Energy Company Warns CARB on ‘The Stark Reality’ Driving In-State Refining Capacity to Zero of CA’s Remaining 7 Refineries

An energy company you may or not have heard of, which has a huge impact on fuels in California, just sent a letter to the California Air Resources Board Friday, according to a Globe source.

Why?

“To provide comments on the California Air Resources Board’s (CARB) Cap-and-Investment (C&I) program, including the “Proposed Amendments to the California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms Regulation.”

These proposed amendments are draft amendments to Assembly Bill 1207 by Assemblywoman Jacqui Irwin (D-Thousand Oaks), seeking to extend the cap and trade program to 2045, and legislators are looking at significant changes to the CA emissions trading program – which will likely now be known as California Cap and Invest. also revises offset limits, establishes an emissions containment reserve, and proposes shifting free allowance allocations from gas companies to electric utilities.

PBF Energy Inc. is warning about “the stark reality the impacts the current CARB Cap & Investment program would have because of the state’s remaining 7 refineries. And, CARB’s “Proposed Amendments will only worsen the current state of the program, making costs skyrocket further. If enacted as written, the Proposed Amendments will inevitably drive in-state refining capacity to zero.”

Whoa. Why? Is the CARB really trying to force all in-state refineries to close?

“Since 2020, when gasoline supply was relatively balanced, five in-state refineries either shut down permanently or completely curtailed gasoline production” says PBF.

Let’s start with Who We Are: PBF Energy Inc.

PBF’s subsidiaries own and operate six domestic oil refineries, including two in California: Torrance and Martinez. Our refineries, together with our logistics assets, are critical to California’s fuel supply chain and the broader California economy:

• Gasoline: We supply ~33% of California’s in-state production and ~23% of total California demand, including ~30% of Bay Area and ~20% of Southern California demand

• Jet fuel: We supply ~50% of demand for Sacramento International and Oakland San Francisco Bay Airports, ~40% for San Francisco and San Jose International Airports, and ~30% for Los Angeles International Airport

• Marine fuel: We supply more than 50% of the ultra-low sulfur marine diesel to ships calling at the Ports of Los Angeles and Long Beach

• Jobs and local economy: We employ more than 1,000 Californians; the majority are union members. We also hire contractors who employ members of the California Building & Construction Trades

• California crude oil: We purchase and refine the highest percentage of California crude, supporting thousands of production jobs, especially in the Central Valley. We also own and operate one of two pipelines that transport crude oil from the Central Valley to Torrance.

• Tax revenue: We are among the largest taxpayers in Contra Costa and Los Angeles Counties, generating well over $1 billion in state tax revenues annually from the fuels and other products our subsidiaries manufacture!

California cannot afford to lose PBF based on these important stats.

 PBF Energy Inc. warns “The status quo of the C&I program will severely undermine the viability of in-state refining, with potentially devastating consequences for California’s fuel supply, economy, and workers. The Proposed Amendments will make the situation exponentially worse by increasing in-state refiners’ stationary payments. Before finalizing the proposed rule, we urge CARB to address the state’s gasoline supply-demand imbalance by revising the current C&I payment schedule and Proposed Amendments to put in-state refiners on equal regulatory footing with fuel importers.”

They say that due to the latest refinery shutdowns – Phillips 66 and Valero – gasoline imports are estimated to have grown to ~250,000 bpd, a ~500% increase, meaning ~30% of the gasoline supply that had been produced in the state is now imported, primarily from refineries in Asia. Consequently, California has become even more reliant on remaining in-state refineries to maintain the feasibility of its gasoline supply.

If the state fails to address inequities between in-state refiners and importers, refinery closures will accelerate and the feasibility of the state’s fuel supply will come into question.

CARB claims that the Cap and Invest program “complements other measures to ensure that California cost-effectively meets its goals for greenhouse gas emissions reductions.”

Not so fast says PBF Energy:

The existing C&I regulations and Proposed Amendments will effectively drive in-state refiners out of business while importers are completely shielded from these costs. This is the central flaw in the current stationary source program. The Proposed Amendments as written will only exacerbate the cost imbalance between California’s refiners and importers.

If in-state refining becomes significantly impaired or infeasible, the catastrophe will go well beyond gasoline supply for consumers by also affecting military bases, jet fuel for California’s airports, marine fuel for ports, plus crude oil production in the Central Valley, all of which would impact thousands of direct and indirect jobs throughout the state.

Despite claims the state is in mid-transition to EVs, more than 90% of registered vehicles, offroad construction and agricultural equipment, trains, boats, and planes, rely on liquid fuels.

Given this continuing demand, curtailing in-state production will jeopardize fuel availability and affordability by driving up costs for every Californian motorist, business, and government entity.

They continue with the outrageous costs involved:

The Cap and Investment (C&I) program is just one compliance burden. Myriad regulatory agencies impose significant costs on California refiners that competing importers never pay, separate from yet additive to current C&I payments the Proposed Amendments would further increase. For example, Valero noted it decided to shutter its Benicia refinery due in part to intense regulatory pressure, high compliance costs, and a record $82 million fine.

To comply with state and federal regulations and ensure safe, reliable, responsible operations, we invest significant capital in our two in-state refineries and logistics assets. Costs range from $100,000,000 to $300,000,000 each year, with most of the work done by California Building & Construction Trades crafts during turnarounds.

Governor Gavin Newsom and the California Legislature could immediately end the state’s fuels crisis. They have the authority, but instead have imposed such high costs and business killing regulations on the state’s refiners and oil producers, we are down to 7 refineries.

In an October policy brief by USC Professor Michael A. Mische, UC Berkeley Professors James W. Rector, and Joseph B. Silvi, they warned:

“California’s in-state oil production has declined by approximately 65% since 2001, while its dependency on foreign imports has risen by nearly 70%. At the same time, refinery capacity has fallen 21% since 2023 and gasoline demand remains largely unchanged at roughly 36–40 million gallons per day.

And they note that Gavin Newsom’s SB 237, designed to permit up to 2,000 new wells annually in Kern County, will add some production but not enough to offset the overall statewide decline and will not adequately stabilize the state’s petroleum infrastructure.”

It’s as if California’s elected lawmakers and governor are trying to destroy California from within because every significant policy area in the state is crumbling: water, infrastructure (roads, bridges, freeways, public safety, education, ports, rail, transit, levees), energy, agriculture, housing…

The Globe will follow up.