In light of refinery closures, California leaders reflect on clean energy goals

SACRAMENTO, Calif. — California officials acknowledge the state’s transition to clean energy will not be seamless, as refinery closures tighten fuel supplies and increase reliance on foreign imports.

Legislators continue to debate how to balance climate goals with consumer costs.

Siva Gunda, vice chair of the California Energy Commission, told legislators on the Senate Environmental Quality Committee during a Feb. 18, 2026 informational hearing that the shift away from fossil fuels comes with economic and logistical challenges.

“This is not going to be a smooth transition,” Gunda said. “Every time you lose a refinery, it’s going to be a double-digit percent of refined fuel lost in California.”

Of the remaining refineries, Gunda added, “It’s not about if they’re going to close. It’s about when.”

Refineries operated by Phillips 66 in Los Angeles and Valero Energy in Benicia have been the latest batch. Phillips 66 ceased operations last year; Valero announced plans to do the same by April of this year, though industry experts say the refinery has already gone dark. 

Experts note the Phillips 66 and Valero facilities were responsible for roughly 20% of California’s gasoline production. Amid closures — as well as consolidation of refineries and the transition of some to renewable energy producers — seven major refineries remain operating in the state.

Republican lawmakers argue the state’s clean energy timeline is moving too quickly.

“You cannot collapse one energy system before the next one is built,” said state Sen. Suzette Martinez-Valladares, a Republican from Santa Clarita. “You cannot punish working families into a transition.”

Of Gunda’s committee hearing remarks, Martinez-Valladares, vice chair of the committee, stated,  “That was one of the most honest opinions I’ve ever heard from the administration ever. This is not a smooth transition.”

The vice chair also noted, “California is in a death spiral when it comes to our oil and gas industry.”

California has set ambitious targets to phase out fossil fuel use and reduce greenhouse gas emissions, while also mandating a shift toward zero-emission vehicles in the coming years.

On that front, representatives from The California Air Resources Board (CARB) detailed that California leads the nation when it comes to deployment of zero emission vehicles — 30% of vehicle sales are zero emission vehicles, officials say.

Gunda said the state must continue reducing fuel demand to meet its climate goals but acknowledged the risks tied to shrinking in-state production. He said the state will fill that gap in supply and demand increasingly with foreign imports of both gasoline — ready-to-use product — as well as crude oil — which must first be processed in the remaining state refineries.

Mike Mische, an energy expert and associate professor with the University of Southern California Marshall School of Business, said that about 40% of the gasoline consumed in the state is now imported from foreign sources — a dynamic critics say exposes California to global supply disruptions and higher prices.

Assemblymember Stan Ellis, a Republican from Bakersfield, warned of vulnerabilities tied to overseas shipments.

“If there’s a conflict of any sort in the Pacific, how are those ships going to get here? If we have a storm? If we have a military conflict?” he said.

Ellis, has for months now, emphasized how less in-state production of fuel supply is also a threat to national security. For instance, experts note the Valero Benicia refinery was the exclusive supplier of jet fuel to Travis Air Force Base. 

Refiners are also pushing back against proposed updates to California’s cap-and-invest program, which allows companies to purchase credits to offset emissions. CARB earlier this year proposed amendments to it — lessening the credits awarded but upping costs for credits available.

Western States Petroleum Association (WSPA), a Sacramento-based lobbying group for the oil and gas industry, wrote a letter of opposition to Governor Gavin Newsom, Democratic state leaders, CEC and CARB, “deep concern and disappointment.”

Jodie Muller, the new president and CEO of WSPA, noted the proposal “imposes severe costs on the remaining in-state refineries with little regard for economic viability, workforce stability, or the direct impact on consumers.” WSPA states the remaining refineries already face financial burdens under strict state regulations and that per independent analysis, the annual compliance costs for refineries could approach $1.5 billion by 2035, with cumulative costs to refineries between $5 billion to $9 billion over the next decade.

In response, a CARB spokesperson tells ABC10, “The Cap-and-Invest Program is the most cost-effective way for California to achieve its statutorily mandated climate goals… The current staff proposal follows legislative direction under AB 1207 and maintains the status quo for the industrial sector. This includes maintaining allowance allocation levels and other program flexibilities that support doing business in California and help ensure liquid fuel supply remains reliable, affordable, and resilient throughout the transition to carbon neutrality.”

AB 1207 was passed by the Legislature last September. It extended and reformed the Cap-and-Invest Program until 2045 — not only further advancing California’s goal to achieve net-zero emissions by that year but also providing better guidance for businesses as the state navigates that energy transition.

CARB says the board is accepting public comment until March 9 and will respond accordingly to concerns. There will also be a public board hearing at the end of May. 

PBF Energy, which operates refineries in Torrance and Martinez, also wrote a letter of operation, warning if the amendments are implemented, it may reconsider its presence in California.

The company explained complying with various state and federal regulations, PBF invests between $100,000,000 to $300,000,000 each year.

“I know for a fact the other refineries are seriously looking at now the impacts of what they’re having to pay. The cap and investment, it’s hundreds of millions of dollars, these refineries are paying, and imported fuel [providers, the foreign countries], they don’t have to pay anything. These [California] refineries, they’re losing money,” said petroleum professional Mike Ariza.

Indeed, PBF is asking for a level playing field with foreign refineries and oil producers. 

Ariza also noted with imports, “You’re advocating all your price control, you’re advocating all your control to foreign powers.”

Democratic state Sen. Catherine Blakespear of Encinitas, who chairs the legislative committee overseeing energy policy, said lawmakers are seeking a balanced approach.

“We want the transition to be as smooth as possible,” Blakespear said. “We’re not trying to court oil companies, but we’re also not trying to push them away. We want a healthy market.”

The state senator also noted — as did state agencies and leaders — “It’s not California that’s leading to these refineries closing. It’s these larger market forces, which are really about the price of gasoline and how easy it is to transport it around the world.”

When asked about Prof. Mische’s study last year, which made headlines for its prediction gas prices could be as high as $8/gallon by the end of 2026, Sen. Blakespear said while she hasn’t read the specific study, there’s no crystal ball. 

“It does seem to me that [those such numbers are] frequently inaccurate. Could something be the case? Yes. Is this going to be the case? I just don’t think there’s any way for us to know,” Blakespear added.  

She introduced a bill to better examine the environmental impacts of refinery closures. The piece of legislation seeks to develop guidelines for estimating the costs of refinery closures, and refiners to deliver reports on what’s expected (i.e. job losses, loss in local tax revenue, impact of water quality). 

Meantime, as the state continues advancing towards its climate goals, Gunda told lawmakers the state must be increasingly proactive, not reactive, as it was when news of the Phillips 66 and Valero Benicia closures first dropped. Amid that news, Gunda said, gasoline prices could have reached between $8 and $10 per gallon last year, if it weren’t for imports helping stabilize supply.

We reached out to the Governor’s office for a response. Spokesperson Anthony Martinez redirected us to CEC and CARB, both of whom provided statements. 

CARB’s is noted above. CEC wrote in part, “A market shift is happening, which is not limited to California. Demand for petroleum fuels is declining and refinery closures are happening in places where operations are more expensive, while larger, cost-effective refineries open in other places. In California, refinery closures mean that we will rely more heavily on imported fuel. To smooth that transition, we will need to continue to ensure that supply can reliably come into the state and promote resiliency in the system. We need to implement strategies that ensure a holistic transportation fuels transition, one that protects California consumers, advances our state goals, and protects workers, host communities, and local governments.”

On that increased storage capacity, experts like Ariza state it’s simply additional investment in infrastructure, which translates to more expenses for refineries.

 “The state wanting them to build tanks, additional tank storage, the first question is, where do you put it? You’re talking billions of dollars of investment of trying to put in extra tanks for storage.” 

Asm. Ellis adds when in storage for too long, oil loses its volatility. 

When asked about the same topic last December, Martinez with Newsom’s office said “The claim that California policies pose a national security risk isn’t grounded in fact.”

Martinez also pointed to the two special legislative sessions that delivered SB X1-2 and AB X2-1.

SB X1-2 seeks to protect consumers from potential price gouging by giving state regulators better tools to monitor maintain transparency and price stability in the fuels market.

AB X2-1 builds off SB X1-2, authorizing the CEC to require oil refiners to maintain minimum inventories of transportation fuels and to plan ahead for resupply during refinery maintenance outages.

Gov. Gavin Newsom also, in an April 2025 letter to CEC Vice Chair Gunda, directed the agency to maintain a fuel supply that is safe, affordable and reliable, even as California accelerates efforts to curb gasoline demand and move toward a zero-emissions future.