Lombardo letter warns California law could drive gas prices higher in Nevada, Arizona

LAS VEGAS (KLAS) — Gov. Joe Lombardo is sounding the alarm on a California law that could have a major impact on gas prices in Nevada.

In a letter to California Gov. Gavin Newsom, Lombardo warns that any profits cap that are put in place as SBX1-2 is implemented raise the chance that refiners might cut gasoline supplies to California — and that would reduce the flow to Arizona and Nevada. Both states rely on fuel that comes through California.

SBX1-2 is known as the California Gas Price Gouging and Transparency Law.

“Since 88 percent of Nevada’s fuels are delivered via pipeline and truck from refineries in California, it’s no surprise that California’s fuel policies significantly impact the costs and availability of fuel for Nevada’s residents and businesses,” Lombardo wrote.

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“As my administration has followed this issue, it seems that the new state agency the legislation created is getting closer to announcing a profits cap structure. While we have no details on what this might look like, I’m concerned that this approach could lead to refiners either constraining supplies of fuels to avoid a profit penalty or even leaving our shared fuels market entirely. Either scenario would likely lead to limited supplies and higher fuel costs for consumers in both of our states,” the letter said.

“Should this happen, I am sure Californians and Nevadans would share a demand for answers and relief from higher fuel costs and the impacts those costs could have across the economy,” Lombardo said.

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Lombardo’s letter was released ahead of the California State Assembly Utilities & Energy Committee hearing on Wednesday. The California Energy Commission will update the committee on the implementation of SBX1-2, regulatory legislation that was rushed into law in March of 2023.

SBX1-2 has already prompted a lawsuit filed in March by the California Fuels & Convenience Alliance.

“Before proceeding with a profits cap, I would request an assessment of potential impacts of this approach across the West, including not only California, but Nevada and Arizona too,” Lombardo wrote. “To assist with this, my Office of Energy stands ready to immediately engage in proactive conversations with the California Energy Commission.”

Lombardo said he hoped the states could “mitigate unintended consequences” to make sure residents of both California and Nevada didn’t go through prices that could go even higher.

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