BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 448|
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VETO
Bill No: SB 448
Author: Leno (D), et al.
Amended: 9/3/13
Vote: 21
SENATE ENERGY, UTILITIES & COMMUNICATIONS COMM. : 6-4, 4/16/13
AYES: Padilla, Corbett, De Le�n, DeSaulnier, Hill, Wolk
NOES: Fuller, Cannella, Knight, Wright
NO VOTE RECORDED: Pavley
SENATE TRANSPORTATION & HOUSING COMMITTEE : 8-3, 4/30/13
AYES: DeSaulnier, Beall, Galgiani, Hueso, Lara, Liu, Pavley,
Roth
NOES: Gaines, Cannella, Wyland
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SENATE FLOOR : 25-12, 5/29/13
AYES: Beall, Block, Calderon, Corbett, Correa, De Le�n,
DeSaulnier, Evans, Galgiani, Hancock, Hill, Hueso, Jackson,
Lara, Leno, Lieu, Liu, Monning, Padilla, Pavley, Price, Roth,
Steinberg, Torres, Wolk
NOES: Anderson, Berryhill, Cannella, Emmerson, Fuller, Gaines,
Huff, Knight, Nielsen, Walters, Wright, Wyland
NO VOTE RECORDED: Hernandez, Yee, Vacancy
ASSEMBLY FLOOR : 41-30, 9/11/13 - See last page for vote
SENATE FLOOR : 21-17, 9/12/13
AYES: Beall, Block, Corbett, Correa, De Le�n, DeSaulnier,
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Evans, Hancock, Hill, Hueso, Jackson, Lara, Leno, Lieu, Liu,
Monning, Padilla, Pavley, Roth, Steinberg, Wolk
NOES: Anderson, Berryhill, Calderon, Cannella, Emmerson,
Fuller, Gaines, Hernandez, Huff, Knight, Nielsen, Torres,
Vidak, Walters, Wright, Wyland, Yee
NO VOTE RECORDED: Galgiani, Vacancy
SUBJECT : Energy: petroleum supply and pricing
SOURCE : Author
DIGEST : This bill requires the California Energy Commission
(CEC), upon appropriation of funds, to investigate suspected
motor vehicle fuel price manipulation and make recommendations
to the Legislature on how to limit motor vehicle fuel price
volatility.
ANALYSIS : Existing federal law prohibits market manipulation
of crude oil gasoline, petroleum, or natural gas.
Existing state law:
1. Mandates the CEC to monitor gasoline pricing throughout the
state and report on price volatility under the Petroleum
Industry Information Reporting Act of 1980 (PIIRA).
2. Requires the CEC, each quarter, to report to the Legislature
and Governor a summary, an analysis, and an interpretation of
this information. In addition, the CEC must prepare a
biennial assessment of the information it receives from oil
refiners and marketers and include that information in the
Integrated Energy Policy Report, a statutorily-required
document that forecasts energy supply and demand and
evaluates current energy issues facing the state.
3. Deposits revenues from oil and gas leases on public lands
into the General Fund.
This bill:
1. Makes findings and declarations relative to California's
deployment of lower carbon and sustainable fuel options and
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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 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.
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
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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,
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
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law.
6. Sunsets these provisions on January 1, 2018.
Background
Recent spikes in gasoline and diesel prices have renewed
concerns regarding potential market manipulation by gas
companies. In 2012, two gasoline price spikes were blamed in
media reports on oil refinery issues that occurred prior to the
spikes. The BP Cherry Point refinery had a fire on February 17,
2012. Subsequently, in May 2012, gasoline prices rose by about
15 cents per gallon. Another refinery fire, this time at the
Chevron Richmond facility occurred on August 6, 2012. It, along
with an electrical outage at Exxon's Torrance refinery on
October 1 2012, was reportedly linked to a 50 cent 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.
On November 15, 2012, the author held an informational hearing
under the Select Committee on Bay Area Transportation which
discussed California oil refineries, gasoline supply, market
power, and gas price volatility. At the hearing, testimony was
heard from the CEC, the Western States Petroleum Association,
Severin Borenstein (Director of UC Energy Institute), and Robert
McCullough (McCullough Research).
A report by the UC 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 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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.
SUPPORT : (Verified 5/24/13)
Asian Pacific Environmental Networks
Communities for a Better Environment
Consumer Action
Consumer Federation of California
Consumers Union
Environmental Defense Fund
Greenlining Institute
Sierra Club California
The Greenlining Institute
United Steel Workers, District 12
OPPOSITION : (Verified 5/24/13)
Western States Petroleum Association
ARGUMENTS IN SUPPORT : According to the author's office this
bill is aimed at ensuring all Californians are not paying more
at the pump because of illegal price manipulation, and further
aims to ensure the state is on a longer term path to decreased
gas prices. The author's office argues that federal statutes
that are intended to prevent market manipulation are
insufficient, because they do not have regulatory standards or
methodologies by which to judge the acts, practices, or courses
of business, including whether concentration of market power or
price setting constitutes an illegal practice. The Office
established by this bill addresses these inadequacies.
ARGUMENTS IN OPPOSITION : Western States Petroleum Association
writes, "This expanded authority would be funded by moneys
collected from royalty payments to California from oil and gas
leases, diverting money from the general fund. This bill is
duplicative of existing authority of the California Attorney
General, U.S. Department of Justice and the Federal Trade
Commission. All of these entities can investigate and monitor
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anti-competitive activities."
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 448 without my signature.
This bill is unnecessary. The Energy Commission already has
the authority to analyze and interpret changes in petroleum
supply and market price.
I am directing the Commission to work with the Attorney
General to evaluate market trends and ways to respond to price
volatility. We need to have a plan and a rapid response team
in place with the capability to respond when sudden and
untoward price fluctuations occur."
ASSEMBLY FLOOR : 41-30, 9/11/13
AYES: Alejo, Ammiano, Atkins, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Campos, Chau, Chesbro, Dickinson, Eggman, Fong,
Garcia, Gatto, Gomez, Gonzalez, Gordon, Hall, Holden,
Jones-Sawyer, Levine, Lowenthal, Mitchell, Mullin, Muratsuchi,
Nazarian, Pan, V. Manuel P�rez, Quirk, Quirk-Silva, Rendon,
Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada,
John A. P�rez
NOES: Achadjian, Allen, Bigelow, Brown, Ch�vez, Conway, Dahle,
Daly, Donnelly, Fox, Beth Gaines, Gorell, Gray, Grove, Hagman,
Harkey, Jones, Linder, Logue, Maienschein, Mansoor, Melendez,
Morrell, Nestande, Olsen, Patterson, Salas, Wagner, Waldron,
Wilk
NO VOTE RECORDED: Buchanan, Ian Calderon, Cooley, Frazier,
Roger Hern�ndez, Medina, Perea, Vacancy, Vacancy
JG:AL:ndk 1/6/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
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