In an uncommon sight of cross-political and cross-state-leadership cooperation, Republican Nevada governor Joe Lombardo and Democrat Arizona governor Katie Hobbs drafted a letter to California governor Gavin Newsom attempting to stop new proposed oil refiner requirements.
Newsom has been pushing for more restrictions on California oil refiners as part of his ongoing war with the Oil and Gas industry.
Newsom Proposal
Governor Newsom, a Democrat, with the backing of the state assembly, has been seeking to implement a legislative proposal known as ABX2-1.
If implemented, this bill would empower the California Energy Commission, giving it an increased ability to regulate oil inventory levels and impose additional requirements on state oil refiners.
Price Gouging
Newsom has accused oil companies of taking advantage of moments of supply shortages and maintenance to artificially raise gas prices for customers to pad their profit margins.
“Price spikes at the pump are profit spikes for Big Oil. Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits. By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year,” said Newsom in August announcing the proposal.
Saving Californians Money
According to the governor’s office, if this proposal was in place this summer, Californians would have saved an estimated $728 million at the gas pump compared to what they spent last year.
“The data is clear: oil refiners have been racking up profits by planning maintenance that reduces supply during our busy driving seasons. The Governor’s proposal gives us new tools to require refiners to plan responsibly and prevent price gouging during maintenance,” said Tai Milder, Director of the Division of Petroleum Market Oversight for the California Energy Commission (CEC).
Teaming Up Against Newsom
In a letter dated September 10, Governors Lombardo and Hobbs teamed up to urge Newsom to reject ABX2-1 over concerns about the effects it would have on their respective states.
“As neighboring governors, we write to you today to express our concerns over the regional implications of ABX2-1 and other legislation related to refinery inventory supplies, which we understand may be under further consideration in California’s special legislative session,” the letter said.
Setting Aside Differences
The letter remarked that the governors were willing to set aside political differences to advocate for the best policies for those they represent.
“Though we may have varying policy agendas as governors, we all share a sincere care for the concerns and well-being of our constituents,” the letter read.
Raising the Cost of Fuel
The primary concern outlined by the letter was that Newsom’s proposal would contribute to rising fuel costs that would affect everyone.
“We’re concerned that mandating refinery inventory would directly raise the cost of fuel for all of our constituencies and create further economic instability in the region,” said the letter.
Making the Case
Lombardo and Hobbs make the case for rising fuel costs by citing data from Newsom’s own agency.
“In their recent report, the California Energy Commission (CEC) explicitly states that SB-950, now introduced as ABX2-1, ‘may artificially create shortages in downstream markets,’ which would raise costs for consumers in Arizona and Nevada. This conclusion alone is deeply troubling and warrants bipartisan, regional communication on this legislation before proceeding,” said the letter.
Worries of Shortages
Paradoxically, despite the proposal trying to guarantee suitable supply levels, the letter makes the case that it might accomplish the opposite, spurring even more supply shortages and refinery shutdowns.
“Further amplifying our concerns, refiners have raised the alarm that refinery inventory mandates could result in supply shortages and potential refinery shutdowns, which would have grave impacts to our shared economies and transportation infrastructure across the West,” the joint letter said.
Not Calling Out Oil Companies
The letter seems to have been drafted carefully, tiptoeing around and only alluding to Newsom’s motivations behind the legislation.
“Despite ongoing conversations about the root causes of rising fuel costs, it is evident that increased regulatory burdens on refiners and forced supply shortages will result in higher costs for consumers in all of our states,” said the letter.
For the Greater Good
Governor Lombardo and Hobbs make an appeal to Newsom, urging him to consider the greater good and taking a harder look at the proposal before implementing it.
“For the good of our neighboring constituencies, and for the greater good of consumers across the West, we ask that you reevaluate mandating refinery inventory and delay taking action on this type of legislation until thorough policy conversations are had with industry leaders and our state energy offices,” said the letter.
Footing the Bill
On X, Lombardo posted a copy of the letter, asserting that “the people of Nevada and Arizona shouldn’t have to foot the bill for California’s misguided policies— which is why I’m partnering with @GovernorHobbs to fight against higher gas prices from California.”
In a statement by the Arizona governor’s office, Hobbs lamented that “Arizonans are struggling with the high cost of living, we can’t afford yet another price hike…I’m glad to work with Governor Lombardo on this critical issue, and hope we can come together as a region to deliver lower fuel costs to all of our constituents.”
