Gavin Newsom’s oil penalty blazes through California Senate — some lawmakers say it’s too rushed

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California Gov. Gavin Newsom’s plan to penalize oil companies for alleged gas price gouging has moved through the state Legislature at lightning speed — much to the chagrin of Republicans, and even some Democrats.

The Senate on Thursday advanced a special session bill from Sen. Nancy Skinner, D-Berkeley, that would empower the California Energy Commission to gather information on the oil industry and potentially cap profits in the name of preventing gas price spikes.

Senators voted 30-8 to send Senate Bill X1-2 to the Assembly, which will likely consider it next week. Skinner provided updated bill language on Monday after Newsom reached an agreement with Senate President Pro Tem Toni Atkins, D-San Diego, and Assembly Speaker Anthony Rendon, D-Lakewood.

But Republicans and a handful of Democrats expressed concern about the speed at which the bill has advanced through the Capitol. The state’s legislative process can drag on for months, but the measure appears poised to land on Newsom’s desk before senators and assembly members depart the Capitol for a spring recess March 30.

Some also balked at ceding authority over potential penalties and industry regulation to the energy commission.

“I’m opposing this bill, not because I’m standing up here protecting the companies,” said Sen. Brian Jones, R-San Diego. “I’m standing up here opposing this bill for my constituents because they were cut out of the conversation. And this bill is going to lead to higher gas prices for all of Californians.”

Oil penalty bill gains steam

Newsom and Skinner say the quick turnaround is the result of lengthy behind-the-scenes discussions that resulted in substantial changes to the bill.

For months, it appeared the special session Newsom officially convened in late 2022 was generating little activity.

The governor’s initial measure contained vague language that suggested penalizing oil companies for profits beyond a certain threshold and returning excess dollars to consumers. But it didn’t contain any information about the profit cap amount or who would be eligible for refunds.

The revised bill language would enable the energy commission to create a new watchdog agency to keep tabs on the oil industry and solicit data and records that companies have not provided until this point. The agency could refer rule violations to the Attorney General’s Office and determine whether a price-gouging penalty is necessary to address high gas prices.

Skinner denied the speed had anything to do with preventing the oil industry from mobilizing against the bill.

“It has much more to do with the fact that we are intent on making sure we are designing the best process possible to protect California consumers,” she said.

Newsom’s office echoed this sentiment as the statewide average price for a gallon of regular unleaded fuel sat at $4.82, according to AAA — down more than a dollar from a year ago and 25% lower than the all-time high for the same gallon in June 2022.

Spokesman Daniel Villaseñor said in a statement the bill-crafting has been “a highly collaborative process together with the Legislature.” He said the perception of a hastily organized bill comes from talking points circulated by oil industry groups like the Western States Petroleum Association.

“The governor wants to get this done for California families,” Villaseñor said. “Every day that goes by without this proposal becoming law is a day Big Oil can stay in the shadows.”

Democrats worry about rushed process

However, even some Democrats have expressed concerns about the bill’s quick turnaround time.

Sen. Josh Newman, D-Fullerton, said during a Senate Energy, Utilities and Communications Committee hearing on Wednesday the bill “seems a little rushed” and worried about its impacts on smaller oil producers.

“If there’s one law I believe in in California, it’s the law of unintended consequences,” Newman said. “We should be wary of that, and we should allow, wherever possible, sufficient time to explore these issues. I think there’s some concern we’re not doing that in this case, moving from a hearing today to the floor tomorrow.”

Sen. Steven Bradford, D-Gardena, on Thursday said the legislative process has “been faster than many of us would like, or what we’re used to.” Although the bill will “increase transparency and enhance the regulatory oversight of the oil refining industry,” it is “far from perfect,” Bradford said, suggesting legislative discussions will continue.

“We should be careful not to conflate factors that impact prices with market manipulation,” Bradford said. “Nor do I think the energy commission has the expertise to regulate the timing of a refinery turnaround for maintenance.”

Bill sails through Senate committees

The Thursday floor vote came after the Senate Appropriations Committee advanced the bill in the morning. Skinner told the committee the plan would cost $7 million to $10 million annually, with one-time setup costs of $1 million.

The Appropriations Committee took up the bill after the Senate Energy Committee voted 12-2 to advance it Wednesday afternoon. Committee members who supported the measure commended the governor and legislative leaders for listening to their concerns and tailoring the bill accordingly.

In particular, several members pointed to a new provision that requires the California State Auditor, no later than March 1, 2033, to complete an audit of any penalty system that may be enacted. If a penalty is instituted and the auditor determines it is not meeting its intended goal to reduce gasoline price spikes and stabilize the fuel supply market, the commission would be forced to terminate it within 180 days.

Sen. Angelique Ashby, D-Sacramento, said the bill had “vastly improved” since its original rendition.

”It’s a data-driven approach, which couldn’t be wiser,” she said. “Because we’re not going to have fines and fees and penalties that are arbitrary or based on nothing. They have to be based on data.”

Newsom’s top climate advisor Lauren Sanchez said Wednesday that the administration hopes to stand up the new watchdog division by the fall of 2023, though that relies on funding to be allocated this budget cycle.