BILL ANALYSIS �
SB 448
Page 1
SENATE THIRD READING
SB 448 (Leno)
As Amended September 3, 2013
Majority vote
SENATE VOTE :25-12
TRANSPORTATION 10-3 APPROPRIATIONS 12-5
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|Ayes:|Lowenthal, Ammiano, |Ayes:|Gatto, Bocanegra, |
| |Bloom, Bonta, Daly, | |Bradford, |
| |Gordon, Gatto, Holden, | |Ian Calderon, Campos, |
| |Nazarian, Quirk-Silva | |Eggman, Gomez, Hall, |
| | | |Holden, Pan, Quirk, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Linder, Morrell, |Nays:|Harkey, Bigelow, |
| |Patterson | |Donnelly, Linder, Wagner |
| | | | |
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SUMMARY : Requires, upon legislative appropriation of funds for
this purpose, the California Energy Commission (CEC) to
investigate suspected gasoline and diesel price manipulation and
make recommendations to the Legislature on how to limit price
volatility for these fuels. Specifically, this bill :
1)Makes findings and declarations relative to California's
deployment of lower carbon and sustainable fuel options and
how the transition to these fuels can be threatened by price
manipulation.
2)States the Legislature's intent to protect consumers against
fuel price manipulation.
3)Directs CEC to consult with other state and federal agencies
in developing its biennial assessment as required under
California's Petroleum Industry Information Reporting Act of
1980 (PIIRA) and to include information into that assessment
that:
a) Identifies CEC data currently collected or developed
that is important to determine whether improper fuel price
manipulation has occurred or is occurring.
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b) Analyzes the data and identifies transportation fuel
market segments and circumstances that are vulnerable to
fuel price manipulation at both the individual business
level and market-wide producer level.
c) Identifies data that is not in CEC's possession and is
considered important to determine whether fuel pricing
manipulation has occurred or is occurring.
1)Requires CEC to furnish data regarding fuel price manipulation
to the Legislature upon request.
2)Requires CEC to establish a Motor Vehicle Fuel Market Advisory
Committee (MVFMAC) to review gathered and analyzed data and
provide recommendations about fuel market behavior and
transactions as it relates to potential market manipulation
and to suggested methods to deter those activities.
3)Requires that MVFMAC consist of at least five members with one
having relevant professional or academic expertise in the area
of motor vehicle fuel market analysis and the four remaining
members to include a representative from the wholesale
gasoline and diesel fuel industry, a representative from the
retail gasoline and diesel fuel industry, a representative
from the alternative fuel industry, and a representative from
an environmental, public interest, or consumer protection
organization.
4)Requires CEC, in consultation with the State Air Resources
Board (ARB) and other relevant state agencies, to include in
the integrated energy policy report:
a) Recommendations to limit the amount of price volatility
and comparative price increase in California's fuel market,
b) Strategies for increasing storage of fuels produced in
the state,
c) Strategies for leveraging the state's motor vehicle
purchasing power,
d) Strategies for increasing timely imports of fuels during
emergency conditions and times of rapid price volatility,
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e) Strategies for coordinating the timing of maintenance
and shutdown activities at in-state fuel production
facilities, and,
f) Strategies for identifying circumstances and market
segments for gasoline and diesel fuels and their refining
stocks that are vulnerable to price changes and potential
market manipulation, as specified.
1)Defines "fuel" to mean finished gasoline and diesel and their
refining feedstocks derived from petroleum.
2)Requires CEC to implement the bill's provisions upon
appropriation by the Legislature from moneys collected as
royalty payments from specified oil and gas leases on public
lands under the jurisdiction of the State Lands Commission.
3)States that CEC is not required to make final findings or
determinations that market manipulation has occurred or is
occurring.
4)Specifies that CEC is not required to make final findings or
determinations that market manipulation has occurred or is
occurring or release or disclose information deemed to be
confidential under PIIRA.
5)Specifies that CEC is not prevented from reporting any
information to state or federal agencies pursuant to existing
law.
6)Sunsets these provisions on January 1, 2018.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time and ongoing costs, through 2017, of around
$180,000 for 1.5 positions to identify data requirements and
analyze data, establish and support MVFMAC, and prepare the
one-time report.
COMMENTS : This bill requires CEC to expand their information
data collection relative to the biennial petroleum production
reports (PIIRA) to the Legislature. Further, in order to allay
concerns regarding conflicts with federal law and monitoring of
the gasoline market where the federal government has primacy,
SB 448
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the bill requires CEC to consult with federal agencies before
undertaking the additional data collection provisions.
Background : In 2012, two gasoline price spikes were blamed in
media reports on oil refinery issues that occurred prior to
these spikes. The British Petroleum Cherry Point refinery near
Bellingham, Washington, had a fire on February 17, 2012.
Subsequently, in May 2012, gasoline prices rose by about $0.15
per gallon. Another refinery fire, this time at the Chevron
facility at Richmond, California, occurred on August 6, 2012.
It, along with an electrical outage at Exxon's refinery in
Torrance, California on October 1, 2012, was reportedly linked
to a $0.50 per gallon price spike in October 2012. The October
spike sent gas prices to near record levels. To alleviate
costs, Governor Brown issued an order allowing the winter-blend
gasoline to be sold early in the state.
A report by the University of California Energy Institute from
2004 examined fuel price volatility and market power. The
report examined the importation, refinement, and storage of fuel
and the potential for firms to exercise market power. Results
of the study showed that the exercise of market power could be
used to explain price volatility, but that volatility was also
consistent with competitive markets. The report highlighted the
difficulty in determining if fluctuations in the market are a
result of competitive forces or market manipulation.
Another report by McCullough Research on June 5, 2012, showed
that the price spikes occurred while crude oil prices were
declining, and inventories were increasing. This report raised
suspicions about market manipulation by oil companies.
A May 15, 2013, Bloomberg report indicates that three of
Europe's biggest oil explorers are among companies being
questioned by European antitrust regulators about potential
manipulation of prices in the $3.4 trillion-a-year global crude
market. According to the report, Royal Dutch Shell, British
Petroleum, and Statoil, indicated that they are "being
investigated after the European Commission conducted raids in
three countries to ferret out evidence of collusion. Price
fixing in energy markets has the potential to inflate production
costs and consumer prices for everything from gasoline to
airline tickets to cosmetics."
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Purpose of the bill : The author has introduced this bill as
recent spikes in gasoline and diesel prices have renewed
concerns regarding potential market manipulation by gas
companies. His intention is to give California the tools
necessary to ensure that major oil companies are not violating
the law through concentration of market power and fuel market
price manipulation. In addition, the bill provides the
California Legislature a detailed accounting of strategies that
can be pursued to limit market power consolidation, price
volatility, and price increases in the California fuel market.
The author contends that although it is illegal to monopolize
and manipulate the market for gasoline, sufficient standards or
definitions do not exist by which to evaluate a particular
company's behavior for conformance with the law. Also, the
author asserts that California has a number of measures in place
that will reduce fuel price volatility over time, but no current
measure that is focused on long-term fuel price reduction. The
author introduced this bill to take on both of these issues.
Analysis Prepared by : Victoria Alvarez / TRANS. / (916)
319-2093
FN: 0002251