BILL ANALYSIS                                                                                                                                                                                                                   1
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             SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                            DEBRA BOWEN, CHAIRWOMAN
          

          SB 1962 -  Costa                                  Hearing  
          Date:  April 25, 2000                S
          As Introduced:  February 25, 2000       FISCAL           B

                                                                       
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                                   DESCRIPTION
           
           Current law  requires oil refiners to report specified  
          information regarding their refinery inputs and outputs to  
          the California Energy Commission (CEC).

           Current law  requires major marketers, as defined, to report  
          on their petroleum product receipts, inventories, and  
          distributions to the CEC.

           Current law  requires the CEC to analyze that information  
          with regard to the nature of any fuel shortages and price  
          changes.

           This bill  requires refiners and major marketers to report  
          more specific data to the CEC, including imports and  
          exports of finished petroleum products, the destination of  
          their exports, and sales of unbranded gasoline.

                                    BACKGROUND
           
          The sponsor of this bill, the California Independent Oil  
          Marketers Association (CIOMA), believes that while the CEC  
          tracks  branded  gasoline prices and supplies, it doesn't  
          have the authority to track supplies and distribution of  
           unbranded  gasoline.  The CEC also has no authority to track  
          imports of gasoline and diesel fuel, nor can it require  










               refiners to disclose how much gasoline, diesel fuel, or  
               blend stocks they are shipping out of state.

               Current law charges the CEC with preparing a plan  
               specifying actions to be taken in the event of an impending  
               serious shortage of energy and with developing contingency  
               plans to deal with possible shortages of fuel supplies to  
               protect public health, safety, and welfare.  In an  
               emergency the CEC, pursuant to an executive order, can  
               order that fuel be made available to relieve a shortage.   
               For example, if there were a shortage of diesel fuel in the  
               Fresno area and such shortage meant that farmers could not  
               operate the necessary equipment to get their product to  
               market, the CEC could order one or more wholesalers of  
               diesel fuel to make supplies available in Fresno.  High  
               fuel prices, while being annoying and disruptive, don't  
               qualify as an emergency under the law.





































                                  KEY QUESTIONS  

          1.Should oil refiners and major marketers be required to  
            report more specific data to the CEC in the manner  
            proposed by this bill?

          2.Do the amendments to the intent section of the  
            Warren-Alquist State Energy Resources and Development Act  
            proposed by this bill conflict with the intent section as  
            a whole?
                                         
                                    COMMENTS
           
          1)  A More Complete Picture  . The author believes giving the  
            CEC the authority to track unbranded gasoline supplies,  
            imports, and exports is critical to helping the CEC  
            develop a full, complete, and effective contingency plan  
            to ensure sufficient supplies of gasoline and diesel are  
            available in an emergency.

          2)  Price Spikes  .  California's experience over the last  
            several years shows that any disruption in refinery  
            operations has a tendency to cause gasoline prices to  
            spike.  While some argue that the spikes are driven by  
            the inability of refiners to build new production  
            facilities and the inability to sell "non-California" gas  
            in the state, the reality is California motorists are  
            competing for gasoline with motorists in Nevada and  
            Arizona because gasoline produced by California  
            refineries is regularly sent to those states.  During  
            periods when the supply is adequate, that's a non-issue,  
            but when shortages develop, those exports probably  
            exacerbate the shortage and help drive up prices.  This  
            bill permits the CEC to track how much  
            California-produced gasoline is exported to other states  
            in an effort to give it a more complete picture of how  
            the state's gasoline market functions in the "real  
            world."

          3)  Overdependence vs. Adequate Supply  .  The bill adds  
            language to the intent section of the Warren-Alquist  
            State Energy Resources and Development Act stating it's  
            the policy of the state to ensure that emergency service  
            agencies, state and local government agencies,  
            agricultural consumers, and business consumers of  









                 petroleum products have adequate and economic supplies of  
                 fuel.  

                 Left out of this intent language are individual  
                 consumers, but even if individual consumers were to be  
                 added,  the author and Committee may wish to consider   
                 whether this portion of the bill actually conflicts with  
                 existing state law as it pertains to the state's energy  
                 policy.

                 That's because Public Resources Code 25000.5(a) states  
                 that an overdependence on petroleum-based fuels as an  
                 energy resource is a threat to the energy security of the  
                 state and that petroleum use as an energy resource  
                 contributes substantially to a number of public health  
                 problems. 

                 Public Resources Code 25000.5(b), which this bill  
                 proposes to amend, states it's the policy of the state to  
                 establish a state transportation energy policy that  
                 results in the least environmental and economic cost to  
                 the state.   The author and Committee may wish to consider   
                 whether adding language to this section, as this bill  
                 proposes to do, stating it's the policy of the state to  
                 ensure an adequate and economic supply of fuel runs  
                 counter to the intent of PRC 25000.5 as a whole.




























                                    POSITIONS
           
           SPONSOR:
           California Independent Oil Marketers Association
           
          SUPPORT:
           None on file

           OPPOSE:
           None on file

          
          Randy Chinn 
          SB 1962 Analysis
          Hearing Date:  April 25, 2000