This weekly newsletter highlights the latest from the California Energy Journal along with links to articles and analysis on key developments in California energy policy.
Questions, comments, or tips? Contact editor@californiaenergyjournal.com.
The week ended January 19, 2026:
Biggest story: The Trump administration continues its challenges to California energy policy through a suite to overturn the state’s 2022 oil drilling setback law.
What to watch in the coming week: Concerns over the impact of data centers on energy prices continue to grow.
From the California Energy Journal
Trump Administration Sues to Overturn California Oil Setback, Citing Federal Preemption (January 16, 2026) – The Trump administration is suing California to pause and overturn the state’s 2022 oil drilling setback law, known as SB 1137. The administration is arguing that the Mineral Leasing Act and the Federal Land and Policy Management Act preempts the law. The administration notes that the law would “knock out about one-third of all federally authorized oil and gas leases in California.” The lawsuit asks the court to declare SB 1137 unconstitutional and seeks an injunction against its enforcement. Read more.
Additional California News and Analysis
Offshore oil drilling
Senator John Laird introduced Senate Joint Resolution 12, a bipartisan measure opposing the federal government’s proposed 11th National Outer Continental Shelf Oil and Gas Leasing Program and calling for California to be removed from the proposed plan, stronger environmental review and public engagement in the process. Office of Senator John Laird, January 13, 2026.
Commentary and analysis
Ken Bouley, “Marin Voice: Offshore drilling plan for California must be rejected,” Marin Independent Journal, January 15, 2026.
Oil and gas
Gov. Gavin Newsom met with the CEO of Phillips 66 days before he unveiled a plan to boost oil drilling and put a hold on the refinery profit cap. Mercury News, January 14, 2026.
Valero Energy expects layoffs of 237 out of 348 total employees at its Benicia refinery by July 1, 2026, following its April 1, 2026 shutdown, the company told state employment regulator and local officials. MSN, January 16, 2026.
Phillips 66 and Kinder Morgan, Inc. launched a second open season for their Western Gateway Pipeline proposal, for remaining pipeline capacity and new access to the Los Angeles market. Phillips 66 and Kinder Morgan proposed the new pipeline system in October. Kinder Morgan, January 15, 2026.
Hundreds of gas stations in California are set to close due to SB 445 of 2014, which requires gas station owners and operators to replace single-walled gasoline storage tanks with double-walled tanks or face fines of $5,000 a day. The Sun, January 19, 2026; San Francisco Chronicle, January 18, 2026.
Commentary and analysis
Noah Baustin and Camille von Kaenel, “The Trump vs. Newsom energy showdown is just getting started,” Politico, January 13, 2026.
Jesse Rojas, “Community Voices: California’s war on oil is a war on working families,” Bakersfield Californian, January 15, 2026.
Marie Choi and Nick Plurkowski, “California shouldn’t let oil companies rewrite refinery safety rules,” CalMatters, January 14, 2026.
Power and utilities
AB 710, which would require the CPUC to require California utilities to offer a dynamic pricing option by 2028, advanced out of the Committee on Utilities and Energy.
Commentary and analysis
Tom Steyer, “While SF residents suffer, PG&E profits. It’s time to smash the utility monopolies,” San Francisco Standard, January 7, 2026
Alison F. Takemura, “First Clean Energy Win of 2026 as AB 710 Passes the Asm. Utilities and Energy Committee,” Canary Media, January 19, 2026
Solar and wind
California’s single-largest solar energy project is scheduled to come up for a vote next month by the Kern County Planning Commission before going on for final consideration by the Board of Supervisors. Bakersfield Californian, January 13, 2026.
Data centers and AI
The California Public Utilities Commission (CPUC) approved an agreement between Microsoft and Pacific Gas & Electric to power a new 90-megawatt data center in San Jose. CPUC, RTO Insider, January 15, 2026.
California legislature introduces new data center bills:
SB 886 would establish a tariff on data centers to protect ratepayers from the increased costs of supplying data centers.
SB 887 would clarify that data centers are eligible for streamlined environmental review under the California Environmental Quality Act (CEQA) but are not ministerial projects exempt from CEQA review and do not qualify for the CEQA exemption for an advanced manufacturing facility.
AB 1577 would require data centers to report monthly to the California Energy Commission on their power and water “usage effectiveness” and their total water consumption and the quantity of fuel consumed by onsite generators or other fuel-based energy systems.
Climate reporting
A panel of judges heard arguments on the constitutionality of SB 253 and SB 261 on January 9, 2025. The court issued an injunction against SB 261, which was scheduled to take effect January 1, 2026. Corporate Disclosures, National Law Review, January 12, 2026.
Energy policy
Commentary and analysis
Elias Van Emmerick, “Crafting a Roadmap for Zonal Decarbonization in California,” Legal Planet, January 14, 2026
Edward Ring, “The Denominators of our Prosperity – Energy and Water,” California Policy Center, January 14, 2026.
Additional News and Analysis
Oil and gas
Chevron and other oil majors argued before the U.S. Supreme Court that Louisiana climate litigation should be litigated in federal, not state, court. Inside Climate News, January 12, 2026.
The Environmental Protection Agency proposed a new rule to limit the power of states and some Indian Tribes to block construction of oil and gas pipelines, coal export terminals, and other energy projects under the Clean Water Act. AP, January 13, 2026
Federal policy
A former DOE senior official warned that if “the administration doesn’t reverse all of the terminations [of Biden-era energy grants], then they should prepare for hundreds of additional similar lawsuits.” Latitude Media, January 13, 2026.
Data centers and AI
Microsoft is pledging to “pay its way” for its AI data centers, as soaring US electricity prices and water use bring a backlash against tech companies and the Trump administration’s AI push. FT, January 13, 2026.
President Donald Trump and the governors of several US Northeastern states agreed to push for an emergency wholesale electricity auction that would compel technology companies to fund new power plants. Bloomberg, January 15, 2026.