California Lawmakers Pass Bill to Limit Oil Company Profits
, Bloomberg News
(Bloomberg) -- California will limit the amount of profit oil companies can earn in the state under legislation pushed by Governor Gavin Newsom to control soaring gasoline prices.
The state Assembly on Monday passed a bill that allows the California Energy Commission to impose a penalty on refiners who charge more than an allowable margin for gasoline. It establishes a watchdog, vested with subpoena powers to obtain data and records, to monitor the market daily. The state Senate approved by bill March 23 and Newsom is expected to sign it into law Tuesday morning.
The bill gives the governor’s office unprecedented oversight over the industry and comes months after a surge in California gasoline prices led Newsom to accuse refiners of “ripping off” consumers while making record profits. During his reelection campaign last year, the Democrat excoriated each major refiner by name for jacking up prices.
At the time, prices in California skyrocketed to record levels, helping boost crude refiners’ profits to all-time highs. The fuel averaged $4.82 a gallon Monday in California, the highest in the nation, according to AAA. The state has seen a decline in refining capacity over the past few years as refiners are encouraged to move into renewables.
The Western States Petroleum Association, an industry group whose members include Exxon Mobil Corp. and Marathon Petroleum Corp., said earlier this month California’s action will likely lead to less investment in production, decreased supply and higher costs in the state.
The bill’s author, Senator Nancy Skinner of Berkeley, said in a statement the legislation contains the nation’s strongest transparency and oversight measures over the oil industry.
©2023 Bloomberg L.P.
New California gas price law another defeat
for oil industry
Gasoline prices are displayed at a gas station in Sacramento, Calif., on Sept. 30, 2022.
(Rich Pedroncelli / AP)
Adam Beam
The Associated Press
Updated March 28, 2023
It was just a few weeks ago that California Gov. Gavin Newsom called the oil industry the second most powerful force on earth, trailing only Mother Nature in its ability to bend the elements -- both physical and political -- to its will.
Yet on Tuesday, Newsom signed a new law that gives state regulators the power to penalize oil companies for making too much money, the first of its kind in the country. It's the type of legislation the oil industry might have crushed in the past. But on Monday, the bill cleared the state Assembly with only one Democrat voting against it. Climate Barometer newsletter: Sign up to keep your finger on the climate pulse
"We proved we could finally beat big oil," Newsom said Tuesday after signing the bill.
The bill is the latest in a string of defeats for the oil industry in California, a state many don't think of as a fossil fuel powerhouse. But for decades, California was one of the leading oil producers in the United States with a bustling industry that was a key part of the state's economy. The state is now the nation's seventh-largest oil producer, according to federal data.
Oil production has been steadily declining since the late 1980s from a combination of exhausting supplies and the state's changing policy priorities. A state law requires California to be carbon neutral by 2045, meaning the state would remove as many carbon emissions from the atmosphere as it emits. The state's plan to do so would reduce demand for liquid petroleum by 94% by 2045.
State regulators have banned the sale of most new gas-powered cars in California by 2035. And last year, the state Legislature approved a bill limiting where new oil wells can be drilled, providing buffer zones around homes, schools and other sensitive sites.
The oil industry doesn't mind a David vs. Goliath comparison "as long as you think we're David and not Goliath," Kevin Slagle, spokesperson for the Western States Petroleum Association, said about the industry's reputation at the state Capitol. "Just look at the results the last couple of years on legislation."
The association, though, spent US$11.7 million lobbying lawmakers in the 2021-2022 legislative session, far more than any other single group. Chevron followed behind it, spending US$8.6 million, according to state campaign finance filings. The next closest single spender was the California Teachers Association, at US$7.1 million.
Likewise, the industry spent millions on campaign contributions in the 2022 election, supporting both Democrats and Republicans. Nearly one-third of all 120 seats in the Legislature are newly elected members.
Those donations did not always translate to favourable votes. New Assemblymember Esmerelda Soria, a Democrat who represents parts of the Central Valley, was the top beneficiary of money from a Western States Petroleum Association-affiliated committee. Soria voted Monday to support the legislation despite industry opposition.
The only Democrat to vote against the potential oil profits penalty was Assemblymember Jasmeet Bains, whose district includes Kern County, home of the state's oil industry. Her vote appeared to irk the Newsom administration.
Bains, a family medicine and addiction doctor who was first elected in November, tweeted a picture of the vote, saying: "Stand alone if you must, but always stand for truth."
Dana Williamson, Newsom's chief of staff, replied: "Alone and confused you shall likely remain."
Bains said she voted against the bill because during the height of the gasoline price spike last summer, the Newsom administration and legislative leaders refused to suspend the state's gas tax. They argued oil companies would not pass along the savings to drivers.
"What's to stop them from passing on the cost of this new tax with high prices at the pump?" Bains said. "That inconsistency is even more frustrating."
Though the industry couldn't stop the legislation, its presence could be felt in the final version, said Chris Micheli, a veteran California lobbyist who represents business clients but was not involved in the oil profits legislation. Newsom initially called for the Legislature to pass a new tax on oil company profits. Then he asked lawmakers to instead impose a penalty if oil company profits surpassed a certain threshold.
Finally, Newsom and lawmakers agreed to let the California Energy Commission decide, punting the decision to a five-person panel appointed by Newsom with the consent of the state Senate. The bill also creates a new state agency with the power to monitor the petroleum markets, including requiring oil companies to disclose lots of data about their pricing.
"The fact it took them three different substantive proposals to find something that would actually pass the Legislature I think goes to show the continued power and influence of the oil industry in this state," Micheli said.
Next year, the oil industry will be looking to exert its influence in another arena -- public opinion. The industry is challenging a new state law that bans drilling new oil wells nearby homes, schools and other sensitive areas. Voters will decide in 2024 whether to uphold the law.
"The partisan numbers of the two houses of the Legislature have dramatically changed," Micheli said, referring to Democrats now having total control over state government. "The broader business community is going to have to go to the voters on some issues of public policy."
Adam Beam
The Associated Press
Updated March 28, 2023
It was just a few weeks ago that California Gov. Gavin Newsom called the oil industry the second most powerful force on earth, trailing only Mother Nature in its ability to bend the elements -- both physical and political -- to its will.
Yet on Tuesday, Newsom signed a new law that gives state regulators the power to penalize oil companies for making too much money, the first of its kind in the country. It's the type of legislation the oil industry might have crushed in the past. But on Monday, the bill cleared the state Assembly with only one Democrat voting against it. Climate Barometer newsletter: Sign up to keep your finger on the climate pulse
"We proved we could finally beat big oil," Newsom said Tuesday after signing the bill.
The bill is the latest in a string of defeats for the oil industry in California, a state many don't think of as a fossil fuel powerhouse. But for decades, California was one of the leading oil producers in the United States with a bustling industry that was a key part of the state's economy. The state is now the nation's seventh-largest oil producer, according to federal data.
Oil production has been steadily declining since the late 1980s from a combination of exhausting supplies and the state's changing policy priorities. A state law requires California to be carbon neutral by 2045, meaning the state would remove as many carbon emissions from the atmosphere as it emits. The state's plan to do so would reduce demand for liquid petroleum by 94% by 2045.
State regulators have banned the sale of most new gas-powered cars in California by 2035. And last year, the state Legislature approved a bill limiting where new oil wells can be drilled, providing buffer zones around homes, schools and other sensitive sites.
The oil industry doesn't mind a David vs. Goliath comparison "as long as you think we're David and not Goliath," Kevin Slagle, spokesperson for the Western States Petroleum Association, said about the industry's reputation at the state Capitol. "Just look at the results the last couple of years on legislation."
The association, though, spent US$11.7 million lobbying lawmakers in the 2021-2022 legislative session, far more than any other single group. Chevron followed behind it, spending US$8.6 million, according to state campaign finance filings. The next closest single spender was the California Teachers Association, at US$7.1 million.
Likewise, the industry spent millions on campaign contributions in the 2022 election, supporting both Democrats and Republicans. Nearly one-third of all 120 seats in the Legislature are newly elected members.
Those donations did not always translate to favourable votes. New Assemblymember Esmerelda Soria, a Democrat who represents parts of the Central Valley, was the top beneficiary of money from a Western States Petroleum Association-affiliated committee. Soria voted Monday to support the legislation despite industry opposition.
The only Democrat to vote against the potential oil profits penalty was Assemblymember Jasmeet Bains, whose district includes Kern County, home of the state's oil industry. Her vote appeared to irk the Newsom administration.
Bains, a family medicine and addiction doctor who was first elected in November, tweeted a picture of the vote, saying: "Stand alone if you must, but always stand for truth."
Dana Williamson, Newsom's chief of staff, replied: "Alone and confused you shall likely remain."
Bains said she voted against the bill because during the height of the gasoline price spike last summer, the Newsom administration and legislative leaders refused to suspend the state's gas tax. They argued oil companies would not pass along the savings to drivers.
"What's to stop them from passing on the cost of this new tax with high prices at the pump?" Bains said. "That inconsistency is even more frustrating."
Though the industry couldn't stop the legislation, its presence could be felt in the final version, said Chris Micheli, a veteran California lobbyist who represents business clients but was not involved in the oil profits legislation. Newsom initially called for the Legislature to pass a new tax on oil company profits. Then he asked lawmakers to instead impose a penalty if oil company profits surpassed a certain threshold.
Finally, Newsom and lawmakers agreed to let the California Energy Commission decide, punting the decision to a five-person panel appointed by Newsom with the consent of the state Senate. The bill also creates a new state agency with the power to monitor the petroleum markets, including requiring oil companies to disclose lots of data about their pricing.
"The fact it took them three different substantive proposals to find something that would actually pass the Legislature I think goes to show the continued power and influence of the oil industry in this state," Micheli said.
Next year, the oil industry will be looking to exert its influence in another arena -- public opinion. The industry is challenging a new state law that bans drilling new oil wells nearby homes, schools and other sensitive areas. Voters will decide in 2024 whether to uphold the law.
"The partisan numbers of the two houses of the Legislature have dramatically changed," Micheli said, referring to Democrats now having total control over state government. "The broader business community is going to have to go to the voters on some issues of public policy."
The California governor’s oil profits cap is another blow to one of Sacramento’s most formidable lobbying powers.
The legislation Newsom approved Tuesday extends a winning streak for the governor against oil companies, long one of most formidable lobbying powers in California’s state capital.
| Jae C. Hong/AP Photo
By JEREMY B. WHITE
POLITICO
03/28/2023 0
Gov. Gavin Newsom signed legislation that could force the oil industry to cap profits and reveal gas price data in its largest U.S. market – demonstrating his clout in a state dominated by Democrats and the weakening of a once powerful lobby.
The legislation Newsom approved Tuesday extends a winning streak for the governor against oil companies, long one of most formidable lobbying powers in California’s state capital.
The governor overcame strenuous industry opposition in muscling a bill through the Legislature that forces companies to turn over earnings data and exposes them to penalties. It came just months after he pushed through a climate package that fortified emission targets and restricted drilling.
“We proved we can actually beat big oil,” Newsom said at a signing ceremony at the Capitol.
That victory came despite the industry deploying “30-plus lobbyists” to stymie the bill, he said.
The industry acknowledges the setbacks.
“I think what we’ve seen is the governor has put this industry in the crosshairs for a number of years now,” said Kevin Slagle, a spokesperson for the Western States Petroleum Association, the main lobbyist for the industry in Sacramento. “With a supermajority and the ability of governors to pull levers with legislators, it’s a tough policy environment for us for sure.”
Newsom has aggressively pursued an ambitious legislative climate agenda since last summer, winning praise from environmentalists who once lamented his hands-off approach and adding to executive orders phasing out gas-powered car sales and fracking. And he has regularly denounced oil companies for standing in his way. Last summer, he excoriated the companies for running ads that framed his push last summer as a matter of righteousness and “which side we’re on.”
“Big oil lost,” Newsom told an audience in New York after pushing the package through the Legislature, “and they’re not used to losing.”
He rode the momentum from those victories into a quest to curtail oil industry profits, announcing his plan before the bill-signing period ended. The proposal has evolved substantially, morphing from a windfall profits tax to a framework for the California Energy Commission to investigate earnings. But Newsom’s rhetoric remained the same: oil companies are ripping you off.
Newsom was uncharacteristically engaged with legislators throughout the process, visiting caucuses and speaking with members individually and in smaller groups. After legislators balked at Newsom’s initial idea, expressing fears it would backfire and raise prices, the administration agreed to language requiring the Energy Commission to ensure the benefits to consumers would outweigh harms.
That both assuaged legislators’ fears of unintended consequences and helped lawmakers feel they were being brought in rather than dragged along. A senior legislative staffer called Newsom’s tactic a “sea change” in his approach to the Legislature and a “very significant factor in how this got landed.”
“This is not something the governor is shoving down our throats,” Assemblymember Jacqui Irwin (D-Thousand Oaks) said on the Assembly floor.
Crafting that language took months. The revamped proposal then rocketed through the Legislature in less than two weeks as Newsom and Democrats sought to preempt a counteroffensive. Oil industry opponents protested that Newsom was rushing through an unvetted proposal that would harm consumers by distorting a complex industry. It didn’t matter.
“Fossil fuel obsolescence is on the horizon,” Assemblymember Alex Lee (D-Milpitas) told members.
That hasn’t always been the case. California’s proud environmentalist bent belies the political and economic might of in-state oil extractors and refiners. Industry groups spend millions of dollars to elect allies to the Legislature — often moderate Democrats — where the corridors teem with lobbyists who are tasked with thwarting legislation that hurts companies’ bottom line. The Western States Petroleum Association spent nearly $20 million on lobbying and campaigns in 2021 and 2022.
They have enlisted powerful political allies. That has meant hiring connected players like the former leader of moderate Democrats and California’s former oil and gas regulator. More crucially, the oil industry forged an alliance with a union umbrella group whose members work at refineries — a critical source of influence in a Capitol where organized labor holds significant sway.
Bills to slash emissions or require new oil wells be far from homes and schools could not overcome that opposition. Newsom’s intervention was decisive. Lawmakers revived the measures at the governor’s urging and pushed them to his desk.
“That is perhaps the most powerful political coalition in the state Capitol,” said Assemblymember Al Muratsuchi (D-Torrance), who has become a vocal critic of oil industry influence. “We’re only able to overcome that with the governor taking the lead and championing climate measures.”
Shifting voter views are also driving political dynamics. A decade ago, a plurality of California voters said strict environmental laws were too costly. By 2021, nearly two-thirds said they were worth the cost. Voters are more likely to call climate change a serious issue as annual wildfires have become more destructive. Both Newsom and the Legislature have taken advantage.
“The governor was more aggressive, and I think that inspired the Legislature to be more aggressive. While there’s allies in both parties to the oil industry, I think a lot of folks were hungry to get stuff done,” said former Assemblymember Cristina Garcia, who helped negotiate last year’s climate package. “The governor deserves some credit but I think here’s some other factors as well with the stars lining up politically so it doesn’t feel like you’re taking such a political hit.”
The money map is changing as well. The climate-focused Energy Foundation spent millions in Sacramento last year, putting it on the same plane as oil companies. The California Democratic Party now refuses oil money. The industry can still shower candidates with cash, but their resources increasingly run up against voter distaste with fossil fuel influence.
The shifting calculus for some lawmakers, Garcia said, has been from “’You’re going to come spend a bunch of money against me, and I could lose my seat” to “you’ll come spend a bunch of money against me and I won’t lose my seat, because the electorate rewards us for being bold.”
Several Democrats who benefited from millions of dollars in oil industry campaign spending voted for Newsom’s oil profits penalty. At the same time, a bloc of Assembly Democrats who were industry beneficiaries withheld their votes.
“A lot of those members rely on campaign support from big oil,” Muratsuchi said.
That support will likely continue. The industry could also undercut Newsom by passing a referendum overturning the oil well setbacks law. But the governor has helped shift the political dynamics around the oil industry, said former Sen. Fran Pavley, an architect of the state’s cap-and-trade system who is now the USC Schwarzenegger Institute’s environmental policy director.
“They are very influential in many parts of the state,” Pavley said, but “I think Gavin Newsom’s done a good job in getting the political wind changing.”
Lara Korte contributed to this report from Sacramento.
By JEREMY B. WHITE
POLITICO
03/28/2023 0
Gov. Gavin Newsom signed legislation that could force the oil industry to cap profits and reveal gas price data in its largest U.S. market – demonstrating his clout in a state dominated by Democrats and the weakening of a once powerful lobby.
The legislation Newsom approved Tuesday extends a winning streak for the governor against oil companies, long one of most formidable lobbying powers in California’s state capital.
The governor overcame strenuous industry opposition in muscling a bill through the Legislature that forces companies to turn over earnings data and exposes them to penalties. It came just months after he pushed through a climate package that fortified emission targets and restricted drilling.
“We proved we can actually beat big oil,” Newsom said at a signing ceremony at the Capitol.
That victory came despite the industry deploying “30-plus lobbyists” to stymie the bill, he said.
The industry acknowledges the setbacks.
“I think what we’ve seen is the governor has put this industry in the crosshairs for a number of years now,” said Kevin Slagle, a spokesperson for the Western States Petroleum Association, the main lobbyist for the industry in Sacramento. “With a supermajority and the ability of governors to pull levers with legislators, it’s a tough policy environment for us for sure.”
Newsom has aggressively pursued an ambitious legislative climate agenda since last summer, winning praise from environmentalists who once lamented his hands-off approach and adding to executive orders phasing out gas-powered car sales and fracking. And he has regularly denounced oil companies for standing in his way. Last summer, he excoriated the companies for running ads that framed his push last summer as a matter of righteousness and “which side we’re on.”
“Big oil lost,” Newsom told an audience in New York after pushing the package through the Legislature, “and they’re not used to losing.”
He rode the momentum from those victories into a quest to curtail oil industry profits, announcing his plan before the bill-signing period ended. The proposal has evolved substantially, morphing from a windfall profits tax to a framework for the California Energy Commission to investigate earnings. But Newsom’s rhetoric remained the same: oil companies are ripping you off.
Newsom was uncharacteristically engaged with legislators throughout the process, visiting caucuses and speaking with members individually and in smaller groups. After legislators balked at Newsom’s initial idea, expressing fears it would backfire and raise prices, the administration agreed to language requiring the Energy Commission to ensure the benefits to consumers would outweigh harms.
That both assuaged legislators’ fears of unintended consequences and helped lawmakers feel they were being brought in rather than dragged along. A senior legislative staffer called Newsom’s tactic a “sea change” in his approach to the Legislature and a “very significant factor in how this got landed.”
“This is not something the governor is shoving down our throats,” Assemblymember Jacqui Irwin (D-Thousand Oaks) said on the Assembly floor.
Crafting that language took months. The revamped proposal then rocketed through the Legislature in less than two weeks as Newsom and Democrats sought to preempt a counteroffensive. Oil industry opponents protested that Newsom was rushing through an unvetted proposal that would harm consumers by distorting a complex industry. It didn’t matter.
“Fossil fuel obsolescence is on the horizon,” Assemblymember Alex Lee (D-Milpitas) told members.
That hasn’t always been the case. California’s proud environmentalist bent belies the political and economic might of in-state oil extractors and refiners. Industry groups spend millions of dollars to elect allies to the Legislature — often moderate Democrats — where the corridors teem with lobbyists who are tasked with thwarting legislation that hurts companies’ bottom line. The Western States Petroleum Association spent nearly $20 million on lobbying and campaigns in 2021 and 2022.
They have enlisted powerful political allies. That has meant hiring connected players like the former leader of moderate Democrats and California’s former oil and gas regulator. More crucially, the oil industry forged an alliance with a union umbrella group whose members work at refineries — a critical source of influence in a Capitol where organized labor holds significant sway.
Bills to slash emissions or require new oil wells be far from homes and schools could not overcome that opposition. Newsom’s intervention was decisive. Lawmakers revived the measures at the governor’s urging and pushed them to his desk.
“That is perhaps the most powerful political coalition in the state Capitol,” said Assemblymember Al Muratsuchi (D-Torrance), who has become a vocal critic of oil industry influence. “We’re only able to overcome that with the governor taking the lead and championing climate measures.”
Shifting voter views are also driving political dynamics. A decade ago, a plurality of California voters said strict environmental laws were too costly. By 2021, nearly two-thirds said they were worth the cost. Voters are more likely to call climate change a serious issue as annual wildfires have become more destructive. Both Newsom and the Legislature have taken advantage.
“The governor was more aggressive, and I think that inspired the Legislature to be more aggressive. While there’s allies in both parties to the oil industry, I think a lot of folks were hungry to get stuff done,” said former Assemblymember Cristina Garcia, who helped negotiate last year’s climate package. “The governor deserves some credit but I think here’s some other factors as well with the stars lining up politically so it doesn’t feel like you’re taking such a political hit.”
The money map is changing as well. The climate-focused Energy Foundation spent millions in Sacramento last year, putting it on the same plane as oil companies. The California Democratic Party now refuses oil money. The industry can still shower candidates with cash, but their resources increasingly run up against voter distaste with fossil fuel influence.
The shifting calculus for some lawmakers, Garcia said, has been from “’You’re going to come spend a bunch of money against me, and I could lose my seat” to “you’ll come spend a bunch of money against me and I won’t lose my seat, because the electorate rewards us for being bold.”
Several Democrats who benefited from millions of dollars in oil industry campaign spending voted for Newsom’s oil profits penalty. At the same time, a bloc of Assembly Democrats who were industry beneficiaries withheld their votes.
“A lot of those members rely on campaign support from big oil,” Muratsuchi said.
That support will likely continue. The industry could also undercut Newsom by passing a referendum overturning the oil well setbacks law. But the governor has helped shift the political dynamics around the oil industry, said former Sen. Fran Pavley, an architect of the state’s cap-and-trade system who is now the USC Schwarzenegger Institute’s environmental policy director.
“They are very influential in many parts of the state,” Pavley said, but “I think Gavin Newsom’s done a good job in getting the political wind changing.”
Lara Korte contributed to this report from Sacramento.
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