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Senate Environmental Quality Committee California State Senate
Follow its sittingsSpeaker 3
are closing, production is declining, demand remains, and imports are rising. And my constituents are paying the price. Let me be very clear here. You cannot collapse one energy system before the next one is built. You cannot punish working families into a transition.
And you cannot tell people that this is for their own good while they're
Speaker 2
standing at a gas pump praying that their debit card isn't declined. Because this isn't abstract policy we're talking about today. This is the single mom in Palmdale who drives 60 miles because housing near work is just unaffordable. This is a contractor who cannot pass along the diesel cost without losing the bid. This is the farm worker.
This is the Amazon driver. This is a restaurant owner. This is a senior living on fixed income. This is groceries going up. This is rent going up.
This is childcare going up. And people are tired. They're tired of being told that this is temporary. They're tired of being told that this is necessary. And they're tired of Sacramento pretending that this is some painless transition.
This is not painless where I come from. You cannot build a clean energy future on the backs of working families. And until we stabilize this supply, we protect consumers and stop outsourcing our standards overseas, this isn't climate leadership. This is economic negligence. And our constituents, my constituents deserve better.
I'm looking forward to an honest conversation about these refinery closures and honest policy solutions that do not that do not hurt my constituents and all Californians. Thank you.
Speaker 1
Thank you. Senator Menjivar, did you want to make any opening comments? Okay. Great. Then, we'll invite up, Siva Gunda, Vice Chair of the California Energy Commission, as well as Matthew Botil, Division Chief, Industrial Strategies Division of the California Air Resources Board and Annalisa Kahara, Assistant Deputy Director of the State Water Resources Control Board, members of our first panel.
And you're welcome to proceed when ready. Thank
Speaker 4
Good morning, Chair, Vice Chair and members of the committee, and thank you so much for having us here this morning. For the record, I am Siva Gunda, currently serving as the Vice Chair of the California Energy Commission, and really grateful to have the opportunity to provide context on the transition and to the comments of the Chair and the Vice Chair, be able to provide information that we're gathering to have a conversation that's transparent and honest. So, just making sure that we center the conversation around our different agencies. The Energy Commission is the state's policy agency. We are focused on gathering information and developing recommendations around energy transition, security and stability.
So I bring the information from that context and move forward into the next slide here. So for the context setting, I think the opening comments covered some of this, and I wanted to kind of just set the stage in terms of what you see here on the chart in black, the bold black, is the overall gasoline demand in California. So that's coming out of our refineries. That's the demand both in California plus the demand of our neighbors that we provide to. As you look at that, in 2008, roughly before the energy crisis, we kind of peaked.
If we had the trajectory without the energy crisis, we might have peaked and then come down, but because of the energy crisis, you had a little bit of a downturn, and the most recent peak in California demand was in 2017, but if you look at California plus our neighbors, it was 2019. And COVID has been a pretty big disruption on just the way we use energy in California, especially people teleworking, less commute, but also the overall global dynamics on how the energy transition has begun to happen. So what you see from post COVID is about a percent to 2% decline in demand moving forward. But what you also have on the chart here is the uncertainty of the demand forecast. You have a pretty broad range of business as usual scenario, which is the baseline in yellow, but a more rapid transition depending on how much the alternate fuels will move.
So, the second chart on there is the second black line, the ZEB penetration in California, as most of you know. For new sales, we are almost approaching 30% of new sales being ZEV's in California. So what that does is there is an inflection point of overall penetration of ZEV's, but again, there is a pretty wide band of uncertainty there. Some of the scholarly work, which will be referenced by Professor Emily Grubert in a future panel, really centered most of this work, and what we use here is the different stages of transition. We have broadly four recognized phases of transition, pre, the early transition, the mid and the late transition.
What you see here is now we are squarely in what we call the mid transition. The demand for the conventional fuels is beginning to decline, but it's still substantial in the economy, while the alternate fuels, while growing exponentially, have not fully come to scale yet. This is the time where you have lower investment confidence by conventional energy, which is going down, but you also need a lot of support for alternate fuels to really bridge the gap. That's the transition we're in, where we need both systems well invested in. So kind of moving to the point that the Baishir was mentioning, each vertical bar here sorry, horizontal bar here is the capacity of a single refinery to produce gasoline in California.
So, as you see here, since 2007, you continue to lose the refining capacity in California. There are two non mutually exclusive observations here. One, the initial consolidation of the refineries. While the number of refineries have reduced in California over the last forty years, the overall the capacity for refining has not gone down as much. It was mostly around consolidation.
But now, we're really squarely in that mid transition phase where we're beginning to see the refineries either converting to renewable fuels, both in a P66. In Rodeo and Marathon, you had the conversions into renewable and SAF fuels, and also you begin to have the closures. More recently, the P66 Wilmington, and now in 2025, Velaroz closure announcement. So, between those two, what you see in the yellow at the top is then how are we going to meet the maximum monthly demand, and it's going to be met by imports. And I think it's really important for the Energy Commission to just share the information here that as we go down, this is not going to be a smooth transition.
Every time you lose a refinery, it's going to be a double digit percent of refined fuel lost in California, so that abrupt transition will mean an abrupt increase in imports that have to come in. If the import capacity exists and the market can rely safely on the global refining capacity, then we'll be okay. But it's going to be less resilient, and that's something that we pointed to in the past. So, think as we move forward to the chair's comments at the top, if the demand in California continues to decline, the number of refineries in California will continue to decline. It's not about if they are going to close, it's about when.
And I think we cannot be in this situation where we were in the last couple of years to rapidly, reactively meet that need versus having a proactive plan, and really that's the work of the Energy Commission the last couple of years. I also want to connect a couple of comments that were made. Think Vaishya mentioned about the pipelines. I think it's important to think about the refineries within the context of the complex value system, and each of the value system elements, whether it's upstream in a production, refineries, a crude oil pipeline, a refined fuel pipeline or a terminal, these are owned by different people with different economic and financial strength. So, for example, a refinery like a Chevron or a Valero could be financially pretty solvent versus a crude oil pipeline might be owned by a specific entity that might not be as financially strong.
So, as these elements move forward with every refinery closure, you will have stress on the infrastructure that connect those different parts, and those elements might not be financially viable, and if they are not backed by strength financially, that liability could fall on the state, and I think that's important for us to think about as we move forward. Taking all this, again, there hasn't been a lot of discussions since 2022. In 2022, we had very high price spikes both in 'twenty two and 'twenty three. Those were globally seen, witnessed, but it was really high in California, and thanks to the legislature, the CEC really has a lot of tools of transparency to think about what was happening and the observations and the causal factors, and one of the first assignments that the Energy Commission was given was to think about long term price stability and what are some of the pathways to do that. So, we've taken a pretty robust conversation with diverse stakeholders, and we put a lot of options on the table for the legislature to think about.
So, I think they've broadly fallen to four pieces. We have to continue to reduce our demand because that's the climate agenda of the state, and the overall climate policy of the state dictates that we move away from the demand fossil demand. And second, I think you have to think about if we are going to move towards a more import based system in California, because it's going to be intermittent, you're not going to have a ship come in whenever you want. Some of those molecules take about forty days to come, either from U. K.
Or Asia. So, for forty days, if I have a need and the market understands the need and it comes in forty days, you need to make sure that intermittency is met with strong storage. So, I think it's important for us to think about how do you pivot from a full in state refining capacity to a storage capacity plus import structure, so that we kind of laid out some key elements on that. We also talked about some of the strategies that we are beginning to observe internationally. So if you look at Norway, and I'm going to touch on it quickly here, the Norway government has taken a very different posture.
They went into a public private partnership with Equinor. So, the state currently owns two thirds of the shares in the company, and so basically what it does is that the state is backing some of the oil production, and it goes into a sovereign fund for the decarbonization strategy of the state. So, I think they've taken a more private public private partnership model. You look at Australia or you look at U. K, they've taken more of a subsidy model, and there are also models where we move to a more utility structure, where there is a guaranteed rate of return to ensure those refineries are there as long as we need.
So we laid all those different elements, and each one of them have pros and cons, and we need to think about those trade offs as we move forward. So, that's kind of like just re highlighting that, whether you're looking at U. K. Steel plants, you're looking at coal production in Appalachia, these unplanned disruptive closures could have incredible impacts on the workers and the communities and the local governments, and I think it's really important for us to think about proactively setting the contours of the transition to make sure we have the policies in place to support the transition in a way that we protect Californians, and we can learn from these different areas. So that kind of comes to my last couple of slides here to set the context.
After Vallero announced last year, the Governor sent office a letter asking us to double down on our efforts to collaborate with the industry and making sure we really set the stage for long term transition and recommendations on what we need to do. So, we laid out three buckets. That's what we're calling them in our kind of internal discussions. It's three buckets of strategies, and they are kind of really nested in each other. So, the first bucket was really reactive.
We were in a posture of like, okay, we have a Vallero refinery just mentioned, just gave us notice of closure. What do we immediately do to ensure that there aren't price spikes because of that? And I think I want to make sure, again, in the spirit of honesty and openness here, the kind of conversation last year was we could get to 8 to $10 in gasoline prices last year. I think that was absolutely possible if the imports didn't show up. I think there's an import model that allowed for imports coming in, and we also benefited from lower crude oil prices across the world.
So, all of those collectively helped us to not cross $5 last year, but it also comes with some negative impacts in terms of the labor losing jobs, both in P66 Wilmington and job loss in the Benicia facility, but you also have local governments not having enough revenue to get through this transition. So, I think it's important for us to think about what are we doing in the near term, and I want to just structure this as it was a very reactive posture, the near term. All the way to the third is really about how do we set up the contours of long term transition by having a proactive discussion about what does this transition look like from the diverse set of stakeholders that we have to serve. It's the labor, it's the local communities, it's the cities, it's the state policies, how do we think about it holistically and set the stage for it. And what you have in the middle is really around adaptive management.
While you have the long term transition, while you have reactive behavior, there will be adaptive management needed, and we, as agencies, have to continue to think about what are the tools we have to ensure that we are aligning strategically with the long term transition of tools. I know the discussion today is largely going to center around bucket three, and I want to make a couple of comments. When we developed this letter, it was really important for us to have diverse voices sitting across the table. We had labor, we had environmental justice, We had Envidos. We had state agencies all sitting across, not necessarily all agree to the same points, and what you see here is not an agreed upon set of solutions, but it is a faithful representation of the holistic set of ideas came on the table.
So the legislature has taken some important actions to stabilize us on bucket two, and I really want to thank the legislature for your leadership. And one of the discussions we had in the EQ committee last year was really thinking about how do we set stage for bucket three. And thank you, Chair, and thank you, Heather, for having the conversations with us to set this table today and look forward to answering further questions. And finally, just a quick timeline for you all to kind of just remind. It's just since 2002 to 2026, over the last five years, there has been an incredible amount of work done.
It has been very dynamic, all the way from two special sessions giving us the tools and transparency necessary, creation of the DPMO, the Department of Petroleum Market Oversight, really looking at the opportunities and potential opportunities for market power and how do you mitigate that, and that has been their central focus. And also kind of just looking at the refinery closures and idling now of Venetia and how do we move through this transition. So, you again for the opportunity and look forward to answering any questions you might have. Thanks.
Speaker 3
Thank you, Vice Chair Gunda. Thank you, Chair and Vice Chair, for your opening remarks, too. My name is Matthew Botill. I am Division Chief of the Industrial Strategy Division at the California Air Resources Board. I'm going to talk a little bit about CARB's work and how CARB's work is driving, air and climate benefits, and as part of this transition that we're in now.
So, for us, our focus is clean air, and clean air means reducing both harmful local air pollution and greenhouse gas emissions. The federal Clean Air Act requires, and sets requirements for national ambient air quality standards for harmful local air pollution, and states that exceed those standards, such as California, must develop plans through a public process to meet those standards. Here in California, we have taken action to support meeting federal requirements, but we also must act to meet previously established state requirements and goals, and the chair mentioned some of these requirements in her opening remarks, and those include statutory mandates to reduce greenhouse gas emissions and achieve carbon neutrality, as shown on this slide. To get to our 2030 and 2045 statutory targets and achieve carbon neutrality, we must continue to cut existing greenhouse gas emissions here in California across all sectors. The passage of AB 32, going back to 2006, mandated that the state work to reduce greenhouse gas emissions by 1990 levels by 2020.
We hit that target early, and now we are working on our SB thirty two two thousand and thirty target, as well as our AB1279 2,045 targets for 85% greenhouse gas reductions and carbon neutrality. Think this is an old hat by now, this slide, but it bears repeating, and that is that transportation emissions remain the largest source of greenhouse gas emissions and air pollution in California. They are the source of unhealthy air. Over 17,000,000 Californians breathe unhealthy air in California. Five of the 10 most polluted cities in the nation are here in California, and 10,000,000 Californians in the San Joaquin Valley and Los Angeles live in areas deemed severe non attainment for ozone, meaning the air is dangerously polluted.
So, we have an imperative to address these emissions and to bring healthy air to Californians, and we've been working hard in CARB to deploy the strategies in a cost effective way that address these sources of air pollution, the transportation emissions that we have in the state. The figure on the left, illustrates over the last two decades how we've moved away from fossil fuels and deployed increasing amounts of alternative fuels. In 2006, when AB 32 became law, the state used almost exclusively fossil fuels. Now, over a quarter of our transportation fuel come from alternative fuel sources. So, the Vice Chair mentioned a concern about disinvestment in California that is happening now, and I do want to re emphasize that we while we may be seeing a disinvestment in fossil fuel infrastructure, we are seeing an investment in clean fuel infrastructure in California, anywhere between 3,000,000,000 to $4,000,000,000 annually in investment being driven by the state's policies in alternative fuel production, in zero emission vehicle deployment, and infrastructure deployments.
We see things like the conversion of the state's refineries to produce alternative fuels. We see investments to restart previously closed refineries to produce sustainable aviation fuel. We see investments in renewable natural gas, in zero emission vehicle infrastructure. These investments are happening. They may not be as visible as a large refinery because they're happening at a community level, at an individual fuel production level, at a smaller scale, but they're happening across California's communities.
And people are buying zero emission vehicles. The slide on the right, or the figure on the right, shows the rapid increase in zero emission vehicle deployment here in California. We lead the nation. That's something to be incredibly proud of as we've worked to reduce the sources of harmful air and climate pollution, reduce fossil fuel dependency. We've had an increase in zero emission vehicle deployments.
Over one in four new vehicles, zero emission vehicles, in California that are bought today. And estimates from our agency and from numerous studies have shown that the future of California's transportation system is more affordable for Californians. As we move to more efficient forms of transportation, we will spend less on our transportation costs over time. Sorry, go back. So, we're continuing to push forward to reduce climate and air pollution from transportation vehicles and fuels in California at CARB.
We're continuing to focus on this transition and utilizing additional private investment enabled by our low carbon fuel standard and other programs to help support clean fuel and vehicle deployment to reduce the demand for fossil fuels. We're also pursuing incentives to address affordability of vehicles and infrastructure to support the EV market expansion and looking at other options to increase ZEV accessibility. As Commissioner Gunda highlighted, we're in the midst of this significant transportation transition, and that transition is bringing cleaner air, more fuel, and vehicle choices, and one that will ultimately save Californians money in terms of avoided health costs and reduced transportation costs. It's exciting to be in this moment, but it's also important to recognize that there's more work ahead to plan and effect this transition to realize the full benefits and promise that the transition provides. I want to thank you for allowing me to speak today.
I'm going to hand it to my colleague from the Water Boards.
Speaker 5
Thank you. Good morning, Chair, Vice Chair, and members of the committee. I'm Annalisa Kehara. I am the Assistant Deputy Director in the Division of Water Quality, where I oversee our groundwater programs, which also includes our site cleanup program. And I just appreciate the opportunity to be able to come today to share California Water Boards and our role in petroleum refinery enclosure cleanup.
So I'll start with our Water Boards background. So at the Water Boards, we're comprised of the State Water Board and nine regional Water Boards located across California. And the State Water Board manages the site cleanup program statewide and provides support and coordination for the regional water boards that oversee cleanups at sites, and in this case, petroleum refinery sites within their regional boundaries. And while I don't have it listed here, I just wanted to note that we also work with Department of Toxic Substances Control, DTSC. They do play a role in refinery cleanups, and specifically for any releases of hazardous waste, and a common example are waste management units on refinery properties that have hazardous waste discharges in them.
And then also to note, local agencies also play a part, specifically through our California Unified Program agencies during any facility deconstruction or equipment decommissioning. Okay. So, our existing statutory authorities are broad and require our authorities to require investigation, cleanup, and abatement of discharges under the California Water Code. Specifically, our authorities are under California Water Code Sections thirteen-two 67 and thirteen-three zero four. So, Code Section thirteen-two 67 allows the water boards to require dischargers, past dischargers, or suspected dischargers to furnish technical monitoring reports, as the water boards may specify.
And then, Water Code 13304 follows up and authorizes the water boards to require cleanup of all waste discharge. And then, noted on here as well, at the water boards, we also regulate waste management units at a refinery under waste discharge requirements for discharges of waste to land pursuant to Title 27, and that's under Water Code Section thirteen thousand two and sixty three. So, at the State Water Board, we adopted a resolution, Resolution 9,249, and it basically took our 13,304 authorities and established policies and procedures to be used by the water boards when, one, determining when a person is required to investigate and clean up a discharge two, concurring with how a site will be remediated and then, three, overseeing the implementation and the schedule for investigation and remedial measures. So, all of these determinations are included in a management plan approved by the Regional Water Board, and the Regional Water Board considers many factors when they review, when they establish that plan and approve it. Some of those factors include, but are not limited to, the current and potential future uses of groundwater and surface water at a site and in the surrounding area, the potential effects on approved local development plans, as well as exposure to receptors, whether they be human or biological.
So, in terms of planned use of a site, that's a factor that the regional boards will consider. Will it be residential? Will it be commercial or industrial? Because the actual exposure to receptors will be different in those cases. So, I'm shifting to the actual assessment, monitoring, and remediation at a site.
So, the water boards have tools in our toolbox when it comes to the technologies available to target sampling, monitoring, and remediation of soil and groundwater, primarily to, one, assess the contamination two, remediate that contamination and then three, monitor the progress of the remediation. And so, some examples for assessment and monitoring are included here. We can use hollow stem auger drilling, and so that's really just drilling into the ground, getting some soil samples to understand the content and the context of soil contamination. We may install a groundwater monitoring well network, and so the groundwater monitoring well networks are intended for us to understand groundwater contamination, as well as the behavior of groundwater under a site. We'd like to know depth variations, maybe the flow direction, and then the velocity of that flow as well.
And then we also could require soil vapor sampling. And so soil vapor sampling is really intended for us to be able to monitor and determine if there's any off gassing of soil or source groundwater and whether or not it may pose a threat to inhalation exposure. So that gets to the human health protection side. So, have a combination of remediation techniques that we have as part of our toolbox. What I have listed here is just a subset of that.
In many of these site cleanup of refineries, full removal and excavation of the impacted soil is preferred, and it's first considered. That's typically done simply by using a backhoe or an excavator. We may apply soil vapor extraction on a site, and this is a system where we would apply a negative pressure or a vacuum to induce and volatize contaminants at the site. Pump and treat of groundwater, especially where there's high groundwater at a site, is common. We would simply pump out the contaminated groundwater, treat it on-site, and then discharge it via a permit to a local sewer system.
And then last on here, at least, we have in situ oxidization, and so that's where we would inject chemicals to the subsurface to promote biodegradation. I've listed monitored natural attenuation here because it is one tool in the toolbox, and this is where there's a level of contamination left at a site where we allow the natural microbes to biodegrade petroleum to a low risk state. But I just wanted to note that this is more common at former gasoline stations in California where we have underground storage tanks that had formerly leaked. We've removed that source. There's just a little bit of the contamination left, and so we are able to confidently walk away knowing that the site will be able to biodegrade to that low risk.
And so, as I mentioned, there's so many factors to identifying the appropriate method for remediation. That could be the extent of the contamination in the soil, in the groundwater, the soil types, as well as maybe groundwater levels. So, a combination could be applied, and it would be very much site specific. While I'm here representing the State Water Board, as I had mentioned on my first slide, it is the regional boards that work and oversee cleanup at specific refinery sites within their regional board area, and so I just wanted to share some post closure considerations that I've heard from many of my regional board colleagues. In general, what they have shared are that many of these refinery sites were filled and constructed a long time ago, so there may be buried drums and other surprises during the demolition and deconstruction.
And so, a good construction risk management plan is important to the regional boards when they come and they start to oversee cleanup at a site. While refineries could already have extensive site characterization and monitoring data, Most of that data was collected from a perimeter or accessible areas within a refinery, and so the regional boards are aware of this, and so a new site assessment would likely be needed after the refinery infrastructure, such as tanks, pipelines, and other structures, has been demolished and removed. So, areas that were previously not accessible, when they become accessible, the regional boards would like to have the opportunity to conduct additional assessment, if needed. And then, specifically, new groundwater monitoring wells may be needed to be installed in areas that were previously inaccessible due to rail lines or subsurface piping, for example. And so, with that, that actually ends my slide deck.
I can pass it back to the chair and answer any questions, but thank you for your time.
Speaker 1
Okay, thank you. Well, we appreciate the expertise of the panel. Thank you so much for coming. I have a couple questions, and then I'll turn it to, the other members of the committee to ask questions, as well. So, my first question is to Commissioner Gunda.
One of the this hearing is really focused on that third bucket in your letter, and one of the things that was mentioned in the June letter was that the state should identify what, the letter said were challenges, opportunities, and strategies for the future of land affected by the transition. And so, I'm wondering if you think that we have enough information to be able I perceive we have asymmetrical information, where we don't have a lot of information, and oil refineries do have the information that they have, and I'm wondering if you think that we need more information in order to do planning around the land transition, or, you know, there were a lot of different things that Ms. Kahara mentioned that seem like there are a lot of tools in the toolbox, but I wonder if we perceive that we're using them all, or if we need more tools. So, I wanted you to reflect on that.
Speaker 4
Yeah, and thank you, Chair. I think this is a point of conversation that came about in the roundtables with the diverse stakeholders in the room. There seems to be definitely regulatory structures in place to understand what the liability could be to some level and what the things that we do. But there is a real I mean, if I'm faithfully representing the conversation in the room, there is a real concern that there might be gaps in understanding both the liability that the state might carry, and from the community standpoint, really the desire to understand, given that some of these assets could take many years to remediate and convert, really, how can they plan for the long term benefits of the community? So, there isn't I don't think there is an agreement that the information is there.
And to your I think the way you framed it, the asymmetry, even if it is there, it's probably not shared with everybody. So, I think it would be helpful, similar to the SPX1two and ABX1two, ABX21, the biggest opportunity there was really shedding light and transparency, so everybody worked from similar information. So, I think having the opportunity to be able to have that information for everybody to consume would be really helpful.
Speaker 1
Okay, thank you. And I think I it's a similar question for Ms. Kehara, but it's basically I mean, I think one of the things that we know is that Valero calculated the Venezia asset retirement obligation that they reported to investors, when they announced the closure, was it was $337,000,000 And so, you know, one of the issues that occurs that occurs to a lot of us is that it's a lot of money, potentially, to clean up these sites, and we want them to be cleaned up, and we want it to be done responsibly, and but we also we don't want to be subsidizing something that's basically just going to that cost. And so, understanding I mean, you said we'd like to be able to conduct initial additional assessments, and you said we have a lot of tools in the toolbox, but how accurate is the picture that you're getting, and how much of how many of those tools are actually being used so that we have a sense of the extent and the cost that these site cleanups will take when they close?
Speaker 5
That's a great question. I believe that, especially when the water boards are involved in cleanup, it's typically when we either have an idea that there may be a release or confirmation that there's a release, and so that's what I had mentioned as part of the thirteen thousand two and sixty seven, thirteen point three zero four authorities. So, we can ask for more information, confirm, and then start to require cleanup. And then, part of that, it requires assessment, as I had mentioned, and that assessment is really what's available during a refinery and what's accessible during a refinery. And so, there are a lot of areas in a refinery that are not accessible due to, as I mentioned, the rail lines, whether or not they're just hazardous areas, and just not able to, you know, be able to put a monitoring well or take a soil sample.
And so, do keep that in mind. And so, yes, you know, especially during the decommissioning process, it is an opportunity for us to go in and to be able to get a holistic view of what cleanup will look like. And in addition to that, early on, you know, there's already steps in place in order to make sure that maybe a monitoring network is put in in the perimeter of a site to make sure that there isn't any further releases or, I guess, the plume itself is not migrating outside of the site area. So really, it is just getting a better idea in terms of the impacts within the area of concern during the decommissioning process. So that really plays a big difference in terms of ultimately how much remediation may cost in the end, and so it's as part of the Regional Board's interpretation and in their experience, what they've mentioned is that sometimes it can take tens to hundreds of millions to remediate a site, and a lot of that depends on those factors in terms of, like, how much soil types, what type of remediation, and how long that remediation needs to happen.
And then I hear the concerns regarding the amount and kind of the financial assurances, and then we'll say that, you know, while we at the water boards, our authorities are really under thirteen thousand two and sixty seven, 13700, and then we have an enforcement policy where we can, you know, go after responsible parties, as well. Much of our authorities, especially during our role with cleanup, has been going into a cost recovery agreement with the responsible party for reimbursement of our oversight costs. What I'm aware of is any kind of early financial assurances from refineries are typically through the Resource Conservation Recovery Act, so that's federal, and Department of Toxic Substance Control is lead with that RCRA implementation. And part of the RCRA and RCRA financial assurances does include, and it addresses post closure and corrective action as well.
Speaker 1
Okay. And so, the tools that we currently have that we've been using for, like, gas stations when they close, are we basically just using those same tools, and do we feel like that's adequate? Do you think the legislature should provide more tools or more obligations, particularly around knowing what those estimated costs are from the beginning, or, not you know, basically, when the equipment comes down, then we figure out what's there, but some sort of pre analysis of that.
Speaker 5
Yeah, I believe that the same technology that we use for cleanup of gasoline stations, because we are talking petroleum, and in many cases, in the refineries, petroleum releases as well, it is the same technology, whether it be groundwater pump and treat, whether it be soil vapor extraction. It's just at a larger scale, which is what affects the cost and the amount of time when we're talking about refinery remediation.
Speaker 1
And so, you feel that those tools are all adequate? Yes. You do? Okay. Okay.
Senator Menjivar, did you have some question or statement? Did you want to?
Speaker 6
Thanks, Madam Chair. Still fairly new in this space, so if you indulge me. Have a couple of questions for the first panel here. I'll start off with the Commissioner. Can you clarify because hearing two things, that demand is high, but I know research is showing that demand is decreasing, and you even shared it's about a 2% decrease in demand.
Just want to confirm that that is correct. Yes.
Speaker 4
It depends on year to year, Senator. We see anywhere from a percent to 2% decline in in state demand.
Speaker 6
Okay. And regarding the capacity is falling, why aren't we seeing more transitions versus full closures?
Speaker 4
Yes. So, I think there's two specific elements, and I think Matt from CARB could kind of talk to this. I think within the broader energy transition, I think the first thing we all look to is the scoping plan as the overarching economy wide decarbonization blueprint. And so the energy space then is a sub portion of that, and one of the elements that we are seeing in terms of long term transition is a large swath of the economy could be electrified, but there will be continued need for molecules. So those molecules are kind of from gas, renewable natural gas.
They could be biofuels, renewable diesel, or aviation fuel, sustainable aviation fuel. I think in recognition of that and recognition that over time, even though the demand for gasoline is decreasing, the demand for aviation fuel is actually increasing. So when you look at those kind of transitions, it is really important that and I can pass it to Matt the recognition of having those molecules that are done in a sustainable fashion. So, there is a business case because of the way the taxes, the tax credits, and the incentives are set up for those business cases to work. But in terms of just continuing gasoline production in California or refining in California, it's important to think about the overall global context, about when a specific company is thinking about where do I put my money in kind of serving the global needs, out of which California is one of them, what is the best place to get the maximum ROI?
And the ROI case for California has been low compared to within in kind of U. S, it's Texas. Texas has the best ROI. But if you think about globally, you also see the trend that the refineries are closing in developed economies, and they're migrating to developing economies because the auto is better. So, the conventional fuels and the fossil refinery side is consolidating in places where it's better ROI, and the developed economies are more moving towards alternate fuels.
And I'll see if Matt wants to add anything to it.
Speaker 3
Yeah, I don't disagree with anything that Commissioner Gunda said. I'll just layer in that when kind of thinking about this from a fuel supplier perspective, there's a couple of considerations. It's what is the projected future gasoline demand, for instance, that I may be trying to satiate, you know, by production, but also diesel and jet fuel, and how is that going to provide a market for me into the future. And in California, as a result of kind of our ongoing work to find more efficient energy sources and transportation choices, we're seeing ongoing gasoline demand, and that is expected to continue into the future. Much of the diesel fuel in California is now being met by biofuels, by renewable diesel in particular, and that is a result of some of the transitions that have already happened in California with P66 and Marathon and a few other refineries.
So, now, we're seeing the diesel market largely being met by renewable fuels, and as Commissioner Gunda mentioned, the next one to think about is the jet fuel market, and you're starting to see increasing production of alternative jet fuel. Jet fuel is one of those areas where there could be increasing demand going forward as our need for aviation increases, but these refiners are making these choices. We've got large assets. We've got costs with refurbishments. Are we going to have a market for my specific product in the future, either within California or outside of California, and making individual decisions about whether or not it makes sense to transition or to potentially close?
And so, what we saw in the 2020s with Marathon and with P66 was a decision to transition and take advantage of a favorable incentive structure and looking at the future of alternative fuels, and so they made those multibillion dollar decisions to transition their assets, and each refinery in California will make its own decisions kind of likewise.
Speaker 6
And is the demand not decreasing enough? If our importing is increasing, it's because we're the demand is just not falling fast enough for that? Because wouldn't you have also that decreasing?
Speaker 4
Yeah. I think the way to think about the Senator is that each of the refinery, I think one of the ways they kind of consider is what is the overall usage, right? So if you have, let's say, you know, seven, eight refineries right now, and the demand has gone just below one of them, right, so the overall capacity, the question becomes when they remove, the demand is falling very smoothly between 12%, but when a refinery leaves, depending on the size of the refinery, it could be 15%. So you have that sudden imbalance, and so that's one thing. The second, I think, important to consider here is when the refineries are looking at making investments, because California was the refineries were developed here based on California crude, which is very thick and sour, So the refineries needed to be very complex, multistage.
So because of that, when they have to make an investment to just bring it up to maintenance standards or whatever, those turnarounds could cost several 100 millions of dollars. And each one of us thinking, Do I have enough time to recoup that? And do I if I put in $400,000,000 and it's going to take me six or seven years to recoup that money, do I have the legroom there to actually recoup that money? So, everybody's kind of being cautious about making that investment, and we'll continue to see that.
Speaker 6
Okay. I have three more questions. My last question to you, Commissioner, is in the option summary of your slides, number 10 is state owned refineries. You know, we're hearing CEOs talk about they're looking at a ten year commitment plan, and obviously, one of the big priorities is the return on investment for their shareholders. We're talking about the economy, the impact the refineries have on the economy.
I mean, what are the steps, immediate steps, that a state could take to do a similar approach to Norway and have state owned refineries?
Speaker 4
Yeah, thank you, Senator. We have been looking at those options and looking at tradeoffs. I think every time there is a refinery closure, that is sudden, you know, that option kind of comes on the table. So we've, you know, looked at last year, had a lot of conversations to think about. So first of all, there needs to be a regulatory construct to be able to even take ownership of a refinery.
So the first part is like what kind of regulatory structure do you have to have an agency actually oversee that and then buy the asset, and where does the money come from? Second, obviously, the state might not be the right team to manage and run the operation, so you have to look at a tolling agreement. You have to look at another refinery that is willing to run the refinery for you. And so those are the kinds of questions we need to think through. And also, an important part for us to kind of consider here is, if you buy one refinery and let's say the market is still not profitable, the next refinery could go.
So you're looking at you buy one refinery, you're willing to operate at a loss, but the other refinery now kind of floats up to the top of not making enough money. So at some point, it will be an importance to think about it as an ecosystem, not an asset by asset. If you do asset by asset reactive purchase of a refinery or try to do that, you will not have the best deal. So, you really need to think about an ecosystem at what time and under what conditions will the state actually intervene.
Speaker 6
Okay. Thank you so much for that. Chief Assistant Deputy Director, thank you for the explanation of your role here, and I saw that there's a lack of regulation or standardization for decommissioning and transitioning. What greater role can the Water Board play in that? And are there conversations, or like, what approach do you take?
Are you one piece mioling it as they decommission?
Speaker 5
In terms of what additional role the Water Boards can play or what support, I do think that we do have existing authorities that we can use in terms of the decommissioning stage, and that we do have authority for the additional collection of data and information, and then we transition that to the authority to require any kind of cleanup. So, we do step in during the decommissioning stage, we say, you know, these were former areas that we could not access. We now can access that. Please install another monitoring well, or please take some additional soil samples. We'd like to get a better idea in terms of the delineation of a pool.
Speaker 6
Some of the feedback I'm reading is that local cities across California struggle because there's no standardized process when this occurs. Is it that you need a legislative direction to do that, or can the Board do this on their own to just do a standardized procedure for all municipalities to follow?
Speaker 5
Yeah, I believe that that comment in terms of the feedback that it isn't standardized is because it really depends on the actual refineries themselves, how many areas are inaccessible during refinery operations that we should take advantage of during the decommissioning phase, and then also during the lifetime of the refinery and when the water boards do become involved and are aware that there's a discharge, how much data were they able to collect where they can confidently say we have a good idea of how much has been released and how large that plume is, that then transitions over, then what's the appropriate remediation based on soil, groundwater. As mentioned, we do have all of those tools in our toolbox. It's just understanding the full picture, how much data was collected during when the refinery was active, and then now how much should we be taking advantage of the decommissioning phase to fill in those data gaps so that we can transition over.
Speaker 6
And that's one of the feedbacks, right? We don't have enough data of the plan of what happens when they decommission. Okay. My last question to you is, is there pressure placed on these entities to do a timely cleanup from the Board?
Speaker 5
Yes. A lot of these requirements we have in the management plans, as mentioned, include timelines, and they include commitments from responsible parties, refineries in this case, to remediate and then to do the cleanup. It includes timelines that they've committed to, and then also, typically, what we'll have are reports in terms
Speaker 5
Follow through really shifts into our enforcement realm. If it's not followed through and the timelines aren't adhered to, then we start to shift into our enforcement where we would issue orders, cleanup and abatement orders. We do have a lot of tools around our enforcement policy at the water boards to compel that cleanup is done within a certain time. But there is decades in between in terms of when cleanup can start. Maybe additional information is collected.
There could be a shift in terms of technologies, but overall, when the regional boards or the water boards as a whole approve a management plan, it does include a timeline.
Speaker 7
Thank you, Madam Chair, and thank you for allowing me to attend today. I know I don't sit on this committee, but I really appreciate the indulgence. As our Senate's lead on the Joint Climate Committee, we're looking at these refining issues pretty squarely, and we're going to be digging in deeper and hearing coming up with CARB, sort of looking at it in the carbon context. So, Mr. Botel, don't know if you'll be in here, your chair will.
And so some of this may be a little bit of a sneak preview for what's coming, but I just wanted to I'm a little nervous about the initial discussion between from our Vice Chair and also some of the the rhetoric, the posture around sort of relative ROIs and where it's more profitable to to refine petroleum. Context is very important here and what I what I sort of missed from the outset is that this whole shift in global production and the refining landscape is not something being driven by California policy or even California climate policy. That implication seems to be out there that it's our fault or that we're doing this. When you look at closures going on all over the world, I I just pulled up a a Wood Mackenzie report, from the end of last year around a global refinery closure outlook to 2035 report as well as a recent Bloomberg study looking at both the closures in the '25, Petro China's Dalian plant, the Petro Aeneos's Grangemouth plant, there's talk about the, which is in Scotland, there's the Lindsay project in The UK, and in fact, the Wood Mackenzie report notes that Europe and The Middle East together account for over half the global capacity identified as at risk of closure by 2035.
So in fact, the biggest closure risks are not even in California at all, but in other markets. The UK for instance is down to six refineries even in Europe and China alone hold the majority of the high risk sites. None of those have California climate policies. Maybe they do have some carbon pricing on the books or different trade policies or economic, economics, but what I wanted to get from you, Vice Chair Gunda, is that sort of global context here, around how refineries go, refining is going in general, and this, if you could just comment on the the era of this, what they call the mega refinery, that they're gonna refine product in India, for example, and send gasoline all over the world as opposed to, you know, utilize our refineries and sort of So is it fair to say that it's not, California climate policy that's driving this global trend, but in fact other issues around technology, supply, demand, tariffs, trade, geopolitics?
Speaker 4
Yeah, I think, Senator Stern, as with many of your questions, is that it's a very you know, the answer is very complex, you know, to I think the kind of the comment that you provided, I think it's a multitude of issues. I think the primary of it is whether it's California, Texas. We have a refinery closure in Texas. You know, that was announced in 2024. So there has been a shift from moving to from basically very complex refineries that has been developed over years and how they transition and how the economics work.
So there's multiple pieces I just want to lay out as considerations, and I do not have an exact answer to this. The multiple pieces are, one, global, just as you mentioned. Depending on where you get crude oil from and how much it costs, the economics of the refinery completely changes. So that's an important issue. There are just a general piece of, if a market like California needs molecules, what is the best way for the market to serve those molecules?
And usually, it's in state, and you kind of have the opportunity to have a resiliency system, but if, you know, the economics in California does not work, then, you know, the market can bring in imports. But to just bridge that point to the actual question that you mentioned, I do not think California's policies are changing global way that refineries are operating. I think the every place that the global refineries are, it's kind of within their own policies, you know, nested in their national policies and the regional policies. I think we have our own specific context, regulatory context, and for us, the question is, as we move forward, the demand is going down, and we are just centering the conversation around the
Speaker 4
transition, it is clear to the market that the overall molecules that are needed in California through gasoline are going to go down, and if it's going to go down, how will the market adapt to that reality? And during the transition, is it easy for the market to provide the molecules to California through imports or through actually making the investments in California to serve it. And the historical context for California, which provides a little bit more resiliency, is we are kind of an island. So for a history, very we made our own molecules in California. So we defined we didn't have a lot of ships coming.
We don't have pipelines coming. So it was really important for California to have its own refineries. But as that kind of drops and the global dynamics change, it's really about the market trying to figure out how best to serve the needs of Californians.
Speaker 7
So, can I pick up on that point? Given that we're in EQ here and this committee oversees the cap and invest program and the allowance markets and carbon, it's I just read a recent study by the UC Energy Institute, Bushnell analyzing why our carbon prices are so low right now. And one of the potential explanations was that these potential importers, these gasoline importers are waiting, and they're not trying to take a forward position in the carbon market, they're not, they're assuming that they're not gonna be regulated like an in state refiner would be. Or at least sort of waiting and seeing how things go. And that they're gonna sort of sit outside our borders, stall, and we're gonna have reduced investment in the carbon market, as a result, you know, lower carbon prices in the near term, lower GGRF revenues certainly, but is this is this trend something that you all are paying attention to in terms of especially at CARB, in terms of a sort of weight and then a potential for a market spike or a manipulation closer to say 28, or when the compliance periods hit, so that they sort of stall now, and then just hope that, I don't know, JD Vance says it's the end of all climate in 'twenty eight, and then we don't have a carb anymore, and they can just import how they want to, and evade our regulations.
I'm sort of trying to think of what that future looks like, and why it is such an anemic market at the moment, and I can only look to the truncation in the refining sector, the lack of demand for those allowances. Is this something that CARB is sort of paying attention to in the medium term outlook? Maybe not right now, but also not super long term, but just potential for carbon market manipulation as gasoline imports potentially increase?
Speaker 3
So, I appreciate the comments, Senator Stern. I'm going to be very just kind of simple in my response. Today's auction day, I think, as you know, and so, as the regulator over the cap and invest program, and responsible for the running of the auctions, the market monitoring of those auctions, I'm not going to say anything that could impact the potential outcome of those. But I will say that, you know, as far as our program design goes, you know, we, for both our low carbon fuel standard, our cap and invest program, we set those trajectories, the stringencies in those programs to make sure that we can hit our climate targets here in California and are always open to suggestions on ways that we can improve the design of those programs to make sure that we hit those objectives.
Speaker 7
Let me ask you just a little simpler way for you then so it doesn't run afoul of, you know, we know there's a lot of sensitivities on a day like this. California's carbon pricing and cap and invest program applies both to gasoline imports as well as fuel that's refined in the state of California from from domestic sources. Is that correct?
Speaker 7
So, regardless of whether you're bringing in straight gasoline to the port and doing that pipeline versus refining crude oil, say, from Kern County, that at that point of entry into the market, you're still going to be subject to the same compliance obligations?
Speaker 1
Okay, thank you. We're going to go to the Vice Chair, and then to Senator Hurtado. Go ahead, Vice Chair.
Speaker 2
Thank you, Madam Chair. I, too, have quite a few questions, and I want to kind of visit this the global impact, and then I want to look at have a few questions around supply, around demand, and then what the plan is. So to kind of bring it back to the global impact we have here, for CARB and like, I don't need long answers. I just I mean, a lot of the questions are pretty simple. California represents roughly 1% of global greenhouse emissions.
Is that accurate?
Speaker 3
So, it's been a little while since I've checked the actual percentage of our representation of total emissions. You know, certainly, as we continue to have success in reducing our greenhouse gas emissions in California, that percentage of our emissions relative to the global emissions does decline. You know, we are part of a global ecosystem of emissions, and we work with many partners to to help ensure that other states, other nations are also pursuing decarbonization policies and reducing their emissions as well.
Speaker 2
So, China emits more greenhouse gases annually than The United States, the European Union, and India combined. Is that correct?
Speaker 3
So, again, I don't have the numbers in front of me. You know, California, as a state of 40,000,000 people comparatively to a country of, what, five four to 5,000,000,000? Certainly, yes, China has much more emissions than California, yes.
Speaker 2
And is it your understanding that China continues to approve and build more coal plants?
Speaker 3
So, interestingly, as part of their five year planning cycle, my understanding is that China has actually made announcements about reducing greenhouse gas emissions. They have national targets now to reduce emissions in China, and they also have provincial policies to reduce emissions. And so, they have, to my knowledge, announced that they plan to peak their total greenhouse gas emissions in the coming years and then ultimately reduce their emissions in the coming decades, which, you know, as the largest current emitter, is quite an accomplishment to make those announcements and start to push down on their greenhouse gas emissions for us here in California. We're lucky enough to have peaked our emissions a little over a decade ago, and are continuing to reduce our emissions here. And so, many of the policies and many of the learning that California has done in terms of deployment of emission vehicles, renewable electricity, alternative fuels, more efficient buildings and homes, We're seeing those things also materialize in other countries, including China.
Speaker 2
So, I believe last year alone, China opened 52 new coal plants. So, when California reduces in state production but imports more foreign crude, does CARB account for the lifecycle emissions of shipping the oil across the oceans?
Speaker 3
So, in our programs, and it is kind of program dependent in how we look at the ultimate compliance obligation, but we do have, in our low carbon fuel standard, provisions that look at the source of the crude that is produced, the transport emissions for that crude, where it's refined, and then ultimately its use in California. So, if you are utilizing more energy intensive crude, you have a higher compliance obligation under that program than if you are not. So, is provisions within our program that address kind of
Speaker 2
So, what is simple is yes or no, are you accounting for those emissions? Is there accounting of them?
Speaker 3
Are we accounting for important emissions? I'm sorry. I'd I'd have to ask you to clarify in in what capacity.
Speaker 2
So, life cycle emissions from across seas. So, the tanker you're you're accounting for if if Venezuela sends crude to India to be refined and then shipped to California, those carbon emissions are all accounted for.
Speaker 3
So when we produce our greenhouse gas inventory, which is the metric that we use to see how we're doing in reducing our emissions towards our state targets, we follow IPCC protocols around emissions accounting, which means and these are the international standards set by the scientific body, the IPCC, to do this greenhouse gas accounting. Those are emissions that take place here in California, so those are our industries. There are emissions associated with the fuel that's used and the energy that's used here in California. However, when we have policies that are pushing to drive down emissions and policies like bringing alternative fuels or energy into California, those look at the full lifecycle emissions associated with them to make sure that we're not simply just transitioning emissions outside of California. We also have directives from the legislature to reduce what's called emissions leakage, which is the result of pushing emissions outside of California from our climate policies.
And so, many of our programs are designed to help address that particular risk and reduce the risk that we're simply just shifting emissions outside of the state borders.
Speaker 1
me. So, I'd just like to encourage a little more concise answers, so we because we do have two other panels. Yeah. So, that would be great. Thank you.
Speaker 2
So, it seems like it's a little muddy, and we don't actually know if we're reducing carbon footprint globally. So I'll move on to the next questions around, really, demand. So to clarify with the Vice Chair, so we've seen a two you had mentioned earlier, we've seen a 2% reduction of demand over the last twenty years. But can you clarify that since 2022, we've actually seen what percentage of an increase?
Speaker 4
So, since 2020 Since COVID. Since COVID is the numbers I actually provided, Vice Chair, is the 1% to 2% since then is what the decline is. Prior to that, up until 2017, you had increase. And since 2017, California has started declining. So, we peaked in 2017 on the gasoline demand.
So, versus the jet fuel could actually increase.
Speaker 2
Okay. So, it's my understanding in some recent report that I saw from USC that our demand since COVID has actually been up about 7.5%. So, I'll make sure that I'm reviewing this.
Speaker 4
Yeah, I think that particular report was looking at the bottomest point of COVID. So, if you if we go back to the chart I provided, it kind of like really dips and then comes back up. So, if you look from that point, it looks like an increase, but that sudden drop in COVID is actually a drop because of the COVID issues.
Speaker 4
No. I think it's a much more smoother transition than a disruptive transition. And
Speaker 2
again, for CARB, your scoping plan projects about a 47% drop by 2030. Are we on track to meet that?
Speaker 3
So, our scoping plan put a 48% reduction by 2030 as a checkpoint on our way to carbon neutrality. What we said was, if we're successful in adopting the policies that are identified in this government plan, should reduce emissions by about 40% by 2030 on our way to an 85% reduction by 2045, which is the target set in statute.
Speaker 2
So, I guess for both CARB and the vice chair here. So, refining capacity is declining faster than demand, aren't we creating a system that is going to be inherently unstable and volatile?
Speaker 4
So, I'll take a for share that Vice Chair. I think the piece that we really need to think through is the long term transition strategy in California. I think one of the things I've learned over the last few years working in petroleum is all the conversations are an and and an and and an and. They are not ors usually. So I think if we move forward, I think under the climate current climate policies, the decarbonization policies of the state, and the general kind of trajectory of where we're going, the demand is going to go down, right?
So it's like to your point then, as the demand is going smoothly, if we have these lumpy transition away from the refineries, what do we do? And I think the question then becomes, you know, what is our long term trajectory here? And I think that's the I really, really appreciate this conversation today. It's multifaceted, right? So, the first thing is, if you look at the East Coast, East Coast has 50% of its overall usage comes from the Colonial Pipeline from Texas, and only 20% of the East Coast overall need is actually coming from refineries there, and 30% is coming through imports from across the Atlantic.
So, that model works on the East Coast primarily because they are using storage really well, and they have a pipeline. So, what we are observing in the marketplace is, I think you probably heard about two pipelines that have been announced potentially from Northern Texas into California. So, if those pipelines come, that's kind of essentially having a refinery replacement, right? So, and then you have the imports coming in. So, I think really the issue around resiliency comes in how well we use storage and what is the long term plan and how do we align our policies.
Speaker 2
Okay. So, I'll move to the supply side and then the plan or the lack of a plan, I should say, that we need to figure out. So, on the supply side, do we know if there are any new refineries being built or planned for in California?
Speaker 4
No, not that I know of. I think there are conversations about desires to do that, but I don't think there is any plans today.
Speaker 4
I think you have to make that up through imports. And so right now, Vaishyat, the question primarily is, are there enough molecules globally to source from? The answer seems to be yes. It's really around figuring out the infrastructure for distribution. So, if the import infrastructure exists in California, I think that's where the market will move.
But I think to your underlying question there, if that is not properly done, we will lose resiliency. And I think that's important for us to think through.
Speaker 2
if supply drops faster than demand prices go up. And then this will be my last question because I know I've taken a lot of your time here. Do you does both I know any of you on the panel, do you believe that California has the import system to sustain our supply needs when our demand is you know, seems pretty stable? And can you anyone kind of speak to the Jones Act and how that implicates what the implications of that are for California?
Speaker 4
Yeah, think I'll just take a first shot and then provide it to my colleagues here. I think 30,000 foot level, just kind of comparing 'twenty five and 'twenty six, Vice Chair, in 'twenty five, we had essentially seven refineries operating because PBF Martinez had a fire and completely out the whole year. So this year, PBF Martinez is coming back online, and then Velero is going to idle. So you essentially kind of move from '25 to '26 with the same amount of in state refining capacity. What we have seen last year is a record level of imports coming in.
Like if we look at the last twelve years, we haven't seen that level of imports coming in. So what it kind of points to is the amount of import infrastructure we need for today for the seven refineries operating does exist. The question is, if you have more refineries leaving, then do you can you keep up with the infrastructure improvements, right? So, one of the pieces that you've heard from P66 Wilmington P66 P66 Wilmington is not completely shutting down, right? So I mean, the refinery is closing, but they're using the tanks to import.
So as long as you have the tanks to import, you will be able to do that because you don't need a rated supply. On the second question of the Jones Act, I think the Jones Act prohibits the basically non U. S. Vessels to move fuel from, for example, Texas to California. So there are some roundabout things that the industry does.
If you look at I think there was an article yesterday on CNBC about how much comes from Bahamas, right? So I mean, there is, like, ways that the industry is kind of moving the molecules around. But I think Jones Act is a limitation that we need to think through, and I think the pipeline will help alleviate that. But the question is, whether it comes on Marine terminals or pipeline, will the ultimately cost be the same or there will be a cost reduction? And what is the benefit is the resiliency and overall downward pressure on spikes.
Speaker 9
Thank you, Madam Chair, and thank you also to the panelists for, you know, being here and answering our questions. I'll have to admit that a lot of this just doesn't really make sense to me. If you and I really appreciate the presentation, by the way, because if you look at page four or five, it tells me that you have had somewhat of well, at least since about 2022 or 2023, a plan, a transition plan in place. And as I'm going back to page number two, slide number three, and focused on the mist of that California is in the middle of a transition, right? It kind of tells me everything that I've kind of been witnessing as one of two state senators that represents Kern County, and that's that, you know, if you look at gasoline, it seems like it's been kind of pretty consistent through, you know, through history.
And then, of course, as you've mentioned earlier, you pointed to a dip. And that dip is around 2020. Well, I came in, in 2018, and a lot of things really began to shift and change in 2018. And you know, I'm a firm believer in clean air and clean water. I that's something that my district, wholeheartedly wants to see.
I think we're probably the most impacted, in terms of the state when it comes to water and air quality. So, I'm very supportive on that end. But, again, going to this transition and the dip, you know, if you look at the historical gasoline usage, I mean, I would predict that it continue, right? But with that dip, as I mentioned, there has been changes. I know that, you know, when I came in, in 2018, we went from Dodger into CalGEM.
You know, we started off with internal managers being removed, being reassigned over conflict concerns, And there was, you know, a lot of it just began to be limiting permits and, you know, other policies and proposals, whether through the regulatory or legislation that really, I think, drove us to kind of be where we're at today. And if you also look at that slide, the ZEVs, it just doesn't seem that it has taken off, which is something that, in a transition, you would expect. And I think that if we are in the middle of a transition and we've known that we're going to be in the middle of a transition, then why don't we start planning for this earlier on? Why are we planning for it 2023, 2022, whenever I mean, I don't know. I'm just assuming here, but it to me, it just doesn't add up.
There's a lot of things that kind of just fell apart along the way. Again, I support our clean air goals in trying to achieve that for our communities, but this dip, it really just doesn't make sense. And it's also at the same time when I think there was just kind of an expectation for zero emission vehicles to really take off. And I don't think that we really have seen that. And it's just it seems like the trajectory is not really showing that either.
So, you know, how do we move forward? How do we did you take into account the history? Did how far back did you go into planning, knowing that we were in a transition?
Speaker 3
Yeah. Happy to comment on a couple of things. And, you know, I've been working in this field for going on twenty years now, and I remember when Governor Brown made the first announcement of I think it was one point two million zero emission vehicles was the objective by the early 2020s, and a lot of naysaying about, like, how impossible that target seemed to be achieved. And here we are, and we've exceeded it and hit about two point five million zero emission vehicles on the road now. And so, you know, we have made huge strides in a short amount of time in deploying technologies and making vehicles more efficient, too, that has cut our overall demand for liquid fuels.
We're down about 20% in twenty years on our transportation fuel usage, and that's huge savings. That's billions of dollars in savings that have been realized by California consumers. That's health and air quality benefits. That's climate benefits. And what we're seeing now in the work that's been going on with the energy commission, the work that this legislature has taken up over the last four to five years now, has been really concerted efforts to look at the fuel landscape and identify the next steps in this transition by, you know, as Commissioner Gunda mentioned, thinking about the mid transition, the late transition, and these longer term strategies as we expect those decline demands, those historical trends to continue going forward into the future.
So, I see a lot of success in our story, and I see a lot of work that we've done and we're going to continue to do here to identify and implement strategies and look forward to the partnership with the legislature as you all think about kind of what are some of the tools that should be deployed, you know, as we look at this changing landscape.
Speaker 9
But how did production I mean, in terms of, you know, limiting permits, how did that impact the supply, you know, year after year? Do you have, that type of information? Is it obviously, there's a lot more that goes into it, but what directly can be pointed to that is, in part because of permits or other reasons?
Speaker 3
Sure. Yeah, no, I would welcome kind of colleagues from our from CalGEM to talk about extraction. I know that the legislature did just take action last year on looking at opportunities for continued crude extraction here in California. Not my expertise. I don't know if Commissioner Gunder wants to jump in.
Speaker 4
I think just to add two specific points, Senator. I think I think you mentioned the spirit of like we knew the transitionals were coming and how did we plan for that. And I think I want to just really emphasize how much we cannot ignore the COVID impacts. The COVID impacts were monumental globally in terms of just the usage patterns that have significantly changed and the economics that, mean, for example, during COVID, that's when I entered this area of work. Really, kind of, we were worried about not having enough jet fuel during COVID while we didn't need gasoline.
So, I think those kinds of issues have accelerated the trajectory of what was coming, and I think it's really you know, to the spirit of the question that you're asking, I think we have had a lot of work that we needed to rush last year to really kind of catch up, and I think we are in a place now beginning to kind of think about the ecosystem as a whole. A big issue here for us, a recognition is we cannot really think about the petroleum ecosystem, you know, an agency by agency or a division by division. It has to be really thought through as an ecosystem, and all of our rules and regulations are harmonized with the long term plan. Since last year, in twenty twenty four January twenty twenty five January, we had Secretaries Garcia and Crowfoot put together the task force with the specific aim of long term trajectory and planning, and so we've been doing that. And I think if the spirit of the question is, you know, we need to be thinking about this more, we are working on it, and I think the tools that you're giving us will put us in a good place.
Speaker 9
Yeah, I'll just end with feel with saying that being here since 2018, I can't really speak for what happened or what was pushed for in the past because I really don't know. I can only speak to the moment I came in and moving forward, and what I've seen is that it's it was expected. We were it's almost expected to be in the situation that we were in. And again, I really appreciate the fact that your work you have a transition plan in place at the moment. I really appreciate the slide on page four that you have on, you know, having the near term supply strategy concurrent.
I mean, that's something that we should have had, in my humble opinion, from the very beginning because otherwise, we'd be where we're at today. So, I feel like we're really late. We're in a very challenging situation. Obviously, there's a lot more going on. There's things going around the world.
There's the pandemic that we went through. But I do believe that, you know, the we're here because of really a lot of what took place beginning as early as 2018.
Speaker 4
So, Sandra, just one point. I think in just giving the broader energy community and the legislature credit, There was effort post-twenty fifteen after we had the Torrance fire. There was an advisory group called PMAC that was set up at the CEC, and many of the recommendations that we put out in 2024 really built off of that. I think there has been work being done to align ourselves. I think it just got accelerated in the last few years, and to your point, well taken, that, you know, we should really be in a proactive place, and I really appreciate this conversation because it is in that mode.
Thank you.
Speaker 1
Okay, great. Well, thank you. This panel ended up going long, so we appreciate your help, and we'll move to the second panel now, which is recent research on past closures. So, we'd like to invite up Emily Grubert, professor of sustainable energy policy at Notre Dame, who's appearing remotely, Tham Hirschbach, Policy Fellow from the Stanford Wood Institute for the Environment, Anne Alexander, Environmental Attorney, and Josh Sonnenfeld, Senior Researcher from UC Berkeley Labor Center. So, welcome.
Okay. And we'll start with you, Emily. So, you're welcome to proceed when ready as others get settled.
Speaker 10
Great. Thank you. And, yeah, thank you for allowing me to join remotely. Hello from Indiana. And also, thank you for entertaining this conversation.
I think it's a really, really important one. I'm a researcher at Notre Dame, as was mentioned. Actually, I was born in Kern County. So this is something that is very interesting for me to watch just as a kind of as a Californian looking at how this policy is unfolding. I think what I'd like to talk about today a little bit is what it actually looks like to think about where closures might go and what that looks like in terms of gaps and potential needs for actually moving through this transition.
As Vice Chair Sivagunda mentioned earlier, a lot of my research group's work really focuses on how we think about the physical asset transition associated with moving toward a decarbonized future. With the refinery conversation particularly, I think one of the things that we've been very, very focused on is what it actually means to ensure that service availability persists even as a transition proceeds as quickly as possible. And really thinking very, very carefully about what that means for the kinds of services that individual facilities are able to provide. How a planner, potentially the state, really thinks about what services are needed in certain situations. So the example that often comes up is making sure that if you have pretty differential transition plans for something like jet fuel versus gasoline, ensuring that you're actually able to handle that.
But then also thinking really carefully about what that end stage looks like. I one think of the things that we often talk about is that this transition period is actually quite dynamic. So not only are you facing the fact that you have different levels of assets moving through systems, but you're also facing the fact that you are experiencing increasing levels of climate change. You're experiencing different levels of alternative technologies and all these kinds of things. And so being very, very explicit about what is providing what services to whom and when is in our opinion something that's pretty critical.
And often leads us to the public ownership question as basically a strategy for actually coordinating within industries that are not legally allowed to coordinate themselves due to anti collusion laws and things like this. So happy to talk about that if folks have questions. What I wanted to talk about today also though is just what we see from other contexts when we think about closures. And in particular when we think about remediation obligations and end of life kinds of processes. One of the things that I think is important to emphasize is that we don't really see a strong track record across industries of correctly estimating end of life costs, even in places where there are very strict requirements on how those costs are supposed to be estimated.
So worksheets, things like this. A lot of the time, generally actually, we see a systematic underestimation of what closure costs are going to look like. With refining, we see this as actually maybe even potentially a bigger gap because of a sort of unusual situation related to accounting principles that allow refineries to generally state that their lifespans are indeterminate, and therefore no end of life costs can be calculated because the lifespan is unknown. That represents a pretty major gap in the sense that we don't have good numbers on what those asset retirement obligations might look like, let alone some of the remediation obligations that potentially really start to get into unknown things about a lot of this land base as we think about that transition. But we do know that generally speaking end of life costs are underestimated, which is a really, really strong motivator to think very carefully about how we get better numbers for systems that are starting to transition as we're starting to experience in California.
I think one of the things that we would recommend is being very, very clear about what those end of life obligations are, not just for actual closeout of the facilities, but also for potentially repairing a lot of the environmental damage that might be present, especially given that a lot of these facilities predate modern environmental laws. One of the examples that I just want to offer up is that we see in states around the country that places that have more experience with closures tend to have stricter requirements for what this looks like. Wyoming in particular comes up for me as an example quite frequently because the state started to realize that unexpected closures in their case of coal mines were putting major, major liabilities on the state. Because under bankruptcies and things like this, most of the obligations for closure and cleanup were basically going back to the state and became a really significant liability. In response to this, they actually initiated a pretty strict program that requires facilities to have cash on hand in order to actually support some of these retirement obligations.
That situation has been I think sort of surprisingly unusual. In many cases companies are allowed to self bond or basically just make claims that the many is going to be there. Why I call attention to the Wyoming example and why I think it's maybe an interesting analogy here is that we we do actually see different behavior from the companies post that change. Most critically I think in the example of one of the biggest coal mines in the country in the world, which is basically saying that they're only continuing operate because they need to generate revenue to fulfill their retirement obligations. So having stricter guidelines on what those estimates look like, but also having stricter guidelines on ensuring that the money is actually present in order to protect the public has led to behavior changes that do reinforce this thing that we see that generally closures are underestimated in cost and tend to accrue to the public.
I will stop there and look forward to questions if available.
Speaker 1
Okay. Well, thank you very much. We'll move on to the second, person in our panel. So, we'll move to Tham. Yes.
Thank you.
Speaker 11
I have some slides as well. Okay. But while those are pulled up, good morning.
Speaker 1
Wait, let's see. Are we working on the slides, or oh, there they are. Okay, great.
Speaker 11
There we go. Good morning. Thank you, Chair Blakespeare, and the committee members.
Speaker 11
Yeah, thank you for inviting me to speak here. My name is Tom Hirsbach. I am a project scientist at the SLAC National Accelerator Laboratory, and also a policy fellow at Stanford's Climate and Energy Policy Program. I'm here today in my capacity as part of the Climate and Energy Policy Program to present to you five reasons why California's refineries are closing. So as we see, I'm going to get into five reasons, but at the top of this, it is important to emphasize that refining companies are global companies that make investment decisions in the context of the relative global competitiveness of California's refineries.
The five factors I'm about to talk to you today, they span different areas, the first one being California's crude oil, which is getting increasingly difficult to extract because California's oil reservoirs are physically depleting, which means that we need more energy to extract it, and therefore the oil becomes more expensive. We also see an in state demand in gasoline, and also fossil diesel. And on top of that, we see two broader market, sort of behaviors, which is that refineries are consolidating both globally and nationally, and that, imported fossil fuels like gasoline are increasingly available. Now importantly, all of these factors point towards more closures that are likely in the future, but the exact timing and order of these closures is uncertain. And that brings me to my main recommendation, which is that policymakers plan proactively for refinery closures.
Now these five factors that I'm going to outline, again, they point to the decreasing global competitiveness of oil refineries, which means that many of these factors are beyond control of the state. In addition, while closing the timing of closures is uncertain, planning for these closures takes years. And at the same time, refinery closures are significant opportunities for, local communities and economies to be reshaped if inclusive redevelopment is supported and adequate site remediation is guaranteed. So therefore, we think that policymakers should plan proactively, and thankfully, we've identified an emerging policy consensus around actions that policymakers can take. I think my fellow panel members will speak to that later.
Let's get into these five reasons. The first one being that California's crude oil productivity has been down for decades. This is because California's oil reservoirs are being physically depleted due to decades or sometimes over a century of extraction. That means that any remaining oil is more difficult to extract, requires more energy, and is costlier, and there's also just less oil available. We see this on the right where the average oil production per well has been decreasing steadily.
This also means that drilling new wells in our estimation is very unlikely to reverse the trend of reducing oil productivity in California. The second reason that we found, has been touched on already is that in state gasoline demand is decreasing, which means fewer opportunities for refiners to sell their most profitable product. We also see due to a variety of incentives that out of state renewable diesel is replacing in state fossil diesel. At the same time though, refineries still have to make fossil diesel just because of how the chemistry and physics of a refinery works, which means that this excess fossil diesel now has to be exported, which means lower profits for refineries. Then getting into the market mechanics, the refinery space has been consolidating for decades, both in The US and globally.
This means that smaller, less efficient refineries are closing, whereas larger refineries are expanding because they're more efficient, they can leverage more economies of scale. In The US, this means recently that we've seen a series of closures on the East And West Coast with refining activity moving to the Gulf Coast. And globally, this means that we're seeing that newer, larger, and more efficient refineries are now competing with California refineries. That brings me to my final point, which is that these newer global refineries mean that there's an increased availability of gasoline that can be imported, and that means that it is now, or can now be profitable for California refining companies to close a refinery here and focus on importing gasoline to keep selling in the California market. So to wrap things up, we've identified five trends that all point towards refinery closures in California.
We don't know exactly when or in which order these refineries are going to close, and at the same time, adequately planning for these closures takes time. And therefore, we believe that proactively planning for these closures is essential. And with that, I thank you for your attention, and I'll gladly take any questions later.
Speaker 1
Thank you. That seems all in line with what we heard from the first panel, which hopefully you were able to watch that, too. Yes. Okay. Next, we'll move to our environmental attorney on the panel.
Welcome.
Speaker 12
Yes. Good morning, Chair Blake Spear and committee. I do have some slides, but I'll start while we wait for those to come up. I'm Ann Alexander, a consultant and environmental attorney specializing in fossil fuel transition policy, and I very much appreciate this opportunity to testify today concerning the increasingly, critical topic of the community impact of refinery closures. A lot of attention has appropriately been paid this past year in the legislature to the statewide economic repercussions of these closures, but sometimes lost in the shuffle has been the question of what happens to the communities left behind when a refinery closes?
How will they recover from the loss of their central economic driver? And what can be done to help them with that process? So, I'm going to be talking to you today about a research report that I've prepared on that subject, which was published in December by two environmental justice organizations, who you'll be hearing from soon, that commissioned the report, the Asian Pacific Environmental Network, and Communities for a Better Environment. The report is essentially a case study of the closure of the Phillips sixty six L. A.
Refinery, and uses the events around that closure to derive lessons learned for future closures. So, what you see here is a summary of the major takeaways in the report. In today's, testimony, given the context here, I'm going to focus on the first two of these takeaways, in particular. So, the first takeaway, no surprise, is that refinery sites tend to be heavily contaminated, as in somewhat in a class by themselves in that regard. Most refineries in the state have been operating for around a century, give or take.
That means perhaps half or more of their life was spent in the era before our entire modern system of environmental laws, came into being. The contamination that's been identified over time at the Phillips 66 site, for instance, includes a lake of hydrocarbons sitting on top of the water table there, at one point measured at 13 feet thick, at the Carson site. We have buried hazardous waste for from decades of that practice, extensive groundwater contamination, some of it carcinogenic, contamination of the soil with PFAS, sometimes known as forever chemicals. Decommissioning and cleanup of a site like that is going to be, at minimum, in the 9 figures, and easily, will take a decade or more. So, a key issue attending this level of contamination, aside from all of our usual concerns about contamination, is its potential impact on site redevelopment.
Communities facing a refinery closure need to act promptly to diversify their economy, by, in part, repurposing repurposing the refinery sites. But the cleanups needed are going to take a lot of time and can potentially get in the way of that. So, this leads us to the second key takeaway, which is that communities are generally in the dark about what to expect in the cleanup process because refineries currently have almost no end of life planning and financial assurance requirements. This makes them an outlier in the energy sector, since such requirements exist for most other energy industries. So, as you see on the summary chart, for most types of energy infrastructure besides refining, there tend to be requirements of some sort about how you plan and pay for decommissioning.
Not all of these requirements are as strong as they should be, but, at the very least, the structures for, planning and financing cleanups are in place. For refineries, they simply I'm going to add a quick note here, too, that, as has been mentioned, there is a minuscule amount of financial assurance associated with waste management unit cleanups at refineries. This is a drop in the bucket compared to the actual full cost of remediation. At Carson and Wilmington sites for Phillips 66, there are waste management units with, financial assurance of roughly 2,000,000 to $3,000,000 out of a hundreds of millions of dollar, potential cleanup cost. So, in any case, along these lines, the report cites research by Carbon Tracker, showing that refinery operators are not even reporting, their anticipated decommissioning cost to the Securities Exchange Commission in their annual reports, unlike other energy companies.
They're taking advantage, as Emily Grubert mentioned, of an accounting loophole to avoid that. So, the upshot of all that is that communities are being left with insufficient information around the site cleanups to allow effective advanced planning for redevelopment, and they also face the risk of the even worse scenario of the cleanup being severely delayed, or worse, due to a lack of funds, to complete it. And relatedly, the state is without information to assess the overall economic cost of refinery closures and the potential attendant risk to taxpayers. So, I would emphasize, to avoid any misunderstanding here, that there are, of course, generally applicable site cleanup requirements that apply to Phillips sixty six and every other refinery or industrial site. And thus far, the Water Board appears to be doing a good job of implementing those at Phillips sixty six and elsewhere.
The problem is with the lack of focused cost estimation and planning, in advance, so that communities and the state can have a big picture before these refineries close of what to expect in the decommissioning and remediation. It's also important to note that, although no funding deficiency has emerged yet in the context of Phillips sixty six, there is reason for bigger picture concern. First off, Carbon Tracker's research on refinery asset retirement obligations, included the unsettling conclusion that the aggregated cost of these refinery site cleanups represents a very large percentage of the combined total equity of the oil companies that operate these sites. That situation might not end well. Also, in the refinery closure situation in Philadelphia, mentioned earlier, where the owner went bankrupt, although, ultimately, a buyer did emerge for that site, the result was that the community had very little say, and leverage in choosing the site's future.
So, getting back to the key takeaways, I just wanted to briefly mention there was also a discussion in the report of concerns with worker attrition and the run up to closure. I won't talk in-depth about this here, but a significant issue that arose at Phillips sixty six and elsewhere it wasn't the first time was large scale understaffing in the run up to closure, as workers, entirely understandably, left to take other jobs, and this resulted in some very real, safety and environmental concerns. And then, finally, the report identified problems associated with the redevelopment process, and the ability of local government and stakeholders to have a meaningful say in it, as well as the need for coordination among the long list of, governmental, labor, business, NGO stakeholders who are generally involved in cleanup and redevelopment. The one quick thing I want to say in particular about that, though, without getting into great detail, is that it's important to note, one key inter stakeholder tension that is going to need to be managed and addressed in these refinery closures, which is the potential misalignment of the state's goal of ensuring a continued flow of refined products through importation following a refinery closure, which may lead it has led it to encourage repurposing of former refinery sites as importation logistics infrastructure, and then, the other hand, community goals, which may strongly disfavor a tank farm facility of that nature because it's a continuing source of pollution and an impediment to the type of mixed use redevelopment that a community is going to feel they need to prosper economically.
So, the report made a series of recommendations associated with all of its various findings. I want to end by presenting the ones specifically having to do with, site remediation and its impact on communities. First of all, the report recommended that California should mandate that all refinery operators, right away, start disclosing to government and the public an estimate of their asset retirement obligation. The state can plug that accounting loophole that refinery operators are currently taking advantage of, to make sure that all of the important information is on the table up front. The information would include a decommissioning plan and cost estimate for it, as well as a description of where the funds to cover it would come from.
And second, to aid in that disclosure process, California agencies, such as the Water Board and others, can develop default standards and guidelines for developing those plans and cost estimates. Cost estimation for site cleanups is common in the energy industry and many other industries, using probabilistic methodologies, such as, Monte Carlo simulations to address any uncertainty. Those methods can be applied to refinery cleanups. And third and lastly, California should contemplate developing financial assurance requirements for refinery cleanups. As you saw on the earlier slide, financial assurance is prevalent in other state energy in other energy industries, but refineries are an outlier.
The upshot of the report is that that outlier status needs to change. So, will conclude there, and I look forward to responding to any questions.
Speaker 1
Thank you. I really appreciated that chart, the green and red chart that you provided, so we could look at the other similar types of things. That's very useful. Okay, thank you. And now, we'll move to our third panelist, Mr.
Sonnenfeld. Welcome.
Speaker 13
Good morning. Good morning, Chair Blakespeare, and thank you to the entire committee and this opportunity to speak with you this morning. My name is Josh Sonnenfeld, and I'm a senior policy researcher with the Green Economy Program at the UC Berkeley Labor Center and former senior California strategist with the Blue Green Alliance, which is a national and state alliance of 15 labor unions and large environmental organizations working collaboratively to build a clean economy and create quality jobs. I was also project director for the Contra Costa Refinery Transition Partnership. The Contra Costa Refinery Transition Partnership is a group of directly impacted labor unions and environmental justice organizations that was formed following the idling of the Marathon Martinez refinery in 2020, which resulted in the layoff of over 700 workers.
Funded by the California Workforce Development Board, this partnership's goals was to bring together impacted stakeholders to understand the pace and scale of refinery closures and develop policy recommendations for how to better support workers and communities impacted. Over three years of detailed research, extensive stakeholder engagement, and many hard conversations, this partnership developed a set of 31 policy recommendations, which we released in January. This partnership recognizes that refineries are among the single largest sites of pollution in California, disproportionately harming people of color, low income, and immigrant communities, and that phasing out the use of fossil fuels and transportation is an essential component of the state of California's climate strategy to meet the Paris Climate Agreement goals and avoid the worst impacts of climate change. This phase out will result in a significant reduction of demand for the primary products of California's refineries as we've heard today and therefore result in refinery closures. The Contra Costa Refinery Transition Partnership commissioned a study that anticipated that the Bay Area's refineries will likely experience between a 6592% reduction in needed refinery production capacity by 2,045, resulting in the closure of all but one large or two small petroleum refineries or perhaps every single one of them, depending on the pace of decarbonization and the level of exports.
In response to further anticipated refinery closures, this group developed a framework of five key areas where policy action is most needed to support impacted workers and communities. Number one, worker impacts. In Contra Costa County alone, we estimate 3,000 direct and 15,000 indirect workers connected to the refining industry. These are typically well paid union jobs with benefits, the type of blue collar jobs that are increasingly rare in the rest of the economy. In collaboration with the United Steel Workers Union, we completed an in-depth study on the impacts to the laid off workers at Marathon Martinez, which documented the very real economic harm as well as mental health struggles of workers and their family from refinery closure.
The study documented that a year after layoff, 26% of Marathon workers were still unemployed, and for those who had found new jobs, their wages were on average 24% less than they were a year prior. California's displaced oil and gas worker pilot program established after the marathon closure has been an important start, but among other limitations, it has run out of funds and is currently set to sunset in 2027. The Contra Costa partnership highlights key programs such as wage replacement and bridge to retirement that could be incorporated into the displaced worker program, among other strategies to minimize the negative impact on refinery workers and their families. Number two, land use decommissioning and cleanup. Despite refineries operating on thousands of acres and communities across the California across California, the state lacks clear refinery cleanup standards, as we've heard today, and communities have significant concerns about being stuck with the bill for cleanup costs or being left with inadequately remediated lands that can pose future hazards to workers, communities, and the local environment, as well as limit future redevelopment opportunities.
Additionally, there is significant anxiety in refinery communities regarding both the safety of refineries as their economics decline and future land use once refineries close. Refineries operate a large percentage of many cities' acreage and the size of these sites between 900 acres and nearly 3,000 acres depending on the facility allow for a wide variety of uses when redeveloped that can meet jobs and economic development needs as well as opportunities for environmental restoration and community serving needs. However, this opportunity can only be realized if refinery lands are cleaned up to the maximum extent feasible and if communities are in the driver's seat for re envisioning land use once facilities close. Additionally, strong labor standards such as collective bargaining agreements and project labor are important tools to ensure the safe and orderly deconstruction and cleanup of refinery facilities. Number three, local community impact.
Again, without proactive preparation, another major concern is a sudden drop off in tax revenue. The UC Berkeley Labor Center estimates that in Contra Costa County alone, the refining industry, which is the refineries plus the refinery supply chain and connected industries, contributes $136,000,000 in direct and $836,000,000 in indirect annual tax revenue to cities, the county, and special districts that includes things like fire protection, water, sewage, transportation. Not only does tax revenue provide vital services for residents, but these are also good quality public sector jobs. City of officials have recently expressed alarm about an anticipated loss of 20% of the city's general fund when Valero closes this spring. However, tax stabilization funds are an important tool available, being modeled in other states such as New York to minimize the immediate impact on fossil fuel facility closures on the tax base of local communities and can also be developed here in California.
Number four, economic development. While short term assistance is necessary to support immediately impacted workers and communities from refinery closures, investing in economic diversification now for communities dependent on fossil fuels for jobs and tax revenue is a necessary long term strategy. However, the type of economic development really matters. The Contra Costa partnership specifically argues for what we call just transition economic development, which is economic development that focuses on creating quality jobs while also improving community health and promoting economic resilience. With assistance from the state and federal government, Contra Costa County is already working to pursue economic diversification strategies, but for these efforts to be successful, it will need additional sustained support.
Lastly, number five, refinery transition planning and oversight. Just like there has been a need to have proactive planning at the state level to navigate transportation fuel supply issues, there is a need for proactive planning and coordination to minimize impacts on workers and communities. While the Contra Costa partnership did not explore this concept on my own behalf, I'll share that six states have successfully created specific offices to coordinate these activities, most notably in Colorado, where they have an office of just transition in Michigan, where they have a community and worker economic transition office, both of which include advisory committees of impacted stakeholders. California has been a global leader in pursuing policies to transition to a clean energy powered economy, and we have a number of successful regional just transition initiatives that have been completed or are underway from Contra Costa to Kern County to Los Angeles. However, state leadership is needed to provide the oversight, coordination, and support, as well as a full range of policy strategies across each of these five categories and more to demonstrate that we can pursue a clean energy transition that does not leave fossil fuel dependent workers, communities, or our local environment behind.
Thank you.
Speaker 1
Okay. Well, thank you to our panelists. Any questions for this panel? Yes, Senator Menshavar.
Speaker 6
Josh, I'll start with you, the most recent point. Can you dive a little bit more on your fourth point regarding what Contra Costa did with the quality jobs? What exactly did they do and what state intervention you set on supporting them financially? What exactly was that?
Speaker 13
Yeah, I mean, so, you know, so a couple of things. We know we need to establish this safety net for workers. That's part of the displaced oil and gas worker fund, thinking about how can we make sure that we're supporting workers with that immediate layoff need so that they don't lose their home, so they don't have to pull their kids out of school. So that immediate safety net's really important for workers, also for communities in terms of the tax stabilization funds. But there's also that long term economic development need, a safety net doesn't create a quality job for workers to transition to.
So in Contra Costa County, there's a few initiatives underway. One is called the Green Empowerment Zone, which was set up through the state legislature, and the UC Berkeley Labor Center is actually leading a whole, clean energy manufacturing, initiative focused on how can we grow clean energy manufacturing industries through a high road model in Contra Costa and Solano County. So there's a lot of work happening there.
Speaker 6
And the Green Empowerment Zone is just focused on those green jobs in there and then having those displaced workers?
Speaker 13
Yeah, it's focused on long term strategies of how do we attract and grow clean energy manufacturing jobs, specifically that are quality jobs that also are not exacerbating local economic or excuse me, environmental burdens on communities. But I want to be clear that, you know, clean energy manufacturing is just one potential industry, and the community is interested in a whole range of different industries to diversify the economy. Refinery workers have really strong skill sets. They're, you know, skilled workers, and we've seen them successfully transition into utilities, manufacturing, also, you know, within the building trades and the maintenance and construction side. You know, these workers work in a range of industries from hospitals to energy facilities.
And so it's really not about one particular industry, but about the range of economic diversification strategies that can be pursued.
Speaker 6
Thank you so much. Anne, I'd like to go back to you, and I asked this question to the Board earlier, and you touched a little bit more on it regarding cleanup can take decades. So, if you're how does that impact the transitioning plan of the communities and so forth? So, tie that into how far in advance are you you think that these refineries should put that information upfront about the cost and so forth?
Speaker 12
Clearly, there's going to be an impact. When you have a hundreds of millions of dollars and ten year remediation effort, that's going to impact how a site is redeveloped. But the type of impact, the portions of the site that are impacted, the public health risks involved, are all going to vary site to site. So, if you're in another industry where you have a polluting facility, if you have, certainly a nuclear facility, but even if you have a solar energy or wind installation, and certainly at a coal mine or oil well, what you have to do in advance is give it your best shot to estimate at the beginning what your decommissioning costs are going to look like. You're obviously not going to know everything, But if you look, for instance, at the nuclear industry as a model, what they're required to do is start off with an initial cost estimate that includes some baseline information.
And then, things progress, as you get closer to the point where you're going to close and decommission, you have to start adding to that information. You have to start refining your cost estimate. There's no perfect model for how it should be done in the refining industry, but there are certainly ways that, before you actually close down the facility, as the Water Board representative was talking about, and are able to actually get in the ground and do a hard dollars and cents cost estimate, you can have a decent idea of what's there. At Phillips sixty six, they have been doing a level of remediation since about 1994, and even a little bit before. So, you can use that.
You can run it through Monte Carlo simulations and at least get some sense of what it's going to take to clean up the site. And you can give that information to the community to help them then be in touch with developers, you know, whoever else they need to be to start planning what the community's future is going to look like, whether there are portions of the site that they could safely develop sooner rather than later, etcetera. It's an aid to that kind of planning.
Speaker 6
Okay. Thank you so much. And why do you think the current proposal for the redevelopment of Wilmington doesn't include the environmental impacts?
Speaker 12
I'm sorry. The current proposal for oh, I understand what you're asking, the Five Points Union proposal. Yeah, that was a question that I asked when I saw it. I don't know why they didn't include them. I also don't know none of us know to what extent they are aware of information that the public is not privy to, cost estimates for the site, that they're simply not disclosing.
We don't actually know what their thinking is, but I think that we can say with confidence that we don't have the information as to how they considered, how they factored in site remediation into their plan, and we can't say with confidence whether there is actually information there. I suspect that, in any real estate transaction, transaction, someone someone has has used used these these Monte Monte Carlo Carlo simulations simulations and estimation tactics to try to at least take a stab at figuring out what the cleanup is going to look like. But that's the kind of information the public should have and not just the insiders.
Speaker 6
Thank you so much. I have two questions to Tom. My first one is, talked about, you know, California can drill more because it costs more it's more energy and it costs us more. And I'm hearing that Norway does that. Is it because they're doing a different approach and doesn't cost them as much?
Or is it they're just accepting that more energy is causing them to drill more Norway? Maybe this is not a question to you.
Speaker 11
Yeah. Thank you. Yeah, I am not familiar with the Norway situation. I can expand expand more more on on the the California California situation situation, if if you'd you'd like. Like.
Speaker 11
extract the type of crude that we have in California, refiners tend to inject steam to heat up and liquefy oil and then to get that out of the ground. And that's that's why the energy intensity is going up and has been documented to go up, I think, since the sixties.
Speaker 6
And then, you know, we heard, you know, my the senator, Senator Stern, talked about there's a lot of closures. It's not just California and so forth. And it seems like focusing on just subsidies are not a long term solution or even protective to communities. Why aren't we asking the bigger question of more long term versus short term solutions?
Speaker 11
That is an excellent question. I think, if anything, our report underscores the need for this longer term planning because there is there are a range of factors that are making refining less and less attractive in California. And so if anything, yeah, I agree. It seems that trying to incentivize in state refining is an uphill battle that can involve hundreds of millions of dollars of incentives a year. And a really important point is these factors that I've outlined, we expect them to keep getting worse over time.
So if you you give $200,000,000 now, maybe in a couple years, that's like $300,000,000 a year. And so you're really fighting an uphill battle. And so I do think it is important to see what are factors that the state can control and where can't the state do things so that we can all work towards a productive future for California. Thank you.
Speaker 14
Yeah, thank you very much. Thank you, Madam Chair, and I want to thank the committee, too, for their really great, analysis. I appreciate that, and this has been a great panel so far. Senator Mengevar actually asked a lot of my questions, and I'm really appreciative of that, especially in the long term planning because that's often been a gripe of mine, is that everything seems so short term, whether it's short term profits, whether it's short term, you know, solutions. And really, the long term is that so many of our communities have to stay, you know, just dealing with the long term impacts environmentally, public health wise, worker attrition, etcetera, without any plans.
So, I'm really grateful of the recommendations, especially on the financial assurances as well as the community process. Are there any other I mean, both Ms. Alexander and Mr. Sunnenfeld really went through the recommendations very thoroughly on both of those issues. Is there anything else we're missing?
Because we are thinking I mean, what we can do as legislators in this session to really proactively make some you know, provide some solutions. So, I'll leave you with that big question. So, anything else that is not on the table now that we have not discussed on worker attrition, planning, financial assurances, and just site development community sort of preparedness?
Speaker 12
I can take that one initially. I won't I'll spare you a full recitation of all of the recommendations in the report, but I want to highlight a couple of key ones. On the worker attrition, there is absolutely something that can be done for that. Currently, we have in place, through our agencies, there are the twin sets of regulations governing industrial safety at refineries, the CALARP regulations and the CALOSHA regulations. Those do purport, on some level, to address changes in organization and management of a facility and all of the danger that goes with that.
The problem is that, although, you know, the biggest type of change that can occur, and perhaps the most dangerous, is a closure, those regulations right now don't directly address closure. That could be changed. You can have a mandate to make those regulations address the closure situation and require, that refinery operators take, a set of proactive, risk based conscious steps, to ensure that the transition happens appropriately. And then, the other related thing that you can do is, we need a set of standards and best practices for what an operator of a refinery should do to make sure to maintain their workers. And there are absolutely steps.
Certainly, you know, they start with extended severance job training during the severance and all manner of practical steps needed to make sure workers can take advantage of that job training. This something like that, certainly not perfect, but was done at a refinery closure in Louisiana, and the results, as you expect, were that people stayed around longer. So, we need a set
Speaker 12
standards for how to make that happen, and the state could facilitate that by setting up a commission with the appropriate labor representatives and others to come up with that set of standards, and then you can order that they be implemented as possible in legislation and regulation. And then, the other thing that I will mention that I think can be done at the state level is, I mentioned the real need for coordination among the many different stakeholders that are significantly in tension, local versus state, all manner of tensions. Right now, there really is no body that has been established on any level to bring all of those together. You see sort of small attempts to convene people, but it's never all of the right people, and there's no mandate that the state, regulatory representatives show up there. That is where the state could step in and really help, by making sure that before a refinery closes, and certainly when it's in the process of closure, you have a body like that that has the right stakeholder representation to work through these issues.
Speaker 13
And I'll just add, if I may, that there are 31 policy recommendations in the Contra Costa Refinery Transition Report. There's a one page in there. I highly recommend reading it. We spent three years developing this with refinery workers' unions, environmental justice groups, a lot of stakeholder engagement, and I do think it's a really useful tool for policymakers on actions we should do, to help support workers and communities. But I also want to say that, you know, today's discussion is really about how are we planning for the decline of an industry in California, right, in a way that centers workers, communities, and affordability of fuel supply, right?
But the other question connected to this is how are we planning for what we're building? How are we planning for the clean economy? And specifically, you know, this is an area where, know, you we had a 2022 analysis from the labor center, and we identified that in the state's climate investments, 60% of those climate investments had labor and community standards, but that meant that 40% of the state's climate investments didn't have any labor or community standards at all, which means that public funds that we are putting in, that the state is putting in to build the new clean economy, we're not guaranteeing that those are actually making quality jobs. And I can tell you this is something felt very real on the ground in communities like Contra Costa County where workers understand that we're going to have facility closures. They get that.
You know, when I talk to refinery workers, you know, they're not questioning the state's climate goals. They're just questioning, you know, is anybody looking out for them and where they're going to be going next for their next job. So, yes, part of that is about, you know, displaced worker support, but the other big thing that comes up as much, if not more, is, well, what's the quality of the other jobs that we're creating? And the state can actually really help with this by putting labor standards, community standards on those investments so that as we're investing billions of dollars into these new companies that we want to have here in California, we want to grow here in California, that we're saying, Hey, you know, we're going be investing public funds in you, we also expect you to create good jobs, be responsible to the communities that you're a part of. So I think that's the other real big missing piece here.
Speaker 14
That's great. And I just want to say thank you both for this that very thorough answer because there's a lot to glean from there, and certainly a lot of work has been done on the labor standards and ensuring that there you know, if there's any public dollars any sort of incentive for these companies in public dollars, that it does have these standards that are stringent in ensuring we uplift communities, for sure. Doctor. Hirschbach, thank you for your presentation as well. I have a question.
You know, right now, the refineries aren't currently open at full capacity. As it stands now, I know PBF Martinez in February, of course, had a fire as well as Chevron and El Segundo that we've been talking about in October, seemingly not, again, operating at full capacity. So if refineries can operate safely and avoid these disasters, how will that impact the stability of supply moving forward? We talked a little bit about it with Commissioner Gunda, but I'm just wondering, given these dynamics, what does that look like in the trajectory of supply?
Speaker 11
We don't explicitly analyze any sort of supply stability. Really, I think the point here is I think the overall point of the of this particular policy brief is that we have a big challenge. There are many reasons why refining is less and less profitable, and that the planning thoroughly is the only way to really ensure that this transition goes well. Think for more concrete recommendations, I would probably refer to things like the transportation fuels assessment. I'm I'm not fully comfortable, like, getting into the details on the the resupply aspects, except perhaps noting that we we have seen increased imports coming in in the past year that have been documented to meet to meet California gasoline demand.
Speaker 13
Okay. Maybe I can jump in and help you here, Tom, if that's okay, Senator. Sure. Absolutely. I mean, so I think Vice Chair Gunda mentioned that PBF Martinez was out for a good portion of last year.
I mean, if you're if we're not having safe refineries and if we're not doing everything we can to keep refineries safe, we're going to have incidents like that, that you have fires that result in workers being injured or dying, community members being impacted. And you know, it's very, very much felt in Martinez. I live in Contra Costa County. These are my neighbors of, you know, Thanksgiving a couple of years ago having spent catalyst all over their, houses and cars and gardens, and the refinery being out. So, you know, this everyone in the state should be really invested in the safety of refineries, for the workers, for the communities, but also for fuel supply because if we have a refinery go out, then, you know, obviously, that impacts prices at the pump.
And a big piece of that, you know, as I think Ann mentioned, is the state's process safety management guidelines through Cal EPA and Cal OSHA, and there's a specific language in there that I will flag that's actually risk right now around ensuring that workers can identify their own representatives to be able to speak on their behalf on safety issues. So who better knows than the workers in the facility themselves and specifically their union to be able to say, Hey, you know what? This pipe here looks pretty corroded. Let's get that checked out, right? And history is full of stories of corroded pipes that should have been, should have been, fixed that weren't on time.
And so we don't want to have more situations where we're looking back and saying, Hey, we really should have done this and the workers knew this. Instead, we should be listening to the workers and making sure that these actions are taken really for our fuel supply but also, of course, the safety of workers and communities.
Speaker 14
Thank you very much. I really appreciate, all of your answers, and appreciate, the comments as well.
Speaker 1
Thank you. All right. Well, thank you so much to our panelists. We'll move on now to our last panel. So, we'd like to welcome forward Zachary Leary from the Western States Petroleum Association, as well as Julia May, Communities for a Better Environment, and Keith Dunn, State Building and Construction Trades Council, and Julia Sebastian from the California Labor for Climate Jobs.
Welcome. Welcome, and thank you so much for joining us. So, can go ahead and start with you, Zachary, when you're prepared.
Speaker 15
Great. Thank you, Madam Chair and members. Really appreciate the opportunity to be here today having this discussion. Zach Leary, Chief Lobbyist for the Western States Petroleum Association. We represent the industry across Washington, Oregon, California, Arizona, and Nevada, essentially pad five region of the industry.
I want to be clear that California is losing refineries because of state policies that have made it uneconomic to operate here. That's not necessarily market failure. That's policy choice. The CEC data is fairly clear, and they have clear insight to our operations and to our data and our profitability. And the numbers that they have posted on their website show that our industry has been losing significantly over a significant period of time.
The refineries that we have left and the refineries that have been really helped build this state into the fourth largest economy in the world. Our industry represents about 8% of California's economy, but without that 8%, the rest of the economy essentially comes to a halt. Obviously, we're essential for a lot of goods movement, for agriculture, for folks getting to and from work. And that being said, Californians consume about 35,000,000 gallons of gasoline every day, and that equates to about 13,000,000,000 gallons a year. Demand is not theoretical.
It's real. It exists today. It will exist tomorrow. The idea that we're in a mid transition away from the products that we're using today is just not the case. I think large scale infrastructure, grid capacity, technology required to replace gasoline, diesel, and jet fuel do not yet exist.
The policy aspirations don't fuel the cars. The fuel does. And I think for us, looking at this market, the transition we're really in the infancy, but the market signals being sent to our companies are the wrong ones at this time. As you heard earlier, in the 80s we had a lot more refineries, a lot more resiliency within the system. But because the state failed to keep Valero open this past year, by April we'll be down to six major refineries left producing gasoline in the state.
That will be two in the North and four in the South. And that's not stability, that's contraction. At the same time, this demand hasn't disappeared. We're seeing an unprecedented amount of imports of more finished gasoline through our ports. We've seen an exporting of jobs, tax base, and economic activity while keeping that same fuel demand here at home.
As you heard earlier, refineries are subject to aggressive and comprehensive regulatory structures as it relates to closures. Heard that from the first panel. They remain bound by the Clean Air Act, Clean Water Act, Greenhouse Gas Reporting Requirements, the Federal spill prevention and pipeline safety rules. At the federal level, also, the facilities must comply with the Comprehensive Environmental Response Compensation and Liability Act, the Resources Conservation and Recovery Act, which you heard about earlier, both enforced by the EPA. And then on top of that, California has additional oversight and accountability.
The California Environmental Quality Act also plays a role here. We didn't hear much about that earlier, but it does guide some of the discussions about refinery closures. And the environmental review and mitigation efforts. The Air Resources Board also maintains its fuel standards, climate programs, reporting obligations through the shutdown. Regional air districts districts also play a role with permitting and changes of operations.
Water boards at the local level, as you heard earlier, also play a role. Hazardous materials regulators, fire departments, and local governments all impose their own permitting and monitoring enforcement requirements. Worker notifications are governed by the WARN Act and California's state level statute as well. Hazardous waste closure standards, underground storage tank removal, groundwater remediation monitoring, asbestos abatement, which I don't think was mentioned earlier, but that is also covered. All of them are regulated and reviewed and enforced.
That framework, as you heard earlier, is not weak. It is actually robust. So I think for us, part of our task this past year was working with the legislature, with the governor's office, with stakeholders about how we keep the remaining refineries operating in California, and whether the state's policies continue to drive them out. And so, part of WSPAs, my as the trade association participated, working with the governor's office, working through the leadership of Vice Chair Sivagunda, to see how we can actually work on these issue areas. Sivagunda talked about those three buckets, bucket one, bucket two, and bucket three.
I know we're focused on bucket three here, but we as an industry think that a lot more work needs to be done as it pertains to bucket one and bucket two. There were a lot of recommendations that he outlined in his letter last year that still have yet to be accomplished to help stabilize the industry. And as we are looking at kind of what's next in the oil and gas space as it relates to operations, last year we saw the passage of AB twelve oh seven, which was the cap and invest regulation or cap and invest extension. Now we're going through the regulatory process at the Air Resources Board, and they're considering the updates. The current draft, from our view, misses the mark on affordability competitiveness to keep refineries economic.
If adopted as written, it could add hundreds of millions, if not billions, in compliance costs to an industry that's already operating at a competitive disadvantage. And those costs don't operate in a vacuum or and they factor directly into the business decisions about whether to continue producing gasoline in California at discussed here today in some of the panels, adding new mandates, new financial burdens, new uncertainty onto the last remaining facilities, it wouldn't be a surprise to see if that would accelerate decisions about their continued operation in the state. And if that happens, Californians will have less fuel overnight. They will just pay more for it while jobs and investment move elsewhere like we've seen, and that's the leakage, and it's self inflicted. For us, we have to face these present day realities about how to continue to supply the market, energy reliability, economic stability, affordability, consumer choice matters to Californians.
And if California wants to keep fuel production within its borders, under its environmental standards, then the state policy must reflect that reality. But if another refinery does close, the issues we're discussing today will be the least of everyone's worries because it will have a bigger crisis at hand. If refineries continue to close, it will worsen the affordability crisis. And as we heard earlier from Vice Chair Gunda, it will likely hurt our neighbors in Arizona and Nevada who are dependent on California and California refineries to provide the fuel that their consumers use so it becomes a bigger regional problem and potentially a national security issue as our refineries provide the fuel for the military fleets here on the West Coast. Look forward to having robust conversation about how to keep our operations open, and look forward to taking any questions from the committee members.
Speaker 1
The slides should appear shortly, and there's a little clicker you Oh, there's this is the clicker?
Speaker 16
Okay, well, I'll start my testimony before as the slides come up. Will they show up here, as well? I see. Okay. Okay, so, I'm Julia May, senior scientist at Communities for a Better Environment.
I'm an engineer. I do technical analysis around clean energy and have worked on refinery issues since 1989, and we also look at supply and demand logistics. CBE is an environmental health and justice organization. For the past five decades, we worked with vulnerable frontline communities in Wilmington, which is part of Los Angeles Richmond Southeast L. A.
East Oakland, and we collaborate closely with the California Environmental Justice Alliance and other environmental justice and social justice organizations like APN and others throughout California. We work on solutions, but today, I'm going to give you a view of what it's like on the ground for neighbors who live next to the refineries. It's surprising we have to state this, but why do we need strong health and safety regulations? The oil corporations are forcing us to recap. It's partly because at least one explosion, fire, or spill occurs almost every year in California, plus major continuous emissions.
The slides seem to have disappeared for some reason. Oh, there we go. So, I can click the next one. There. Okay.
So, Chevron Richmond refinery explosion, 2012 Torrance Refinery Explosion, 2015. And here, a slew of refinery explosions, 2009, 2010, 2012, 2012, 2014, 2016, 2016, 2017, twenty nineteen, twenty twenty, twenty twenty three, twenty twenty four, twenty twenty five, twenty twenty five, twenty twenty five. These are just examples. That's not the full list. This industry is still poorly controlled.
Three explosions last year. It's dangerous and inherently polluting. And in answer to the question earlier, if we don't attend to the safety, it can take out a whole refinery at once, and that drastically impacts supply. We need to attend to safety. And so, next slide.
The refineries emit hundreds of toxic chemicals in our communities. We have found that individuals who live in close proximity may be at risk of chronic exposure to hydrogen sulfide, a neurotoxin. The South Coast found that VOCs in Wilmington Carson, West Long Beach, which is the highest concentration of refineries in the state, is the largest source. Despite being very large transportation emissions, refineries are the largest VOC sources. There were studies that found that benzene emissions are grossly underestimated at every refinery in the South Coast.
That's found. It's likely true statewide and also in Texas. It was found in Texas. Our refineries live on these fence lines. Our these are our members.
They're right up against it. We need transparency, which can be very hard to come by. A lake of oil is reported under LA's soon to close refinery, with the water board finding extensive contamination from MTBE, benzene, and many other chemicals. So how is this going to be cleaned up? How long will it take?
And how completely will it be done? Our neighbors want to know. Our members want to know. Chemical leaks spread underground. There is evidence that it has spread out from under
Speaker 16
refineries. That's why we need regulation. We already have cost effective, efficient, cleaner, far better technologies we can phase in gradually, escaping the oil corporation's costly treadmill and chaos. Refineries closed in Texas, Philadelphia, and you've already heard it's not just in California. It's happening everywhere.
California did not cause these closures. Even Phillips sixty six announced in the press that they were not closing because of regulation but because of their own business reasons. We do need fossil fuel phaseout desperately. The long term solution is transportation electrification. California has many studies showing that's feasible, long term, more economic, and, of course, healthier, zero emission.
Environmental justice groups have always asked for a long term planned phaseout gradually by 2045. You can see that in our scoping plan comments, also in our comments on the fuels assessment to the CEC, where we're looking at logistics, balancing exports and imports, storage, safety regulations, and all the means that we can match supply and demand so we don't have these big, lumpy changes. So, who's causing the chaos? It's not the state of California. It's the oil industry with sudden closures after leaving after one hundred years of high profits in California suddenly dumping workers and potentially leaving contaminated sites.
Oil corporations have opposed safety regulations recently in California that can keep them producing in the mid transition. We're awaiting final decisions from Cal EPA and Cal OSHA. We need stronger accident prevention regulations. We need a long term phaseout plan with continued demand reduction toward zero emission transportation electrification. That's the only way to get us out of this mess.
We need significant allocation for the displaced oil and gas worker fund, and we need greater transparency for our communities. People really want and frontline communities have had to put up with this breathing impact, flaring in the middle of the night, severe health impacts for a long time, and want zero emission technology, and it's cheaper in the long term. Thank you.
Speaker 17
Thank you. Okay. Good morning, Madam Chair and members. Thank you for inviting me to engage in dialogue with you today on this critical issue. My name is Julia Sebastian.
I am the climate policy director at Jobs Adjustment San Francisco, and I also staff the California Labor for Climate Jobs, a coalition of 17 labor unions advancing a worker led transition to a just and climate safe economy. Relevant to this issue today, to give background, our members statewide include unions representing public sector workers, unions representing low wage private sector workers who do live and work in environmentally overburdened localities, and also the United Steelworkers who represent proprietary workers at refineries across California. And just to clarify, I'll use the term proprietary workers when speaking to the kind of full time permanent employees who are really solely employed at the refinery facilities, as I don't want to confuse representation here from the building and construction trades who can speak to the critical work of that contractors provide to refineries facilities. So, today, want to draw your attention to two main areas where our members are already witnessing the negative impacts of unplanned refinery closures. One, public budget shortfalls and subsequent loss of critical services in oil and gas dependent municipalities and two, impacts to proprietary refinery workers, including job loss unsafe staffing levels during refinery closure and rollbacks on worker participation in an oversight of safety programs.
Given that refinery closures, you know, from as we've heard today, from Texas to California is projected to continue and even accelerate, we strongly advocate for proactive policies to maintain critical public services, support laid off workers, maintain safe staffing levels, and ensure that workers have voice in refinery safety on public sector impacts. The minute closure of the Valero Energy Refinery in Benicia illustrates the acute risks of unplanned refinery shutdowns for municipalities and their residents. City officials anticipate a ten million to twelve million dollars annual tax revenue loss from a $65,000,000 general fund when the refinery closes this spring. The local school district projects a 2,000,000 to $3,000,000 shortfall, and the county faces similarly untenable trade offs to maintain core services. The mayor has warned of potential city staff layoffs and reduced services from parks to libraries, while estimates are still unavailable for broader public sector job losses across health and human services, firefighting, and education.
These are the immediate consequences of an unplanned closure. City leadership is not actually advocating for indefinite refinery operations, as they acknowledge the serious health impacts associated with the facility. Rather, they are calling for sufficient time, resources, and authority to plan and execute an inclusive economic transition with appropriate stakeholders. Currently, there are no state level policies or dedicated financial resources to help oil and gas dependent municipalities maintain essential public services following sudden revenue losses from refinery closures. These local fiscal shocks are unfolding amid broader public sector strain across California, driven by the federal budget cuts and things like escalating climate disaster costs, such as the Los Angeles wildfires.
It was in the billions. This does not even account for what we've heard a lot today, potential exorbitant costs that municipalities across the country have shouldered for refinery remediation and land redevelopment. So, California, therefore, requires really a multi pronged strategy to stabilize urgent local budget shortfalls. We also need to provide state level support for refinery economic transition planning and shield local governments from bearing remediation and cleanup liabilities. On refinery worker impacts, proprietary refinery workers are essential employees whose decades of experience are necessary to maintain the day to day safe operations at a given facility.
They are also the most vulnerable when closures occur, as they are almost certain to lose their jobs. California must ensure these workers are supported and that community health is protected as refineries shut down. As colleagues at UC Berkeley Labor Center have documented, proprietary workers in Contra Costa County have consistently emphasized that retraining alone is insufficient. Workers need direct financial support to pay bills and avoid losing their homes after job loss in order to even be able to utilize the training. In 2022, California Labor for Climate Jobs helped secure the state's first displaced oil and gas worker fund pilot program to provide education and retraining.
This program must now be extended to cover future job losses and expanded to meet workers' stated financial and transition needs. Safe staffing during refinery closure is equally critical. Adequate staffing protects not only workers' lives, but also the health and safety of surrounding communities and the stability of California's fuel supply. Chronic understaffing, like we've seen at P66 and Santa Maria, makes refineries more dangerous, and accidents leading to unplanned maintenance have been a significant driver of gas spikes statewide that do remain over time. The reality is when closures are announced, workers are forced to make challenging personal financial decisions to quit immediately in order to compete for the few remaining jobs in the industry, thus leaving facilities dangerously understaffed.
In the months preceding the Phillips sixty six refinery closure in Los Angeles last year, severe understaffing forced employees to work twelve and sometimes sixteen hour shifts for thirteen consecutive days, followed by a single day off before repeating the cycle. This schedule endured for nearly a year. Safe staffing policies are absolutely necessary to address this undoc this documented pattern. And I would be remiss if I did not name that simultaneous to these unsafe staffing conditions during refinery closure, there is current rulemaking being undertaken at CalOSHA Standards Board that threatens to further erode the ability for refinery workers to uphold the highest standards in refinery safety. Following a catastrophic explosion at the Richmond refinery in 2012, the United Steelworkers, along with the state building construction trades, APN, many justice organizations fought to pass the highest standards in process safety management.
Unfortunately, the current proposed changes to those standards would markedly water down those winds. California's oil infrastructure is aging, and given market forces, as has been stated here today, refiners are often forced to invest less and less in proper maintenance. Refineries are only becoming more dangerous, so we really do need the strongest process safety management regulations to protect workers and residents and our fuel supply in the future. To protect affordability, worker safety and community health, California urgently needs statewide minimum staffing standards for proprietary refinery workers alongside policies that incentivize retention of experienced staff throughout closure periods. These workers who inspect equipment daily and possess critical operational expertise are the first line of defense against accidents.
Ensuring they have strong, protected voice and safety planning and authority to flag emerging risks is essential to preventing small issues from becoming catastrophic failures. In summary, California must have a robust plan for when refineries close. The question is how we're going to make that plan together. So, thank you for your attention to these issues, and I look forward to the conversation.
Speaker 8
You, Madam Chair and members of the committee. Keith Dunn here on behalf of the State Building Construction Trades Council. As I sit here and listen to the panelists that have gone before me and the title of this hearing, I think I'd like to add a tagline to the end of it, which is, And what can we do to ensure that the refineries that are still operating here continue to do so while we make this transition? And let me be clear that the California State Building Construction Trades Council and our workforce are here to make sure that these facilities are safe. We work in these communities.
We live in these communities. A buzzword that we hear often today is the fence line community, and I can tell you that the men and women of the Building Construction Trades Council represent a large portion of that fence line community. I also want to make sure that we understand that the building trades support our leading renewable efforts, with energy policies here in the State of California. We show up our rank and file show up you've all seen them here in support of renewable energy policies in California. However, supporting renewable energy transition does not require pretending that we've already finished it.
We haven't. California is not 100% renewable. Every credible analysis says we're decades away from getting there. We've heard that here today on this panel. Until then, refineries remain essential to the functioning of the world's fifth largest economy, maybe the fourth, it depends on what day we look at, not only for the hundreds of thousands of union workers that I represent, but for every single Californian.
These refineries are the safest, the cleanest, the most accountable facilities because they are operated and maintained by a highly skilled union workforce under California's strict environmental laws. The fact today is that the refined fuels our economy and workforce depend upon will continue to shift to imports, longer supply chains, which mean higher emissions, higher prices, with production and jobs shifting to countries and states with weaker, if any, environmental and labor standards. These facts stand in conflict to California's values. Our laws for over a half century have protected our workers and citizens. From CICA to the Port of Colon Water Quality Control Act, engagement and regulatory oversight has enforced decades of protections and obligations on refiners operating in California.
Should a refinery close, owner doesn't get to walk away. Closures trigger decades of legally binding obligations, including cleanup, containment, remediation, all overseen by state and federal regulators. A refiner that's been mentioned here today in this hearing has been engaged in a mandated cleanup process since I was in elementary school. I'm in my 50s. Under the cleanup and abatement orders administered by the L.
A. Regional Water Control Board, the cleanup efforts contain control and remediate impacts so that they do not pose harm to the current and future community members, or that they lose the property values that they've worked to own. They are not theoretical commitments. These are long term, enforceable requirements designed to protect current and future communities. The same building trades workers who safely maintain and operate these facilities are the same workers who are tasked when these facilities announce a closure.
They're among the most technically trained, safety certified, regulator supervised industrial workers anywhere in the world. Their skill set exists because California chose decades ago to demand a higher labor standard, safety and environmental standards, as well as protections for our workers. That is why California is viewed, and we've seen in the national press, our state going out and interacting with other world leaders, because they California is viewed as a leader in this space, for good reason. So what are the environmental impacts of policies that push refineries to close ahead of our ability to provide 100% renewable energy? It's an easy answer.
You've heard it today, and I'm gonna be real blunt about it. These actions will decimate our world class economy for all Californians, devastate our union workforce, and disregard decades of environmental leadership and labor standards that we've developed here in this state. We've had a lot of talk about what it means to have workers and setting up policies and plans that establish a fund so that they can transition. I want to be very clear with members of the committee here today. The men and women who work in these refineries chose these careers, often multigenerational careers, because not only are they the best trained workers in that space, but they like what they do.
They're not interested in getting retrained to go be a tech worker, no offense to tech workers, but the men and women of the building trades are proud of the jobs that they do. They will fight for the jobs that they have, because they provide careers for themselves, opportunities for their children, and the American dream, to have a little something for themselves. So as we look at the impacts, let's not forget that the biggest impact is to the workers, the community members who live around those facilities, who support that supply line that also is an economic driver for communities. So with that, I would just say thank you for the opportunity. We're here to answer any questions that you may have, but let's remember that California's economy still needs our refineries to operate here in California.
Thank you very much.
Speaker 1
Okay. Well, thank you so much. We're coming up on twelve, so we're not going to be able to have questions, but Can I
Speaker 2
I promise it'll be one question here. So, was a lot of conversation. We had to first of all, thank you, Chair, for having this important conversation. The first panel took longer than I think we all anticipated, but I do believe that there is an opportunity for us to talk about solutions. And I think that that opportunity is now if you all could do one super brief, like how do we keep refining here?
How do we keep the good jobs here? And then lastly, I really do think we need to take a holistic look at what's happening in California and present real policy solutions because working families depend on it. So that's it. But I would like, if there are any solutions that could be proposed, super brief,
Speaker 15
Yeah, I would say get the cap and trade or cap and invest regulation right to ensure that it, you know, doesn't disincentivize production of gasoline in the state by increasing the operation costs of our refineries.
Speaker 17
Yeah. Given that we are seeing refineries close, just naming the support for critical public services to be able to protect residents as it happens, and then the link between supply and safety for workers, certainly the worker voice and safe staffing is critical to make sure that accidents don't happen and affect the supply.
Speaker 16
Balancing exports and imports, California exports a lot of gasoline. Storage, you heard those earlier. More demand reduction, transportation, electrification is cheaper long term for us, and it creates more jobs. We need the safety regulations to be beefed up. CalOSHA and EPA are on the verge of making a decision.
We need to make sure we strengthen rather than weaken those regs. There's a lot of others we could say.
Speaker 8
Thank you, Madam Chair. I would just say, Vice Chair Gunda had a slide deck that wasn't handed out to the audience, so maybe it's available on the website of the committee, but he had three buckets. We talked about the third bucket. I think bucket number two and bucket number one are things that this legislature can look at to make sure that we're incentivizing continued operation. I think it's something that this administration has identified, and I think it's critically important that as you look at how we protect the existing needed infrastructure and production of refined fuels in California that we consider very strongly what the other two buckets have in that.
It was kind of laid out there, not talked about extensively, but it would be interesting to see what this legislature could do with those other two suggestions that I think are very strong recommendations to ensure that we don't have further closures.
Speaker 1
Thank you. Yeah, thank you for that great question. Yes, well, thank you again for your testimony. And if there are members of the public who would wish to make a comment, please come forward to the microphone at this time, and you can make a brief comment before we conclude. Great work, Julia.
Speaker 18
Faraj Rizvi with APN, Asian Pacific Environmental Network. We, work, in Oakland, Richmond, and Wilmington, representing communities that are impacted by refineries. We have worked with Ann and Julia from CBE on the Before the Last Drop report, which really highlighted that the Phillips sixty six refinery has a number of really important things that communities need to know. One of the pieces that I think just really wanted to highlight is that that refinery was built in 1919, which is one hundred and seven years ago. The first major federal environmental regulation was passed in 1969, fifty years afterward.
So for the first fifty years of its existence, it was essentially operating without real regulations to ensure that it wasn't reducing releasing toxic pollution into the communities. And so because of that, there is a 16 feet thick layer of oil underneath the facility that we only know because of an abatement order from the 1990s. And, you know, there were some investigations that found them illegally dumping water into polluted water into the L. A. Water basin.
And so, there are, I think, really important tools that the legislature needs to look at to increase transparency, so that communities know what the impact is from these operations, and what the cost and timeline for remediation is. Thank you.
Speaker 1
Okay, great. Thank you. Well, thank you to everyone who came to participate in this hearing today. We are now adjourned.
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