California’s first-of-its-kind bill to cap oil company profits and regulate the industry easily won approval March 23 from the state Senate as it moves to the Assembly and near-certain passage.
Democrat Gov. Gavin Newsom’s campaign to punish oil companies for charging record-high prices at the pump last year in the state—reaching $9 a gallon in some cases—has gained overwhelming public support and unanimous approval by Democrat senators.
The bill cleared Senate committees and the Senate floor on a party-line 30–8 vote at about 10:30 a.m. on Thursday, about 21 hours after the latest version was introduced.
Senators suspended their operating rules to quickly pass Newsom’s proposal.
The bill’s sponsor, state Sen. Nancy Skinner (D-Berkeley), estimated California will pay up to $10 million in setup costs to organize the new division within the Energy Department and hire staff. Most of the cost is associated with energy commission staff, according to a representative from the California Department of Finance. Then, about $2.5 million is needed every year for the independent division operations and $14.4 million for the energy commission and 14 staff. Another $1 million is needed to prepare a transportation fuels transition plan.
The new program would do just that but also create industry oversight, asking companies to disclose sensitive private data, and a new state oversight department to institute fines and fees for violations.
Republicans, who are outnumbered in the state’s Legislature where Democrats have a supermajority, opposed the rushed bill.
“If you want to know what socialism is, it’s government running everything,” state Sen. Brian Dahle, a Republican farmer from Bieber, said on the Senate floor during discussion about the bill March 23. “We’re supposed to be in a non-socialistic environment in America. We don’t have the right to take private people’s investments and earnings and redistribute them to somebody else. That’s a taking under the Constitution.”
Eloy Garcia, a lobbyist representing the Western States Petroleum Association (WSPA), the nation’s oldest nonprofit petroleum trade association, said during a committee hearing the group was never consulted about the bill and urged lawmakers to take more time before passing it.
“Energy policy has consequences,” Garcia said. “You’re asking a California regulatory body to set a maximum refinery profit margin, and then you’re calling that ‘price-gouging.’ You’re defining what price gouging is. That’s arbitrary and it will have consequences.”
WSPA was joined by several other groups who also opposed the bill, including the California Chamber of Commerce.
“This bill sets a bad precedent and sends the wrong message to other industries here in California, allowing an unelected body that is not for any one constituency [to] determine what a reasonable profit is. It sends the wrong signal to the business community and leaves them asking if they will be next.”
Kern County officials, who represent companies that produce about 70 percent of the state’s oil supply, also adamantly opposed the bill, along with the California Fuels and Convenience Alliance, representing gas stations, the California taxpayers Association, the Los Angeles Business Federation, the California Business Roundtable, the Orange County Business Council, and the California State buildings and Construction Council.
Newsom called a special session in part because of the urgency and faster process, a spokesman told The Epoch Times. Other special session bills in the past have flown through the approval process in the same way.
In November, the governor billed the program to repay residents for high gas prices by collecting penalties from oil companies and giving it back to them in a rebate.
However, that might not be how the new program will work.
Skinner told senators debating the bill Wednesday before it passed in the Committee on Energy, Utilities, and Communications they would be able to direct the rebates in a way that could compensate lower-income Californians and communities of color more than others, she said.
“When gas prices go up, it affects all other prices,” Skinner said. “Given there is less disposable income, (these communities) are more affected because everything they’re paying for is impacted by such prices.”
Newsom’s senior climate adviser Lauren Sanchez told the committee the bill provided the state with the ability to oversee the oil industry that “has been allowed to operate in the shadows.”
“It provides us with the tools needed to mitigate these price spikes going forward with transparency measures to finally look under the hood and ask ‘what are these companies hiding?’” Sanchez said.
The new law would create a Division of Petroleum Market Oversight within the California Energy Commission and Fuels Advisory Committee made up of experts appointed by the governor and the Legislature to advise the state’s Energy Commission.
The committee would also have subpoena powers and provide information to the state’s attorney general’s office about any possible violations.
“Their responsibility would be to monitor California’s petroleum market to ensure market participants play by the rules,” Skinner said.
Before the full Senate considered the bill, the Senate Appropriations Committee passed it 5–2.
If passed by both chambers and signed by the governor, California would make history as the first state to implement a windfall profits penalty on the oil industry. The law would take effect 90 days later.
