Supreme Court Ruling Opens Door to Challenge California Emissions Policies — Implications for Refinery Viability and the Importance of In-State Crude Production

In a decision with potentially far-reaching implications for California’s energy and environmental policy landscape, the U.S. Supreme Court ruled on Friday that oil and ethanol companies, including Diamond Alternative Energy, a subsidiary of Valero Energy, have standing to challenge California’s longstanding waiver under the Clean Air Act.

The waiver, originally granted in 1967 and reinstated by the Biden administration in 2022, allows California to impose vehicle emissions and zero-emission vehicle (ZEV) standards that are stricter than federal regulations. The 7-2 ruling does not overturn the waiver outright but allows litigation against its constitutionality and implementation to proceed.

This development lands at a particularly sensitive moment in Sacramento. The administration and legislative leadership have become increasingly concerned about the state’s vulnerability to another refinery closure. With California already facing historically high fuel prices and struggling with refinery capacity constraints, any additional financial or regulatory pressure on in-state refining assets could have severe consequences for affordability and energy reliability. Lawmakers in the democrat supermajority are growing wary of policy decisions that risk exacerbating fuel supply shortages or driving up consumer costs.

Affordability has become the defining issue in California’s energy politics. In recent months, bipartisan concern has emerged over the direct link between the state’s aggressive climate mandates, including the ZEV targets, and rising costs for working families and businesses. With inflationary pressures and public skepticism mounting, political leaders are recognizing the need to calibrate climate goals with economic realities. This shift in tone is particularly noteworthy as California considers how to maintain its refinery fleet, which remains vital to regional fuel stability and employment.

The Supreme Court’s decision, by enabling legal scrutiny of California’s Clean Air Act waiver, could delay or undermine the enforcement of ZEV mandates that would require a rapid transition away from gasoline-powered vehicles – but to what, no one knows. While environmental advocates see this as a setback for climate action, the oil production and refining sectors see it as an opportunity to highlight the importance of maintaining in-state energy infrastructure. As California barrels toward a future unknown, with a transition lacking a transition plan, there is a growing acknowledgment that a stable transition must not come at the expense of affordability and supply security.

CIPA has long maintained that California’s in-state crude oil production and refining capacity provide environmental advantages over alternatives that are too often overlooked by regulators. Crude oil produced within California is processed close to where it is extracted, significantly reducing transportation emissions. In contrast, imported crude, particularly from countries with weaker environmental oversight, is delivered by supertankers burning high-emission bunker fuel across thousands of miles of ocean. This importation not only undermines California’s climate goals but also increases fuel costs due to logistical expenses and international market volatility.

The environmental and economic benefits of local production are clear: refining California crude in state results in lower lifecycle greenhouse gas emissions, creates high-paying local jobs, and insulates consumers from the price shocks of global crude markets. Yet California’s regulatory framework continues to discourage local production through permit delays, legal uncertainty, and aggressive policy targets. This creates a paradox, California is importing more foreign crude to comply with climate mandates, while simultaneously restricting the production of the very resource that offers the cleanest, most affordable and secure supply chain.

As the legal battles over the emissions waiver unfold, CIPA will continue to advocate for a balanced energy strategy that recognizes the role of domestic production and refining in meeting both climate and economic goals. The state cannot afford to lose another refinery, nor can it sustain a transition built on unstable, expensive, and carbon-intensive imports. The Supreme Court’s ruling is a reminder that regulatory overreach can, and often does, trigger legitimate constitutional and economic questions.

In the months ahead, CIPA will engage with policymakers, regulators, and the courts to ensure that any emissions strategy protects Californians from unaffordable energy, maintains refinery operations, and acknowledges the indispensable value of California-produced oil.