California faces refinery closures, high fuel costs, and reduced oil demand, the combination of which have contributed to concerns regarding potential impacts on price volatility. SB 237 seeks to boost in-state oil production safely, utilize idle pipelines, increase financial transparency, and streamline the process of acquiring drilling approvals in Kern County. It also directs the state to explore ways to lower fuel costs and adopt strategies for the medium and long-term consistent with California Energy Commission (CEC) guidance. The governor signed this bill Sept. 19, 2025, as part of his year-end climate and energy package.
California Oil Production Decline and Supply Challenges
California’s reliance on crude oil has declined since the 1980s, in-state petroleum production has been declining since 1985, two of the states’ oil refineries have recently announced closures, and the state, which requires a unique formulation of gasoline (California Reformulated Gasoline, or CaRFG) that is primarily produced by California refineries, continues to depend heavily on imported crude oil. While several refineries rely on pipelines connected to in-state oil fields, declining production reduces the economic viability of those pipelines. To address supply challenges, this bill includes provisions related to restoring pipelines for offshore production in the Santa Ynez Unit and deeming Kern County’s Second Supplemental Recirculated Environmental Impact Report (SSREIR) approved, which would facilitate additional in-state oil development. Pipeline operators are already subject to state and federal safety requirements, including hydrostatic testing, and facilities must demonstrate financial capacity to cover the cost of worst-case oil spills through certifications the Office of Oil Spill Prevention and Response (OSPR) issues.
Kern County has spent more than a decade revising its zoning ordinance and related environmental review for oil and gas permitting, with ongoing litigation leading to repeated supplemental environmental impact reports, the latest of which remains under challenge. At the same time, the CEC has emphasized the need for policies to stabilize the transportation fuel supply during the state’s clean energy transition. In June 2025, the CEC recommended pursuing strategies to stabilize fuel imports and refining capacity, provide industry with confidence to invest in infrastructure, and develop a comprehensive long-term transportation fuels transition plan.
California Oil and Gas Regulatory Framework and Environmental Requirements
Existing law establishes a framework for state oversight of energy resources, oil and gas production, and environmental protection. The CEC is charged with monitoring statewide energy trends, including fuel supply and demand. The California Geologic Energy Management Division (CalGEM) oversees the drilling, operation, maintenance, and removal of oil and gas wells. The Office of the State Fire Marshal is responsible for adopting hazardous liquid pipeline safety regulations consistent with federal law, while the OSPR, housed within the Department of Fish and Wildlife, serves as the state’s lead regulator for oil spill prevention and response.
In addition, the California Environmental Quality Act (CEQA) requires state and local agencies to evaluate and disclose the environmental impacts of proposed projects through the preparation of a negative declaration, mitigated negative declaration, or environmental impact report, unless an exemption applies. CEQA also authorizes the preparation of a Program Environmental Impact Report to evaluate the cumulative impacts of a series of related actions under a single, programmatic review. At the same time, the state has implemented a Low Carbon Fuel Standard and zero emission tailpipe standards (which are currently the subject of litigation related to revocation of the state’s Clean Air Act Waiver under the Congressional Review Act) to reduce the life cycle emissions associated with in-state transportation.
SB 237 Key Provisions: Kern County Drilling Permits and Pipeline Safety Requirements
SB 237 adopts the following provisionswith a goal of safely boosting in-state oil production, increasing utilization of existing idle pipelines, increasing financial transparency, and streamlining the process of acquiring drilling approvals in Kern County.
- Allows up to 2,000 permits each year for drilling in Kern County—making CalGEM the lead agency for projects under this division, and contains a 10-year sunset on provisions that specify that the SSREIR is sufficient, complete, and not subject to lawsuits for new drilling.
- Requires the OSPR to solicit feedback on and periodically update its worst-case scenario spill volumes.
- Requires any existing oil pipeline that is six inches or larger that has been idle, inactive, or out of service for five years or more not be restarted without passing a spike hydrostatic testing program.
- Allows the governor, under certain circumstances, to suspend California’s “summer blend” gasoline requirement, which contributes less smog but is more expensive, to protect against extreme gasoline price increases.
- Requires the CEC, in its next Transportation Fuels Assessment, to study the costs and supply impacts of gasoline that is not California’s standard blend. The study may also include recommendations on whether and how using this type of gasoline may benefit the state.
- Requires the State Energy Resources Conservation and Development Commission to convene a working group to ensure reliable, equitable, yet safe results of this transition.
These changes are intended to eliminate legal and regulatory uncertainty and create new opportunities for developers seeking to permit new production facilities in Kern County.
* Special thanks to Law Clerk/JD Julia Lopez˘ for contributing to this GT Alert.
˘ Not admitted to the practice of law.