AMENDED IN ASSEMBLY JUNE 15, 2026
AMENDED IN SENATE MARCH 25, 2026
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
97
Introduced by Senator Stern
February 19, 2026
An act to amend Section Sections 25371 and 25372.2 of the Public Resources Code, relating to energy.
Vote: majority Appropriation: no Fiscal committee: yes Local program: no
LEGISLATIVE COUNSEL’S DIGEST
Existing law requires the State Energy Resources Conservation and Development Commission, on or before January 1, 2024, and every 3 years thereafter, to submit an assessment to the Governor and the Legislature that, among other things, identifies methods to ensure a reliable supply of affordable and safe transportation fuels in California and evaluates the price of transportation fuels, including branded and unbranded retail prices, alternate formulations of gasoline with lower carbon impact, and other products suitable for production from refineries in California, as provided.
Existing law authorizes the State Air Resources Board (state board) to grant variances from gasoline specifications adopted by the state board and to impose fees and conditions in granting a variance.
Existing law requires the commission, in the first assessment after January 1, 2026, to evaluate the cost and supply impacts of allowing the sale of gasoline with alternative specifications to support a reliable and affordable supply of transportation fuels in California. If the evaluation finds that allowing the sale of gasoline with alternative specifications is likely to support a reliable and affordable supply of transportation fuels in California, existing law requires the commission, in coordination with the state board, to recommend a strategy to facilitate the sale of gasoline with those alternative specifications that, at a minimum, considers, among other things, the use of a fee, as provided, associated with the sale of gasoline with those alternative specifications to mitigate for any increase in emissions.
This bill would require the commission to submit that assessment on or before July 1, rather than January 1, of the applicable year. The bill would require the commission to implement, rather than recommend, that strategy and would require the strategy to consider the use of fees and conditions, rather than fees alone, developed for the purposes described above.
Existing law establishes the Division of Petroleum Market Oversight in the State Energy Resources Conservation and Development Commission commission to, among other things, provide independent oversight and analysis of the transportation fuels market for the protection of consumers by identifying market design flaws, market power abuses, and any other manner by which market participants act to harm competition or act contrary to the best interests of the
consumers in the state. Existing law requires the division to report its findings and recommendations to improve market performance, at least annually, to the Legislature, the Governor, the commission, the Attorney General, and the California Department of Tax and Fee Administration.
This bill would make the annual report due on or before July 1 of each year.
year, and would require the report due on or before July 1, 2027, to analyze the price differential between branded and unbranded gasoline sold in California and the market barriers to competition in the gasoline imports market, as provided.
The people of the State of California do enact as follows:
SECTION 1.
Section 25371 of the Public Resources Code is amended to read:
25371.
(a) (1) Notwithstanding Section 10231.5 of the Government Code, on or before January July 1, 2024, and every three years thereafter, the commission shall submit an assessment to the Legislature, in accordance with Section 9795 of the Government Code, and to the Governor that does all of the following:
(A) Identifies methods to ensure a reliable supply of affordable and safe transportation fuels in California. The assessment shall include estimates for the level of transportation fuels at the state level, and, to the extent feasible, at regional and local levels, and individual refineries if relevant, that should be held in reserve by refiners to prevent gasoline price spikes. The assessment shall consider all factors causing price fluctuations in retail gasoline prices when recommending adequate reserve levels. The commission shall consider all relevant evidence from any reasonably available source, including, but not limited to, information about imports, by amount, source, if known, and data received by the commission pursuant to existing laws, economic and business experts, and information from any local, state, and federal agencies. The commission shall transmit to the Legislature, in accordance with Section 9795 of the Government Code, any proposals it deems appropriate for mandatory reserve levels and the terms of a program to implement reserve levels.
(B) Evaluates the price of transportation fuels, including branded and unbranded retail prices, alternate formulations of gasoline with lower carbon impact, and other products suitable for production from refineries in California. This evaluation shall consider the market demand for these products at 3-, 7-, 10-, and 20-year intervals from the date of the assessment and shall rely on the most recent transportation forecasting and assessment activities conducted pursuant to Section 25304. This evaluation shall include both of the following:
(i) An examination of whether branded fuel additives have any impact, and, if so, how much, on fuel efficiency and vehicle emissions.
(ii) An assessment of the presence and availability of retail outlets, including monitoring changes in availability of retail outlets that contribute to increasing retail prices in local and regional areas.
(C) Considers different levels of supply conditions and assesses the impact of potential refinery closures in California.
(D) Includes an analysis of the impacts on production of refinery planned maintenance, unplanned maintenance, and turnaround. The assessment shall evaluate ways to manage necessary maintenance among the various facilities that would protect the health and safety of employees and the public, and minimize the impact of maintenance-related production losses. Notwithstanding any other law, the Department of Industrial Relations and Division of Occupational Safety and Health shall disclose to the commission, upon request, any information the department and division have received under Section 7872 of the Labor Code to ensure all aspects of refinery safety are incorporated into the assessment. All information designated confidential shall be treated as confidential by the commission.
(E) Evaluates the utility and feasibility of alternative methods to maintain adequate supplies of transportation fuels, including delivery alternatives for fuel and components of refined fuel, such as delivery by rail, a publicly maintained strategic fuel reserve, and other solutions beyond the activities of refineries and petroleum market participants.
(F) Proposes solutions to mitigate any impacts described in the assessment. The solutions shall include an assessment of the employment impacts and the cost and cost-effectiveness of any proposal, including cost impacts to all impacted sectors, both public and private. The assessment shall include recommendations and alternatives.
(G) Beginning with the first assessment submitted after the effective date of this subparagraph,
January 13, 2025, evaluates California’s future petroleum product and crude oil import needs and identifies steps that can be taken to ensure that marine infrastructure and port facilities will be adequate to accommodate the efficient movement of petroleum products to meet those needs. In preparing the evaluation pursuant to this subparagraph, the commission shall consult with the ports in California at which petroleum and refined transportation fuels are imported, tanker terminal operators at California ports, the State Lands Commission, the California Coastal Commission, and the San Francisco Bay Conservation and Development Commission and evaluate ways to maximize the use of existing infrastructure and minimize cumulative pollution burdens.
(H) Beginning with the first assessment submitted after the effective date of this subparagraph,
January 13, 2025, evaluates the effects of state regulations on supplies of transportation fuels that the commission identifies may be causing supply constraints, or for which the commission believes alternative compliance pathways should be considered by state agencies to mitigate potential impacts on supply.
(I) In the first assessment submitted after the effective date of this subparagraph, evaluate January 1, 2026, evaluates the cost and supply impacts of allowing the sale of gasoline with alternative specifications from those in Subarticle 2 (commencing with Section 2260) of Article 1 of Chapter 5 of Division 3 of Title 13 of the California Code of Regulations to support a reliable and affordable supply of
transportation fuels in California. If the evaluation finds that allowing the sale of gasoline with alternative specifications is likely to support a reliable and affordable supply of transportation fuels in California, the commission, in coordination with the State Air Resources Board, shall recommend implement a strategy to facilitate the sale of gasoline with those alternative specifications that, at a minimum, considers (i) a trigger mechanism for when the gasoline with those alternative specifications may be sold based on the conditions of the transportation fuels market, (ii) the existing variance process in Section 43013.2 of the Health and Safety code,
Code, and (iii) the use of a fee
fees and conditions established pursuant to Section 43013.2 of the Health and Safety Code associated with the sale of gasoline with those alternative specifications to mitigate for any increase in emissions.
(J) (i) In the first assessment submitted after the effective date of this subparagraph, evaluate January 1, 2026, evaluates the development of a westwide gasoline specification that could be used in a western region to include California and areas outside of the state as an alternative to the California-specific specification established under Subarticle 2 (commencing with Section 2260) of Article 1 of Chapter 5 of Division 3 of Title 13 of the California Code of Regulations to stabilize
the petroleum market and petroleum prices in the western region, including California. The commission, in coordination with the State Air Resources Board, shall conduct outreach to the western states, including the States of Arizona, Nevada, Oregon, and Washington, in furtherance of this evaluation.
(ii) The evaluation pursuant to this subparagraph shall assess the costs and benefits of each alternative specification, including economic impacts to the state and to consumers, labor impacts, public health impacts, and environmental impacts. In making this evaluation, the commission shall take into consideration the impacts of the state’s electrification efforts and the requirements of the federal Clean Air Act (42 U.S.C. Sec. 7661 et seq.). The evaluation shall identify and recommend the alternative specification that would minimize the costs and maximize the benefits to the state.
(2) The first assessment shall include the evaluation of oil and gas extraction and refining that the State Air Resources Board outlined in the most recent update to the scoping plan prepared pursuant to Section 38561 of the Health and Safety Code.
(b) The assessment shall be separate from the report submitted pursuant to Section 25302 and shall be developed in a public process. The assessment shall be available to the public within the proceeding docket and shall be approved by a vote of the commission at its business meeting.
(c) The commission may enter into contracts to perform the assessment required by subdivision (a) and the contracts shall not require the review, consent, or approval of the Department of General Services or any other state department or agency and do not need to comply with requirements under the State Contracting Manual or the Public Contract Code.
(d) The Division of Petroleum Market Oversight shall provide input to and otherwise support other divisions of the commission in preparation of the assessment required by subdivision (a).
(e) The Independent Consumer Fuels Advisory Committee established pursuant to Section 25373 shall provide input to the commission in preparation of the assessment required by subdivision (a).
SECTION 1.SEC. 2.
Section 25372.2 of the Public Resources Code is amended to read:
25372.2.
(a) The division shall do all of the following:
(1) Provide independent oversight and analysis of the transportation fuels markets for the protection of consumers by identifying market design flaws, market power abuses, and any other manner by which market participants act to harm competition or act contrary to the best interests of consumers in the state.
(2) Provide guidance and recommendations to the commission relating to the development of the assessment required by Section 25371 and the Transportation Fuels Transition Plan described in Section 25371.3.
(3) Provide guidance and recommendations to members of the commission, other divisions of the commission, and the California Department of Tax and Fee Administration relating to the reports described in Section 25355.7.
(4) Provide guidance and recommendations to the Governor, members of the commission, and other divisions of the commission on any other issues related to transportation fuels pricing and transportation decarbonization in California.
(5) Report its findings and recommendations to improve market performance at least annually, on or before July 1, to the Legislature, in accordance with Section 9795 of the Government Code, the Governor, the commission, the Attorney General, and the California Department of Tax and Fee Administration.
(6) (A) The report due on or before July 1, 2027, pursuant to paragraph (5) shall analyze both of the following:
(i) The price differential between branded and unbranded gasoline sold in California, including, but not limited to, all of the following:
(I) An analysis of average and regional price differentials between branded and unbranded gasoline at the wholesale and retail levels.
(II) Historical trends in branded and unbranded price differentials over a period of not fewer than five years, if the data is available.
(III) An assessment of the extent to which the observed price differentials are attributable to branding, contractual arrangements, fuel specifications, or other legitimate market factors.
(IV) An evaluation of whether the price differentials appear to be consistent with competitive market conditions.
(V) Identification of any data gaps or limitations that affect the analysis in this clause.
(VI) A discussion of potential policy solutions, including open supply and divorcement.
(ii) The market barriers to competition in the gasoline imports market, including, but not limited to, both of the following:
(I) The potential capacity or access barriers to competition in the gasoline imports market.
(II) A discussion of potential policy solutions, including additional data and transparency measures.
(B) The reporting requirement imposed pursuant to this paragraph is inoperative on January 1, 2030, pursuant to Section 10231.5 of the Government Code.
(b) (1) The division may subpoena witnesses, compel their attendance and testimony, administer oaths and affirmations, take evidence, and require by subpoena the production of any books, papers, records, or other items material to the performance of the division’s duties or exercise of its powers, including, but not limited to, current and historical pricing and sales data and contracts with other petroleum industry participants.
(2) With respect to the division, the director of the division is the “head of a department” for purposes of, and the division may undertake investigations in the manner described in, Article 2 (commencing with Section 11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the Government Code.
(c) The division may confidentially refer potential violations of law to the Attorney General at any time.