Nevada, Arizona governors urge Newsom to rethink his oil refiner proposal

SACRAMENTO, California — The governors of Arizona and Nevada urged California Gov. Gavin Newsom in a letter Tuesday not to rush to impose new storage requirements on California oil refiners, raising concerns the requirements could raise costs in their states.

The letter from Nevada Gov. Joe Lombardo, a Republican, and Arizona Gov. Katie Hobbs, a Democrat, came in response to a Newsom-backed Assembly proposal , that would give the California Energy Commission authority to require refiners to store more gas to try to prevent price spikes caused by shortages.

Newsom called a special session of the Legislature on Aug. 31 to consider the proposal after the Legislature balked at passing it in the last days of the regular session.

The letter raises the political stakes for Newsom’s bid to address gas price spikes that occurred in the last two years amid a presidential election in which California’s high gas prices could be used as a line of attack on state Democrats.

The governors of the neighboring states, which get a significant portion of their gas from California refineries, said they were concerned that “mandating refinery inventory would directly raise the cost of fuel for all of our constituencies and create further economic instability in the region.”

They cited refiner concerns that the requirements could induce shortages by keeping supply off the market to maintain the reserves. They also quoted a California Energy Commission letter that said a supply requirement came with the potential for shortages.

“The people of Nevada and Arizona shouldn’t have to foot the bill for California’s misguided policies,” Lombardo said on X.

"Arizonans are struggling with the high cost of living, we can’t afford yet another price hike," Hobbs said on the site.

Newsom has been focused on gas prices since the fall of 2022, when California prices reached an average $6.44 per gallon. He called a special session that December that resulted in a law that directed the CEC to analyze gas prices and consider capping refiners’ profits.

The agency suggested the idea of new supply requirements in January of this year, along with suggesting new regulations on oil spot markets where prices are set.

Most of California’s Assembly Democratic Caucus saw the language for the first time two weeks ago, with just days left to pass it. Moderates balked at the timeframe, raising concerns about unintended consequences, leading to Newsom’s decision to call another special session — an idea Assembly Speaker Robert Rivas supported but Senate President Pro Tem Mike McGuire did not.

Nevada’s Lombardo already raised concerns back in May about the CEC’s potential regulations, provoking a sharp response from Newsom, whose spokesperson called it a “stunt” to appease “Big Oil donors.”

The concerns from a Democratic governor in Hobbs could be more complicated for Newsom to address. The governor’s office did not immediately respond to a request for comment.

The first hearing of the special session is scheduled for Sept. 18.