The California Energy Commission (CEC) paused implementation of the state’s profits cap on refineries, known as the maximum gross gasoline refining margin (GGRM), and the related penalty until 2030. The delay is part of the state’s recent efforts to improve the operating and investment environment for the oil industry in California.
The five-year delay comes two years after California passed SBX1-2, which gave the CEC new powers to monitor the gasoline market and impose penalties on refiners who charge more than a maximum margin for refining gasoline. The change comes in response to California's high gasoline prices, declining refining capacity, and recently announced plans to close two refineries, in 2025 and 2026.
Under the resolution for the delay, the CEC allows that if it adopts a maximum GGRM and penalty before 2035, a refiner could request an exemption to penalties if they “made significant investments in gasoline producing units” at a California refinery between 2026 and 2030. The CEC also reserved the right to revise or rescind the resolution and to implement the law.
In June, CEC Vice Chair Siva Gunda recommended pausing the GGRM and penalty implementation for a “reasonable length of time” as one of his policy recommendations to help stabilize California’s gasoline and petroleum markets. The Western States Petroleum Association wanted a 20-year pause to the profit cap.
The CEC still plans to implement rules under ABX2-1 to require oil refineries to maintain minimum inventories of refined fuels, feedstocks, and blending components and to have resupply plans to cover production loss during maintenance.
In other efforts to address the investment environment for the oil and gas industry, the legislature is considering draft legislation that would streamline the permitting process for drilling new oil wells in existing fields until 2036.