offshore drilling

SACRAMENTO — In a bid to stabilize struggling crude-oil refineries, state lawmakers on Saturday passed a last-minute bill that would allow the construction of 2,000 new oil wells annually in the San Joaquin Valley while further restricting drilling along California’s iconic coastline.

The measure, Senate Bill 237, was part of a deal on climate and environmental issues brokered behind closed doors by Gov. Gavin Newsom, state Senate President Pro Tem Mike McGuire (D-Healdsburg) and Assembly Speaker Robert Rivas (D-Hollister). The agreement aims to address growing concerns about affordability, primarily the price of gas, and the planned closure of two of the state’s 13 refineries.

California has enough refining capacity to meet demand right now, industry experts say, but the closures could reduce the state’s refining capacity by about 20% and lead to more volatile gas prices.

Democrats on Saturday framed the vote as a bitter but necessary pill to stabilize the energy market in the short term, even as the state pushes forward with the transition from fossil fuels to clean energy.

McGuire called the bills the “most impactful affordability, climate and energy packages in our state’s history.”

“We continue to chart the future, and these bills will put more money in the pockets of hard-working Californians and keep our air clean, all while powering our transition to a more sustainable economy,” McGuire said.

The planned April 2026 closure of Valero’s refinery in Benicia will lead to a loss of $1.6 billion in wages and drag down local government budgets, said Assemblymember Lori D. Wilson (D-Suisun City), who represents the area and co-authored SB 237.

Wilson acknowledged that the bill won’t help the Benicia refinery, but said that “directly increasing domestic production of crude oil and lowering our reliance on imports will help stabilize the market — it will help create and save jobs.”

Crude oil production in California is declining at an annualized rate of about 15%, about 50% faster than the state’s most aggressive forecast for a decline in demand for gasoline, analysts said this week.

The bill that lawmakers approved Saturday would grant statutory approval for up to 2,000 new wells per year in Kern County, the heart of California oil country.

That legislative fix, effective through 2036, would in effect circumvent a decade of legal challenges by environmental groups seeking to stymie drilling in the county that produces about three-fourths of the state’s crude oil.

“Kern County knows how to produce energy,” said state Sen. Shannon Grove (R-Bakersfield). “We produce 80% of California’s oil, if allowed, 70% of the state’s wind and solar, and over 80% of the in-state battery storage capacity. We are the experts. We are not the enemy. We can help secure energy affordability for all Californians while enjoying the benefits of increased jobs and economic prosperity.”

Environmentalists have fumed over that trade-off and over a provision that would allow the governor to suspend the state’s summer-blend gasoline fuel standards, which reduce auto emissions but drive up costs at the pump, if prices spike for more than 30 days or if it seems likely that they will.

Some progressive Democrats voted against the bill, including Assemblymember Alex Lee (D-San José), the chair of the Legislative Progressive Caucus. The bill, Lee said, was a “regulatory giveaway to Big Oil” that would do little to stabilize gas prices or refineries, which are struggling because demand for oil is falling.

“We need to continue to focus on the future, not the past,” Lee said.

The bill also would make offshore drilling more difficult by tightening the safety and regulatory requirements for pipelines.

Lawmakers also voted to extend cap-and-trade, an ambitious climate program that sets limits on greenhouse gas emissions and allows large polluters to buy and sell unused emission allowances at quarterly auctions. Lawmakers signed off on a 15-year extension of the program, which has been renamed “cap and invest,” through 2045.

The program is seen as crucial for California to comply with its climate goals — including reaching carbon neutrality by 2045 — and also brings in billions in revenue that helps fund climate efforts, including high-speed rail and safe drinking water programs.

Also included in the package was AB 825, which creates a pathway for California to participate in a regional electricity market. If passed, the bill would expand the state’s ability to buy and sell clean power with other Western states in a move that supporters say will improve grid reliability and save money for ratepayers.

Opponents fear that California could yield control of its power grid to out-of-state authorities, including the federal government.

SACRAMENTO — Amid concerns that refinery closures could send gas prices soaring, California legislative leaders Wednesday introduced a last-minute deal aimed at increasing oil production to shore up the struggling fossil-fuel industry while further restricting offshore drilling.

The compromise, brokered by Gov. Gavin Newsom, Assembly Speaker Robert Rivas and Senate Pro Tem Mike McGuire, would streamline environmental approvals for new wells in oil-rich Kern County and increase oil production. The bill also would make offshore drilling more difficult by tightening the safety and regulatory requirements for pipelines.

With support from Rivas and McGuire, Senate Bill 237 is expected to pass as part of a flurry of last-minute activity during the Legislature’s final week. Newsom’s office said the governor “looks forward to signing it when it reaches his desk.”

The late introduction of the measure may force the Legislature to extend its 2025 session, set to end Friday, by another day because bills must be in print for 72 hours before they can be voted on.

The bill was introduced Wednesday as part of a package of energy policies that aims to address growing concerns about affordability and the closure of California oil refineries.

Valero and Phillips 66 plan to close plants in the San Francisco Bay Area and Los Angeles County’s South Bay, which would reduce California’s in-state oil refining capacity by an estimated 20%. Industry experts warn that losing refining capacity could lead to more volatile gas prices.

The closures have become a sore spot for Newsom and for state Democrats, pitting their longtime clean-energy goals against concerns about the rising cost of living — a major political liability.

The package tries to strike a balance between the oil industry and climate activists, but neither side seemed particularly pleased: Environmental groups panned the agreements, and industry groups said they were still reviewing the bill.

“I don’t think what’s in that legislation is going to keep refineries open,” said Michael Wara, the director of Stanford University’s Climate and Energy Policy Program.

Crude oil produced in California makes up a fraction of what refineries turn into gasoline, he said, so although increasing production may help stabilize the decline of local oil companies, it won’t benefit the refineries.

The bill would grant statutory approval for up to 2,000 new wells per year in the oil fields of Kern County, the heart of California oil country, which produce about three-fourths of the state’s crude oil. That legislative fix, effective through 2036, would in effect circumvent years of legal challenges by environmental groups seeking to stymie drilling.

The state, which has championed and pioneered progressive environmental policies to slash carbon emissions, also is home to a billion-dollar oil industry that helps power its economy and has significant political sway in Sacramento. Despite steady declines in production, California remains the eighth-largest crude oil producing state in the nation, according to the U.S. Energy Information Administration.

Hollin Kretzmann, an attorney at the Center for Biological Diversity’s Climate Law Institute, said the legislation “acknowledges the harms of oil drilling yet takes radical steps to boost it.”

“Removing environmental safeguards won’t reverse the terminal decline of California oil production but it will allow the industry to do more damage on its way out the door,” Kretzmann said, adding that it will have “no impact on refinery closures or gas prices.”

Ted Cordova, a vice president of E&B Natural Resources, an oil and natural gas company with operations in Kern County, told reporters earlier this week that California needs to reverse falling oil production to keep refineries operating. He said his firm gets emails from pipeline companies saying they are operating “at dangerously low levels, can you send us more?”

The bill also has the potential to create new hurdles for Sable Offshore Corp., the Texas oil firm that is moving toward restarting offshore drilling along Santa Barbara County’s coast, depending on when the company navigates through a litany of ongoing litigation and necessary state approvals.

The company has moved forward on repairs to the network of oil pipelines that burst in 2015 in one of the state’s worst oil spills, despite opposition from the California Coastal Commission.

The bill, which would take effect in January, reasserts the authority of the commission to oversee pipeline repair projects and requires the “best available technology” for any pipe transporting petroleum from offshore. That could add lengthy governmental reviews for Sable if the operation isn’t running by January.

The company, despite reports that it’s running low on capital and has suffered repeated setbacks, continues to say it hopes to begin sales as soon as possible.

Representatives from Sable did not respond to questions Wednesday.

Mary Nichols, an attorney at UCLA Law’s Emmett Institute on Climate Change and the Environment, said the bill probably wouldn’t affect the ongoing project off Santa Barbara County’s coast — which remains tied up in litigation — but makes clear that there’s no easy path for any other company looking to take advantage of offshore oil in federal waters under the oil-friendly Trump administration.

“This was designed to send a message to anybody else who might be thinking about doing the same thing,” said Nichols, a former chair of the California Air Resources Board.

Lawmakers also introduced a tentative deal on cap-and-trade, an ambitious climate program that has raised roughly $31 billion since its inception 11 years ago. The revised language would extend the program from its current 2030 deadline until 2045.

The program, last renewed in 2017, requires major polluters such as power plants and oil refineries to purchase credits for each ton of carbon dioxide they emit, and allows those companies buy or sell their unused credits at quarterly auctions.

Assemblymember Lori D. Wilson (D-Suisun City), one of the authors of SB 237, said she was glad to make progress on the push and pull between the state’s fuel needs and its commitment to green energy. She said she understands there are environmental concerns, but “at the end of the day, our purpose was an issue of petroleum supply.”

“We all don’t want an import model,” she said.

Times staff writers Melody Gutierrez and Hayley Smith contributed to this report.