California Law Opens Pathway for New Kern Drilling as Refinery Capacity Declines
In less than six weeks, California’s oil and gas permitting has already outpaced the entirety of 2025. The sudden acceleration follows the Jan. 1 implementation of Senate Bill 237.
Signed in September 2025, the law aims to stabilize in-state energy supplies as California faces significant refinery closures and a production decline that has outpaced the drop in fuel demand.
Thirty-two new drilling permits have been issued so far this year, surpassing the 17 total permits granted in 2025, according to CalGEM/Wellstar data. The acceleration marks a sharp reversal of a years-long downward trend. In 2024, the state issued 73 permits, a number that plummeted to 17 in 2025.
Of these new approvals, Aera Energy leads with 10 permits, followed by Sentinel Peak Resources (9), Chevron (6), California Resources Production Corp. (6), and Pacific Gas & Electric Co. (1).
SB 237 streamlines the process by allowing up to 2,000 new drilling notices per year in Kern County based on its supplemental environmental impact report, a limit that can be exceeded only if the California Energy Commission determines more permits are required to supply 25% of the state’s refinery feedstock.
Legislative documents also note that setback limits in 3,200-foot health protection zones remain in force and that operations in those zones are excluded from reliance on Kern’s programmatic environmental review.
CalGEM and the Department of Conservation reported that the law clarifies roles by treating Kern County as the lead agency for most local production approvals while preserving CalGEM’s independent obligations under statewide oil and gas regulations.
Bill text and committee reports add that the measure requires updated spill-prevention standards, including periodic review of “reasonable worst case” spill volumes and public posting of financial responsibility data for covered facilities by the Office of Spill Prevention and Response.
The statute further bars restarting large idle oil pipelines without spike hydrostatic testing that meets State Fire Marshal requirements, with test parameters and results to be posted on the agency’s website.
A 2025 California Energy Commission response to the governor notes that in-state petroleum refining capacity is declining faster than gasoline demand and warns that abrupt refinery exits can create a risk of severe price spikes without a managed transition plan.
The planned shutdown at the Philips 66 Los Angeles refinery and Valero’s Benicia refinery will remove roughly 20% of the refinery capacity in the region, OPIS previously reported.
Legislative and legal summaries state that SB 237 also authorizes the governor, in consultation with air and energy regulators, to temporarily suspend California’s low RVP “summer-blend” gasoline requirement when sharp price increases are identified, subject to specific findings.
Lawmakers and local officials in Kern County had said the bill is expected to “jump-start oil production” in the county and provide a clearer permitting path for operators tied into California refineries.
Policy analyses indicate that the actual effect on future gasoline and diesel production will depend on how many permits are issued under the 2,000-per-year ceiling, the performance of new wells and the pace of refinery closures and conversions over the coming decade.