Independent Fuel Future Critical for Arizona and Nevada, Officials and Industry say

Arizona and Nevada are taking steps to break away from a decades-long dependence on California fuel as the Golden State experiences refinery closures and becomes increasingly dependent on gasoline imports that can take weeks to secure and ship.

Phillips 66 said in the fourth quarter last year that its operations at its 156,0000 b/d Los Angeles refinery would be phased down by the end of 2025. Valero recently doubled down on plans to close its 150,000 b/d refining facility in Benicia by April 2026, but said it is committed to importing gasoline into California after the plant’s closure.

The two refineries account for 17.5% of the state’s refining capacity, according to data compiled by the California Energy Commission, and their closures have supply implications that span beyond the boundaries of California.

Being a major supplier of gasoline to both Arizona and Nevada, California provides 33% of Arizona’s and 88% of Nevada’s gasoline supply, according to analysis firm Stillwater Associates.

Local industry participants and government officials have said the push away from California is aimed at diversifying their fuel supplies to tackle the incoming turbulence in affordability in their states.

Looking at his state’s reliance on California, Nevada Gov. Joe Lombardo said in October he would propose a resolution to the Nevada Commission on Homeland Security for a Fuel Resiliency Subcommittee in its upcoming commission meeting.

The subcommittee would conduct assessments of Nevada’s current and projected fuel supply, explore options to expand infrastructure and recommend policies to increase emergency responses to fuel shortages. It would also coordinate with different government jurisdictions to expand permitting and address barriers to infrastructure projects.

“When we talk about 88% of Nevada’s fuel being reliant upon California, what we’re talking about is the lack of infrastructure that Nevada has and our direct relationship with California as we currently sit,” said Miranda Hoover, state executive of the Energy and Convenience Association of Nevada.

Along with having one refinery that is “very minuscule,” Hoover said Nevada receives its gasoline through three main sources: pipelines, rail systems and trucking. In terms of pipelines, the state relies on the UNEV pipeline that comes from Salt Lake City, Utah, and enters into Nevada on the northeast side, before shooting down into Las Vegas. It also utilizes Kinder Morgan’s SFPP North Line, which comes into the state on the west side and fuels the Reno area.

Nevada’s rail systems are usually utilized as a backup to pipelines. If a pipeline is experiencing issues in California, the state works with its rail partners to “rail in” fuel, Hoover said. Trucks are typically involved when bringing fuel from the railway line or the pipeline to gas stations.

Hoover added Nevada’s Clark County and Arizona’s Maricopa County are under fuel standards that are different from the rest of both states. Those fuel standards were adopted to ensure that they could accept fuel from California.

Hoover has been working with Lombardo on fuel affordability for the past four years. She said she has noted the California fuel standard and Nevada’s lack of infrastructure as factors that make collaborating with states like Texas “not as simple.”

“Without an executive order or other type of governor-level instruction, we wouldn’t be able to accept that oil because it does not fall within the standard that is currently allowed based on regulations for those counties,” Hoover said.

Hoover highlighted that a task force has been created under the Nevada Department of Homeland Security because of the state’s reliance on California hitting its military bases, which are “using fuel constantly.”

“It is a national security risk that these refineries are going down,” she said. “That is a very important point that I do want to emphasize.”

After losing six months of progress with a previous task force proposal from state Sen. Robin Titus being rejected in May, Hoover said the subcommittee is tackling the upcoming fuel supply shortages and subsequent price changes that industry experts have explained to the state.

“If nothing is done right now, next summer prices will start to go up. That is something that we do not want to see happen,” she said.

Companies have also taken notice of the supply changes in Nevada and Arizona.

Phillips 66 and Kinder Morgan are collaborating to build a 1,300 mile pipeline that would supply gasoline to California, Arizona and Nevada. Phillips 66 Chief Executive Officer Mark Lashier said in October that the project was proposed because of declining refining capacity in California and growing demand for fuel in Arizona and Nevada.

Hoover said the subcommittee will collaborate with private industry partners to expand the state’s long-term projects as it tackles the short-term supply changes. So far, she said the subcommittee has considered the new Western Gateway pipeline, which would reverse fuel flow to allow more products to move into Las Vegas and HF Sinclair’s proposed expansion to build a new fuel pipeline lateral from Salt Lake City to Reno to boost supply.

The subcommittee is also exploring regulatory powers available to the state in instances of emergency, which, though temporary, would allow collaboration with Texas for gasoline supply.

“It’s not like we’re over here just rolling the dice to see what happens,” Hoover said. “I think we are a really strong bet that building a new pipeline, expanding a pipeline, even putting in a new rail spur is going to be successful.”

With a 33% fuel reliance on California, Arizona Gov. Katie Hobbs signed an executive order in September that established the Arizona Energy Promise Task Force to analyze the state’s transportation fuel affordability and its opportunities to plan for EV adoption, among other initiatives.

Blaise Caudill, the Deputy Director for the Governor’s Office of Resiliency, said the task force had its first meeting in November. He said multiple reports, including the energy strategic plan and the energy affordability report, are due by March 1.

“One of the core tenants of the executive order and the work of the task force is to identify frameworks and policy solutions to help address affordability,” Caudill said.

With multiple industries, regulatory authorities and consumer organizations involved, Caudill said that Hobbs, with the executive order and task force, is focused on a clean energy economy in Arizona delivering on affordable and reliable energy through Arizona solutions while learning from best practices in states across the nation.

“Not necessarily just neighboring states, but really best practices across the country,” Caudill added. “We also are wanting to prioritize Arizona solutions, making sure that we’re delivering on affordable energy for Arizonans.”

Josh Umar, executive director at the Arizona Petroleum Marketers Association, said his honest take on the executive order was that it viewed transportation fuel “as a little bit of an afterthought in comparison to what we’re seeing out of some of our neighboring states.”

Umar said 33% of the state’s gasoline and about 50% of diesel comes from California. With California’s refinery closures and no existing plans for a refinery in Arizona, Umar added that the state “can’t afford to just sit back and have everything dictated to us by other states.”

“I don’t think independence is a feasible goal,” Umar said, “but I think a broader interdependence is reasonable, including ideas that are coming down the pipeline for broader networks of distribution.”

The broader interdependence in U.S. West Coast fuel supply is present in new pipeline projects championing Arizona as a major recipient of refined products. The Western Gateway Pipeline project would bring an additional 200,000 b/d of refined products into Arizona, which is about half of the refined products running through the proposed line.

With completion dates of 2028 and beyond for the pipeline projects planned to impact Arizona, Jess Miller, board member of APMA and CEO at Miller Oil, said none of these projects “have any real traction.”

“We’re going to lose the refineries next year. So we’re going to have a year and a half or two years of backfilling these markets,” Miller said. “What does that mean? Those markets are probably going to have some additional costs and we know the resiliency of the oil industries, they’re going to find a way to supply those markets.”

As of Dec. 4, Miller said Arizona was “a little oversupplied.” Reflecting on the state’s past 24 to 36 months, he said Arizona’s fuel supply has been “pretty balanced.”

“We haven’t been in a position where we’re having to chase barrels in other markets because there were none here,” he said. “If there was any shortness or tightness, it would have been the Las Vegas market.”

With a company that he considered “a lot smaller” than refiners like Marathon, Miller said the state’s fuel market is facing downward pressure in the immediate future, which means they will have no appetite for storing or hedging additional variables now or later in 2026.

Miller added that California’s energy policies have bled into Arizona for the last decade.

“Now is the time to open our eyes and realize that California policy has been an absolute onslaught on the fossil fuel industry and that we need to stop absorbing a lot of those policies,” Miller said.

With subject matter experts in the task force meeting more often, Caudill said the challenge and subsequent opportunity is navigating the “numerous stakeholders and jurisdictions that exist in energy policy in the state of Arizona.”

He said a “massive win” for the task force in its first year would be to build the political will necessary to deliver frameworks and policies that make up the state’s energy infrastructure.

“Our door is open,” Caudill said, “and we are very much willing and wanting to continue our partnerships that we’ve established over the past few years to deliver on those solutions that Arizonans are needing.”

Reporting by Shaheer Naveed, snaveed@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com