Regulatory requirements in California refining operations are increasingly influencing planning decisions — a new framework is emerging for how refineries plan their long-term viability. For decades, California’s refining sector has operated under a more complex regulatory structure than most other U.S. states. Over the past decade or so, this regulatory framework has become even tighter, changing how refineries are operated and how companies think about their long-term viability.
Legislative focus on refinery closures and accountability
Recent legislation passed by the California Senate provides examples of how regulatory requirements will increasingly be a key factor in the decision-making process within the refining sector.
On February 26, 2026, California State Senator Catherine Blakespear (D-Solana Beach) introduced Senate Bill No. 1259. This bill was created after a review by the California State Senate Environmental Quality Committee on the impacts of refinery closures. The legislation intends to require that refineries give notice of planned decommissioning, including the estimated cost of cleanup and remediation, and the long-term obligations associated with closing the facility.
As part of the proposed legislation, the State Water Resources Control Board is to develop standardized guidelines for estimating the costs of cleanup and closure. Based upon the development of these standardized guidelines, refiners will need to file reports using the new guidelines. These reports will provide regulators and local communities with more information about the possible environmental and financial impacts of refinery closures at an earlier date. As such, while presented as a measure of transparency, the proposed legislation illustrates the increasing extent of regulatory oversight of long-term exit planning from refineries.
California’s refining sector is under continued regulatory pressure
The California refining sector has been consolidating for many decades. There were approximately 50 refineries in operation in the early 1980s. Today, there are only seven major refineries that are still in operation. The recent closure of a refinery in Los Angeles and the announced closure of another in Benicia have increased concern about the ability of California to maintain a reliable fuel supply, and the potential disruptions to the workforces of refineries and the liability associated with aging infrastructure.
During a recent hearing of the California Senate Committee on business, professions and economic development, California Energy Commission Vice Chairman Siva Gunda testified that refinery closures are not single-event occurrences.
The closure of a single refinery can result in the removal of a significant percentage of in-state fuel production. The loss of a single refinery could create fuel supply problems at a time when fuel demand has not yet declined to pre-pandemic levels.
Expanded obligations go beyond daily operations
SB 1259 represents another regulatory requirement imposed on refinery operations. Other regulatory requirements include fuel inventory mandates and emissions standards. Most recently, the legislature empowered regulators to establish minimum inventory levels to stabilize prices. The combination of these regulatory requirements increases the complexity of compliance for the remaining refineries in the state.
Together, these regulations represent a regulatory environment in which refiners must plan not only for compliance with regulatory requirements during normal operations, but also for decommissioning, remediation, and post-closure land use. By requiring advanced disclosure of costs, the state is shifting the risk and timing of these costs further into the future, and thereby influencing capital allocation decisions years before facilities are scheduled to close.
The California Senate’s interest in refinery transparency and closure planning represents another expansion of regulatory constraints
Although the measures themselves are procedural in nature, they will collectively affect the investment decisions, maintenance planning, and long-term viability of California’s remaining refineries in what is arguably one of the most heavily regulated fuel markets in the United States.
