Gov. Gavin Newsom (D-CA) is easing his stance on the oil industry as his state suffers high gas prices and refinery closures, while also positioning himself as a presidential candidate in 2028.
Last week, Newsom signed into law a sweeping climate and energy legislative package addressing several key initiatives, including approving new oil drilling to help reverse the decline in state oil production.
The legislation represents a departure from the course Newsom has taken in recent years to impose stricter regulations on the oil industry. For instance, Newsom has phased out new permits for fracking in the state by 2024 and called on the California Air Resources Board to analyze how to phase out all oil extraction by 2045. He also signed legislation that restricts oil and gas operations from occurring near schools, daycares, and other sensitive communities.
Most notably, in 2023, Newsom signed into law a price cap on gasoline refineries for the next five years, claiming the industry was engaged in price-gouging. The rule would allow the California Energy Commission to cap oil profits and issue fines if refineries exceed it. Earlier this month, though, the commission put the rule on hold amid the drop in oil production in the state. The state also implemented stricter vehicle emission standards to usher out gas vehicles in favor of electric vehicles, but the Trump administration has since rolled back these standards.
“Our state of mind is firmly planted on the application, the implementation, and that includes a balanced approach in this context,” Newsom said during the signing ceremony on Friday. “This is not an ideological endeavor. We’re in the practical application business.”
The legislative package included a measure to streamline the permitting process for 2,000 new oil wells per year in Kern County to help stabilize the supply. Kern County plays a significant role in the state’s energy production, providing energy from fossil fuels and renewable sources.
Lorelei Oviatt, a former director of the Kern County Planning and Natural Resources Department, told the Washington Examiner that “Kern County is the center of energy” in California.
“Not only do we produce 70% of the wind and solar, and 80% of the battery storage. Not only do we keep the lights on in California, but we also produce 80% – when we can get permits – we produce 80% of the oil and almost 90% of the natural gas,” said Oviatt, who was involved in developing the measure.
Oviatt said the country has lacked permits over the past three years. She explained that, while oil companies sought to obtain permits in the county and undergo environmental reviews, they would often become entangled in ongoing lawsuits.
“The state has gotten caught in its own policies, caught its own environmental issues with the California Environmental Quality Act,” she said. The California Environmental Quality Act is a state law that requires public agencies to identify the environmental effects of a proposed project before approving it.
“It’s not only decimated our ability to provide in-state oil, but it’s decimated the economy of Kern County,” she said.
However, Oviatt said the state is now experiencing a “re-examination” of policy.
The measure, which she helped develop, streamlines the permitting process for new oil drilling in Kern County. Oil companies will also be protected from litigation for 10 years, through 2035, with the issuance of 2,000 new permits per year in the county.
Oviatt said that, although the measure accelerates the permitting process, it still protects the environment.
“This isn’t a shortcut. This doesn’t take away environmental effects, environmental mitigation measures,” Oviatt said.
State Sen. Shannon Grove (R-Bakersfield) told the Washington Examiner the measure is the “step in the right direction.” She noted that, today, California imports oil from other countries with poor environmental regulations and standards.
According to the Energy Information Administration, California’s refineries have increased their supply of crude oil from abroad, including from Iraq, Brazil, Guyana, and Ecuador, which supplied almost two-thirds of the crude oil refined in the state in 2024.
Grove said that when oil companies drill in Kern County, they adhere to the state’s environmental standards. “Why would we not want to produce [oil] in a California-compliant way?” she asked.
Western States Petroleum Association President and CEO Jodie Muller told the Washington Examiner that the resolution helped avoid a worst-case scenario of a pipeline closure, which could have led to a refinery shutdown, fuel shortages, and price volatility.
She said, though, that the measure might be insufficient to address California’s price problems. “It was not enough to really give all the assurances that the investors have said they need to continue to restore confidence in the market,” she said.
“It is hard to do business in the State of California,” Muller said. “We have to address the fact that we’ve done a little bit, and we’ve made some small progress, but more needs to be done.”
The measure comes as oil companies are planning to leave California due to challenges in doing business in a heavily regulated state.
Valero Energy announced plans to end operations at its San Francisco-area refinery earlier this year by next April. Phillips 66 also announced last year that it would end operations at its oil refinery in Los Angeles. The refinery is set to close at the end of the year.
Gas prices in California are typically higher than those in the rest of the country, which has been attributed to oil companies leaving the state. The average price of gas in California is about $4.66, compared to the nation’s average of $3.17.
NEWSOM SIGNS LEGISLATION THAT WOULD BOOST OIL PRODUCTION
Oviatt said the legislation signals a shift in how the state engages with the oil industry.
She said the legislative package represents “new dialogue” between the state and the oil industry.
“We never had this conversation with Sacramento … mostly we just throw sound bites at each other. That’s what it’s been for the last few years – the oil industry and the state of California,” she said.
“Kern County is very interested in this new relationship with Sacramento, but frankly, with the oil industry and investors, we need to see more,” Oviatt added. “We’re not sure this goes far enough, but this is just the first step.”
