Amended in Senate May 24, 2013

Amended in Senate May 6, 2013

Amended in Senate April 23, 2013

Amended in Senate April 1, 2013

Senate Bill No. 448

Introduced by Senator Leno

February 21, 2013

An act to add begin delete Section end delete begin insert Sections 25351 and end insert 25356.5 to the Public Resources Code, relating to energy.

LEGISLATIVE COUNSEL’S DIGEST

SB 448, as amended, Leno. Energy: petroleum supply and pricing.

Existing law establishes the State Energy Resources Conservation and Development Commission in the Natural Resources Agency, and specifies the powers and duties of the commission with respect to energy resources in the state. Under existing law, various provisions regulate petroleum supply and pricing. Existing law requires the commission to obtain and analyze monthly production reports prepared by the State Oil and Gas Supervisor under a specific provision. Existing law authorizes the State Lands Commission to enter into oil and gas leases for the extraction and removal of oil and gas deposits on state lands. Existing law requires the leases to include a royalty provision.

This bill would require the State Energy Resources Conservation and Development Commission, begin insert or the commission, end insert upon appropriation by the Legislature of moneys generated by the collection of royalty payments from the oil and gas leases, to identify begin delete motor vehicle fuel price manipulation, establish a methodology to determine whether fuel price manipulation is occurring, and analyze data and investigate for suspected end delete begin insert data currently collected or developed by the commission and to establish a methodology to analyze whether end insert fuel price manipulation begin insert has occurred or is occurring. The bill would require the commission to notify the appropriate state or federal agencies if a probable market manipulation has occurred or is occurring end insert . The bill would require the commission, in consultation with the State Air Resources Board and other relevant state agencies, to prepare and submit to the Legislature a report on further legislative recommendations to limit the amount of price volatility and comparative price increase in the California fuel market.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 25351 is added to the end insert begin insert Public Resources
Code end insert begin insert , to read: end insert

begin insert

begin insert 25351. end insert   

The Legislature finds and declares all of the following:

(a) California is in the process of creating investments in, and
deployment of, lower carbon and more sustainable fuel options
for consumers.

(b) California’s transition to a lower carbon and lower cost
transportation fuel mix can be threatened by illegal actions that
manipulate prices and make it difficult to understand the real
impact of new standards and regulations.

(c) It is the intent of the Legislature to implement policies that
protect consumers against market manipulation in the wholesale
markets for finished gas and diesel fuel and their refining
feedstocks.

(d) It is the intent of the Legislature to use existing resources
at the State Energy Resources Conservation and Development
Commission and develop additional expertise to prevent market
manipulation.

(e) It is the intent of the Legislature that the authority under
this act be complementary to the authority of other state and
federal agencies.

(f) It is the intent of the Legislature that the State Energy
Resources Conservation and Development Commission work with
other state and federal agencies to identify activities that may
indicate market manipulation and investigate those activities.

end insert

begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

Section 25356.5 is added to the Public Resources Code,
to read:

25356.5.  

(a) In addition to the requirements of Section 25356, begin insert end insert
begin insert and in consultation with relevant state and federal agencies, end insert the
commission shall do all of the following:

begin delete

(1) Establish a definition for fuel market manipulation.

end delete begin delete

(2)

end delete

begin insert (1) end insert  Identify data begin delete necessary end delete begin insert currently collected or developed by
the commission that is important end insert to determine whether begin insert improper end insert
fuel begin delete pricing end delete begin insert price end insert manipulation begin insert has occurred or end insert is begin delete occurring that
includes end delete begin insert occurring. The data may include end insert all of the following:

(A) Individual fuel producer data begin insert and importer and bulk trader
data end insert , including all of the following:

(i) Production or throughput data.

(ii) Emission data or operational data.

(iii) Sales begin insert , storage, and transfer end insert volumes.

(iv) Price.

(B)  begin delete Marketwide pricing data. end delete begin insert Observed and forecasted wholesale
market prices. end insert

begin delete

(3)

end delete

begin insert (2) end insert  Establish an analytical methodology begin delete necessary to evaluate end delete
begin insert for use in evaluating data collected by the commission to inform end insert
whether fuel price manipulation begin insert has occurred or end insert is begin delete occurring that
includes both end delete begin insert occurring. The methodology may, at the discretion
of the commission, be targeted to analyzing data on transactions
and market conditions most likely connected with fuel pricing
manipulation, and may include, but shall not be limited to, both end insert
of the following:

(A) Producer begin insert , importer, and bulk trader end insert level analysis.

(B) Marketwide analysis, comparing real time prices to expected
prices based on begin insert end insert begin insert published forecasts or end insert modeling output.

begin delete

(4)

end delete

begin insert (3) end insert  Analyze the data begin insert under paragraph (1) that is in the
possession of the commission end insert and investigate for suspected fuel
price manipulation begin delete using end delete begin insert in end insert both of the following:

(A)  begin delete Producer level analysis. end delete begin insert Individual business level. end insert

(B) Marketwide begin delete analysis end delete begin insert producer level, taking into account
the actions of multiple producers end insert .

begin insert

(4) Identify data that is not in possession of the commission and
is considered important to determine whether fuel pricing
manipulation has occurred or is occurring. The commission shall
furnish a list of the data to the Legislature upon request.

end insert

(b) The commission, in consultation with the State Air Resources
Board and other relevant state agencies, shall include in the begin insert first end insert
biennial assessment specified in subdivision (b) of Section 25358
begin insert following enactment of this section end insert a report on further legislative
recommendations to limit the amount of price volatility and
comparative price increase in the California fuel market. The report
shall include an evaluation of strategies begin insert for end insert doing all of the
following:

(1) Increasing begin delete fuel end delete storage begin insert of fuels produced in the state end insert .

(2) Leveraging the state’s purchasing power related to the state’s
fleet.

(3) Increasing timely imports of fuels during begin insert emergency
conditions and rapid end insert price begin delete swings end delete begin insert volatility end insert .

begin insert

(4) Coordinating the timing of maintenance and shutdown
activities at in-state fuel production facilities.

end insert

(c) For purposes of this section, “fuel” means begin insert finished end insert gasoline
and diesel begin insert end insert begin insert and their refining feedstocks end insert derived from petroleum.

(d) The commission shall implement this section upon
appropriation by the Legislature of moneys generated by the
collection of royalty payments from oil and gas leases entered into
pursuant to Article 2 (commencing with Section 6826) of Chapter
3 of Part 2 of Division 6.

begin insert

(e) (1) Upon collection of the data and completion of the
analyses required under this section, if the data indicates that a
probable market manipulation has occurred or is occurring, the
commission shall notify the appropriate state or federal agencies
of the probable market manipulation.

end insert begin insert

(2) Nothing in this section shall require the commission to make
final findings or determinations that market manipulation has
occurred or is occurring.

end insert