Chronicle: Chronicle: Newsom promised to punish ‘Big Oil’ for profit, but so far it’s just talk

SACRAMENTO—

Since early fall, Governor Gavin Newsom has been loud and adamant about punishing “greedy big oil” for its “windfall” profits. But talking is cheap. He still hasn’t produced a detailed plan.

And the legislature, which must approve any plan, has shown little enthusiasm.

Newsom dramatically called a special session of the Legislature in early December to slap the oil companies with a windfall tax. The word “T” was eventually replaced with “penalty” to make it sound more like a fee.

A tax would require a two-thirds majority legislative vote, which would be virtually impossible to obtain. Regardless of their supermajority and liberal leanings, even blue California Democratic lawmakers are wary of anything labeled a tax hike.

A fee – called a “civil penalty” in this case – simply requires a simple majority vote.

A bill, SB 2, was introduced by Sen. Nancy Skinner (D-Berkeley). It currently contains only language denouncing the oil industry and expressing the legislature’s intention to give the state Energy Commission greater regulatory authority over refineries and the ability to fine them. for excessive profits.

Under the bill, the state would establish an annual profit cap — a “maximum gasoline refining gross margin.” Refineries that exceed it would be hit with a “civil penalty”. The money would go into a “price gouging penalty fund” and be “reimbursed” to California residents, presumably including people who don’t own a vehicle.

That’s about all we know.

The purpose of a special session – usually held at the same time as a regular session – is to cut corners and speed up action on legislation. But there hasn’t even been a committee hearing on SB 2. The Senate Energy, Utilities and Communications Committee, however, intends to hold its first hearing in a week or two.

Hopefully by then Newsom will have a specific plan in place – he promised this a month ago – and Skinner will have added some details to his bill. But don’t count on it.

Neither the governor nor the legislature rushed into it, despite Newsom’s speech.

“While Californians were being ripped off at the pumps last year, Big Oil’s bottom line soared to levels never seen before in history – making record profits on the backs of hard-working families,” said Newsom in a recent statement after oil companies reported making more money than ever in 2022.

“They rip you off. That’s why, together with the legislature, we’re going to enact a price gouging penalty to hold Big Oil accountable.

If they know how.

The inaction is not because the legislature is beholden to the oil industry for political favors, although some lawmakers no doubt are. That’s because neither the governor nor any legislator has figured out exactly how to punish the industry.

How do you determine what is excessive profit?

How much do you penalize profiteers?

It may be called a “penalty”, but how do you design it so the courts don’t see it as a tax?

What’s stopping gas stations from raising prices at the pump anyway? They would not be penalized.

Is it really a good idea to tell a company how much profit it can make? A utility, OK. The government grants it a monopoly. But the oil companies compete with each other. If we penalize them, when will we start taxing the windfall profits of pharmaceutical companies?

Newsom’s aides met with Democratic lawmakers in a bid to agree on a plan. Staff members solicited ideas from lawmakers with little success. Legislators have listened but are uninspired, I am told.

This, after all, was not their idea in the first place. He was thrown to them by Newsom.

“The Governor has done a good job reaching out to the Senate. Its staff is very engaged,” said Sen. Anthony Portantino (D-Burbank), chairman of the appropriations committee that will eventually review the bill.

“But I don’t think the Governor has landed yet. It hasn’t been one of those things where the governor walks into the room and says, “Take it or leave it.”

Assembly Appropriations Committee Chairman Chris Holden (D-Pasadena) said, “As far as the chatter around the issue goes, it’s not there. It hasn’t reached anyone’s consciousness at this point.

It refers to legislators. There is a lot of talk in the oil industry. He runs an all-out opposition campaign, hires political consultants and airs television ads.

Meanwhile, Newsom faces a potential new hurdle besides the legislature and the inevitable lawsuits in his bid to punish oil profiteers. It is an anti-tax initiative that qualified last week for the 2024 ballot.

If passed, the measure will require voter approval for any state tax increases enacted after Jan. 1, 2022. That could include the refinery profit penalty, depending on the court’s interpretation.

“The windfall tax is a tax. Like everyone in California, we know it’s a tax,” says Brooke Armour, executive vice president of the California Business Roundtable, co-sponsor of the initiative.

“We don’t think a profit penalty will hold up in court either,” said roundtable chair Rob Lapsley.

Another measure qualified for the 2024 ballot last week that affects Newsom’s anti-oil war. The oil industry-backed referendum would repeal a 2022 state law that prohibits new wells within 3,200 feet of homes, schools, parks and other public facilities.

“Big Oil knows that California goes beyond fossil fuels, so in stepping out, these companies are doing whatever they can to make a profit by polluting our communities,” Newsom said in a prepared statement.

“We don’t defend it…and that starts with passing our price gouging penalty to avoid extreme gas price spikes.”

The governor keeps promising it. But he didn’t understand how to deliver.