CIPA Sounds Alarm: A Major Warning to the State Energy Commission About an Impending Fuel-Market Crisis

California’s energy system is standing on a cliff’s edge and this week CIPA delivered the blunt truth straight to the California Energy Commission’s doorstep. In a sweeping, meticulously documented, and urgent letter to CEC Vice Chair Siva Gunda, CIPA made clear that the state is now within weeks of a cascading failure – one that could cripple refining capacity, shutter the last remaining crude pipeline into Northern California, and set off fuel-price shockwaves that would rattle every household and business in the state.

The letter, authored by CIPA CEO Rock Zierman, warns that the dismantling of the Valero Benicia refinery and the idling of the San Pablo Bay (SPB) Pipeline are not isolated events. They are the latest dominos in a chain reaction the state will not be able to reverse. If both fall, California loses a refinery, loses a pipeline, loses access to Kern County crude, and becomes fully dependent on foreign imports carried in by supertankers exempt from every California environmental rule.

That is not a transition. That is a collapse.

CIPA put the Commission on notice: without immediate intervention, the fuel-supply system will buckle. The letter lists the following urgent actions:

• Stop the dismantling of the Valero Benicia refinery. Once torn apart, it is gone forever.

• Stabilize the San Pablo Bay Pipeline. It is losing millions of dollars monthly and was officially idled December 1.

• Restore routine well maintenance inside Health Protection Zones. SB 1137 is accelerating production collapse by blocking basic upkeep.

• Fix AB 1167’s broken bonding scheme. For two years, not a single oil-asset sale has occurred in California, an unprecedented freeze.

• Lift the illegal ban on well-stimulation treatments (WST). California’s own Attorney General and Lawrence Livermore National Laboratory (LLNL) declared them safe under the SB 4 program.

• Prevent counties from banning duly-permitted oil production. Los Angeles and Santa Barbara are moving toward local bans that would shred statewide energy stability.

California once operated over 40 refineries. Today there are nine left. By 2026, with Phillips 66 and Valero Benicia gone, one-fifth of the remaining capacity disappears, taking 6.2 million gallons per day of in-state production off the table.

Academic research cited in the letter confirms refinery capacity has already fallen 21 percent since 2023, a catastrophic rate of decline. When a refinery shutters:

• Supply tightens

• Fuel prices spike

• Market competition collapses, and

• The state becomes dependent on foreign imports.

Valero Benicia is not “one refinery;” it is Northern California’s anchor refinery. Losing it means the region becomes exposed, volatile, and structurally undefended against market shocks.

The San Pablo Bay Pipeline is the final surviving route carrying Kern County crude to Bay Area refineries. Without it, the only options are trucks, trains, or foreign tankers. All are dirtier, costlier, and riskier.

The pipeline already faces multi-million-dollar losses each month. According to the Silvi–Rector–Mische study, the line needs 90,000 barrels per day minimum to stay alive. If Valero closes, throughput plunges below that, and the line becomes unviable.

That means:

• No pipeline → No refineries

• No refineries → No market for California crude

• No market → Production drops even further.

This would be a total system crash.

CIPA’s letter warns: “The combined loss would create a statewide fuel-supply crisis.”

Inside Health Protection Zones (HPZ), which encompass 24 percent of existing production, operators cannot get approvals for routine maintenance. The result? Wells decline faster. Entire fields shrink.

And the irony isn’t subtle:

• The refinery producing 80 percent of California’s transformer oil, which is critical for grid stability, is inside an HPZ.

• The field feeding that refinery is also inside an HPZ.

• As production declines, California risks shortages of transformer oil, which is a product made in only four U.S. refineries.

The governor himself warned explicitly that AB 1167 could freeze asset transfers and increase the risk of well desertion. He was right.

In 2024 and 2025, not one single well was bought or sold. Not one.

This has never happened in California history. Two full years without asset transactions would be a national crisis in any other industry.

Fixing AB 1167 is not optional; it is existential.

California’s ban on well-stimulation treatments wasn’t passed by the Legislature. It was imposed unilaterally despite:

• SB 4 creating the most rigorous WST regulatory program in the nation

• LLNL confirming WST could be done safely, and

• Then–Attorney General Kamala Harris declaring the anti-WST petition “factually inaccurate” and “legally flawed.”

Even Governor Newsom said in 2019 he lacked the legal authority to impose a ban, yet then directed regulators to do it anyway in 2021.

If California wants to “unleash Kern County,” it must stop illegally tying its hands.

CIPA stands ready to help assemble the “stabilization package” the state desperately needs. The question now is whether California’s leadership will take the warning seriously, or whether the state will continue drifting toward an energy crisis it built with its own policies.

One thing is certain: CIPA has put the truth squarely on the record. And the Commission cannot claim it wasn’t warned.