California Regulators Step In to Prevent Crude Pipeline Shutdown

State regulators stepped in to prevent a crude oil pipeline shutdown, a move that could shape near-term operations and future oversight.

(P&GJ) — California regulators have approved emergency interim rate relief for Crimson Utilities’ San Pablo Bay crude oil pipeline system, allowing a nearly 60% increase in shipping rates to prevent a potential suspension of pipeline operations, according to a draft resolution issued by the California Public Utilities Commission (CPUC).

The resolution authorizes Crimson Utilities — San Pablo Bay Pipeline Company LLC and Crimson California Pipeline LP — to raise interim transportation rates on the SPB-KLM system to $3.7527 per barrel, effective August 1, 2025, subject to refund. Regulators concluded the increase is necessary to address sustained volume declines that have left the pipeline with negative operating cash flow and, at times, zero nominations.

The SPB-KLM system is a 373-mile intrastate crude oil pipeline that transports crude from California’s San Joaquin Valley to refineries in the San Francisco Bay Area. CPUC staff found that declining throughput — including months where nominations dropped to zero — threatened the pipeline’s continued operation absent immediate relief.

“As reflected in the data provided, Crimson reported that nominations for the SPB-KLM pipeline for December 2025 were zero and that continued operation of the system without interim rate relief would not be financially sustainable,” the resolution states.

Regulators warned that suspending operations could disrupt crude movements across California, force greater reliance on trucking or waterborne transport, and introduce additional environmental and safety risks. The commission also noted that the SPB-KLM line plays a critical role when other crude pipelines experience outages.

Chevron Products Company and Valero Marketing and Supply Company protested the request, arguing the increase exceeded statutory limits and should be resolved through formal hearings. Crimson countered that California law does not restrict the commission’s authority to approve interim rate relief above 10% when circumstances warrant immediate action.

“The Commission has statutory authority to approve emergency rate relief for oil pipeline corporations in excess of 10 percent per year where, in the Commission’s discretion, circumstances warrant such relief,” the resolution concluded.

The CPUC emphasized that the rate increase is interim only, with final rates and any refunds to be determined in Crimson’s pending general rate case. As a condition of approval, Crimson must secure a letter of credit to protect shippers in the event refunds are required.