CEC to consider, at a minimum:
a) Whether it is likely that the max margin and penalty will lead to a greater imbalance
between supply and demand in the California transportation fuels market than would
exist without the max margin and penalty.
b) Whether it is likely that the max margin and penalty will lead to higher average prices at
the pump on an annual basis than would exist without the max margin and penalty.
c) Whether case-by-case exemptions from the max margin will be sufficient to ensure that
individual refiners have an opportunity to demonstrate the need for a greater margin
before they make decisions about production.
7) Authorizes the CEC to petition the court to enjoin a refiner from exceeding the max margin.
8) Requires that collected penalties shall be deposited in the Price Gouging Penalty Fund in the
State Treasury to be used, upon legislative appropriation, to "address any consequences of
price gouging on Californians."
9) Authorizes the CEC to rescind or adjust the max margin and penalty to ensure that a
sufficient, affordable, and fairly priced supply of gasoline is available to Californians.
10) Requires the CEC to consider a refiner's request for an exemption from the max margin, as
provided. Requires a refiner seeking an exemption to file a statement under penalty of
perjury setting forth the basis of the request for exemption. By requiring the statement to be
filed under penalty of perjury, this bill expands the scope of the crime of perjury, thereby
imposing a state-mandated local program.
11) Requires the California State Auditor (Auditor), no later than March 1, 2033, to complete an
audit and performance review of the max margin and penalty. Requires the Auditor to make a
determination in a report to the Legislature and the CEC, by no later than June 1, 2033, as to
whether the max margin and penalty is achieving the intended goal to reduce gasoline price
spikes and stabilize the gasoline fuel supply market. Requires the CEC, within 180 days
after the issuance of the report, to cease implementing the max margin and penalty, if the
Auditor concludes that the max margin and penalty should be terminated.
12) Requires the CEC, in cooperation with the California Department of Tax and Fee
Administration (CDTFA), to submit a report to the Legislature, by March 1 of each year that
includes a review of the price of gasoline in California and its impact on state revenues for
the previous calendar year. Authorizes CDTFA to request from any person certain records
required to be maintained and any records in the person's possession, custody, or control that
the CDTFA deems necessary to facilitate the report or to assist the CEC. Mandates CDTFA
records requests shall be provided within 30 days of notice; failure to provide records may
result in the CEC imposing a civil penalty, up to a maximum of $10,000 per day.
13) Authorizes the Attorney General (AG) to request from the CEC or CDTFA, or for the
agencies to provide, any information collected pursuant to the oil production supply chain
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data reporting and CDTFA records collection provided in this bill. Specifies any data shared
shall be treated confidentially by the AG.
14) Requires the CEC, on or before January 1, 2024, and every three years thereafter, to submit
an assessment to the Governor and the Legislature that identifies methods to ensure a reliable
supply of affordable and safe transportation fuels in California. Requires the CEC to use
reasonable means necessary and available to seek and obtain information from any sources
for purposes of preparing the assessment and would authorize the CEC to impose a civil
penalty if a person fails to timely provide information necessary for preparing the
assessment. Requires the CEC and the California Air Resources Board (CARB), on or
before December 31, 2024, and taking into account the assessment, to prepare a
Transportation Fuels Transition Plan.
15) Establishes the Division of Petroleum Market Oversight, within the CEC, as an independent
authority whose director is appointed by the Governor, confirmed by the Senate, and staffed
with economists, experts in the fuels market, and legal investigators. The Division shall
provide oversight and analysis of the transportation fuels market, and provide guidance and
recommendations to the CEC on the various reports and data gathering it will conduct
pursuant to this bill. Empowers the Division with subpoena power, and allows confidential
referrals of potential violations of law to the AG at any time. Treats data provided to the
Division as presumptively confidential and not subject to public disclosure. The Division
shall publish an annual (aggregated and anonymized) report on recommendations to improve
market performance, and the director shall appear, when requested, before the appropriate
Legislative policy committees.
16) Establishes the Independent Consumer Fuels Advisory Committee (Committee), within the
CEC, consisting of six members appointed by the Governor, one member appointed by the
Speaker of the Assembly, and one member appointed by the Senate Committee on Rules.
This bill requires the Committee to advise the CEC and the Division. Provides the
Committee with access to all the information provided to the CEC and Division. Establishes
revolving door protections for members of the Committee where no member – except the
representatives from labor and the petroleum fuels industry – shall have been employed or
otherwise received direct compensation from any oil market participant within a year both
preceding and following their appointment. Requires the executive director of the CEC to
ensure any confidential information shared with the members of the Committee is subject to
a nondisclosure agreement.
17) Requires the operators of refineries to report additional information, including the net
gasoline refining margin per barrel of gasoline sold in that month. Requires the CEC to post
on its internet website certain information related to the net gasoline refining margin.
18) Requires refiners to report maintenance activities to the CEC under specified timelines,
including turnaround, planned, and unplanned maintenance, and specifies that information
shall be treated confidentially.
19) Authorizes the CEC to regulate – in consultation with the Labor and Workforce
Development Agency, labor, and industry stakeholders – the timing of turnaround and
maintenance, if such a regulation can protect worker and public health and safety while also
minimizing the risk of maintenance-driven supply shortages or price shocks.
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20) Requires any in-state refineries to report to the CEC at least a year in advance if the refinery
intends to permanently shut down, shut down to reconfigure, or sell a refinery.
COMMENTS
For comments on the impacts of this measure on gasoline prices, and potential drafting
refinements for future consideration see the Assembly Utilities and Energy Committee analysis
from the March 27, 2023, hearing of this bill.
Additionally, for information on California's oil and gasoline market and recent price
fluctuations see the background document prepared for the First Extraordinary Session
Informational Hearing by the Assembly Utilities and Energy Committee on March 22, 2023.
According to the Author
According to the author, "In 2022, oil companies hauled in more than $200 billion in profits.
And while oil companies were raking it in, Californians were paying for it in record high gas
prices – $2.61 per gallon higher than the national average. We were charged those sky-high
prices even though the cost of crude oil was down and there were no changes to state taxes, fees,
or regulations. To push oil companies to treat California consumers fairly, [SB 2 X1] includes
the strongest, most effective transparency and oversight measures in the nation so we can look
under the hood and hold oil companies accountable for high gas prices. [SB 2 X1] includes a
first-of-its-kind independent watchdog that would monitor California's petroleum market to
ensure the industry plays by the rules. The division would have access to new information
required by law, subpoena power to compel data and records that would reveal shady practices,
and direction to refer violations of law to the Attorney General for prosecution. Additionally, the
bill includes a price-gouging penalty that would fine oil companies for making excessive profits
off the backs of Californians. Ideally, the penalty will never even be used — like with other good
policy, its existence may motivate oil companies to keep prices down to avoid being penalized.
But if oil companies do engage in price gouging, then [SB 2 X1] will protect Californians from
fossil fuel businesses that pad their profits at our expense."
Arguments in Support
Attorney General Rob Bonta expresses strong support for this bill stating: "At great hardship,
California consumers have been paying too much at the pump, while oil companies continue to
report record profits at their expense. This is unacceptable and unsustainable. I stand with the
Governor in supporting financial penalties to deter profiteering, and new measures to increase
transparency in the price of gas in the retail market."
A coalition of over 100 environmental, environmental justice, consumer, faith, labor, and clean
energy organizations writes to express strong support for [SB 2 X1]stating: "We support a
windfall profits cap to rein in refiners' unconscionable price-gouging and provide greater
transparency for California's gasoline market. Additionally, given that [SB 2 X1]also notes the
legislature's intent to establish a multi-agency process "to plan for and monitor progress towards
the state's… transition away from petroleum fuels," we urge you to partner with environmental
justice groups to ensure that transition is rapid, equitable, and just."
Arguments in Opposition
A coalition of 50 organizations, including the California Chamber of Commerce, several local
chambers, business associations, and the Western States Petroleum Association, strongly
opposes SB 2 X1 stating that this bill is "unlikely to provide any price relief for consumers or
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businesses and in fact, will make matters worse." They further contend that "[SB 2 X1]will result
in numerous disruptive unintended consequences," including: potential gasoline supply reduction
that means higher costs for consumers and businesses, likely job losses, reduced funding for
schools and local governments and likely increase the frequency and duration of volatile price
spikes given California's isolated market.
FISCAL COMMENTS
According to the Assembly Appropriations Committee, this bill will result in significant ongoing
costs to the CEC, in the millions of dollars annually, to develop rules and review data
submissions; to establish and administer the Advisory Committee and the Division; to exercise
its new authority to set a maximum margin; and to administer a penalty, if created. The CEC
estimates some of these responsibilities to require 34 new positions and contracting, at an annual
cost of $9.4 million. (General Fund or special fund).
Additionally, significant ongoing costs to CDTFA to develop a processes to request information
from taxpayers involved in gasoline sales, collect and analyze the information, and share the
information with other agencies. CDTFA estimates annual costs of $50,000 to $250,000 related
to these activities (General Fund). One-time cost to CARB, working with the CEC, to complete
the Transportation Fuels Plan. CARB estimates this work will entail contracting costs of $1
million to complete this work (Cost of Implementation Account). Absorbable costs to the Labor
and Workforce Development Agency to consult with the CEC on its consideration of ways to
manage refinery turnarounds and maintenance and, possibly, develop related regulations. One-
time cost in 2032-33 of an unknown, but significant amount, likely in the hundreds of thousands
of dollars, for the State Auditor to conduct a performance review of the maximum gross refining
margin and penalty, only if the CEC sets such a margin and establishes such a penalty (General
Fund).
Finally, penalty revenue of an unknown, but potentially significant amount to the Price Gouging
Penalty Fund, only if the CEC sets a maximum gross refining margin penalty.
VOTES
SENATE FLOOR: 30-8-2
YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese,
Dodd, Durazo, Eggman, Glazer, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min,
Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Umberg, Wahab,
Wiener
NO: Alvarado-Gil, Dahle, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto
ABS, ABST OR NV: Stern, Wilk
UPDATED
VERSION: March 20, 2023
CONSULTANT: Laura Shybut / U. & E. / (916) 319-2083 FN: 0000170


Statutes affected:
SBX1 2: 25354 PRC, 25355 PRC, 25362 PRC, 25364 PRC
03/20/23 - Amended Senate: 25354 PRC, 25354 PRC, 25355 PRC, 25355 PRC, 25362 PRC, 25362 PRC, 25364 PRC, 25364 PRC
03/27/23 - Enrolled: 25354 PRC, 25355 PRC, 25362 PRC, 25364 PRC
03/28/23 - Chaptered: 25354 PRC, 25355 PRC, 25362 PRC, 25364 PRC