Column: Column: Newsom promised to punish “Big oil” for profiteering, but so far it’s just talk

Since early fall, Gov. Gavin Newsom has been loud and adamant about punishing “greedy Big Oil” for its “windfall” profits. But talking is cheap. He has not yet presented a precise plan.

And the legislature, which must approve any plan, hasn’t shown much enthusiasm.

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

A tax would require a two-thirds majority in the legislature, and that would be virtually impossible to achieve. Notwithstanding their supermajority and liberal leanings, even Democratic lawmakers in blue California are suspicious of anything called a tax hike.

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

A bill, SB 2, was introduced by Sen. Nancy Skinner (D-Berkeley). It currently contains only language that denounces the oil industry and expresses the legislature’s intention to give the state Energy Commission more regulatory powers over refineries and the ability to penalize them for excessive profits.

Under the bill, the state would set an annual profit cap — a “maximum gross margin in gasoline refining.” Refineries that exceeded it would face a “civil penalty.” The money would go to a “price gouging penal fund” and “returned” to California residents, including presumably those who do not own a vehicle.

That’s really all we know.

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

Hopefully by then Newsom will have a concrete plan in place – he promised a month ago – and Skinner will have incorporated some details into their bill. But don’t count on it.

Neither the governor nor the legislature pounced on it, despite Newsom’s speech.

“While Californians were being ripped off at the pump last year, Big Oil’s profits soared to levels never seen in history — posting record profits at the expense of hard-working families,” Newsom said in a recent statement after oil companies reported it in 2022 more money than ever.

“They rip you off. Because of this, we will pass a price-cutting penalty with the legislature to hold Big Oil accountable.”

If they can figure out how to do it.

The inaction isn’t because the legislature is beholden to the oil industry for political favors, although some lawmakers undoubtedly are. That’s because neither the governor nor any lawmakers have figured out exactly how to penalize the industry.

How do you determine what is excessive profit?

How severely do you punish the profiteers?

This can be called a “penalty,” but how do you design this thing so the courts don’t see it as a tax?

What prevents gas stations from raising prices at the pump anyway? You 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 him a monopoly. But oil companies compete with each other. If we punish them, when do we start taxing drug companies’ windfall profits?

Newsom staff have met with Democratic lawmakers to agree on a plan. The employees have solicited ideas from legislators without much success. Lawmakers have listened but are uninspired, I’m told.

After all, it wasn’t her idea at all. It was dumped on her by Newsom.

“The governor did a good job of reaching the Senate. His staff are very dedicated,” said Senator Anthony Portantino (D-Burbank), chair of the Appropriations Committee that will eventually review the bill.

“But I don’t think the governor has landed yet. This wasn’t one of those things where the governor comes into the room and says, ‘Take it or leave it.’”

Chris Holden (D-Pasadena), Chair of the Assembly Appropriations Committee, says, “As far as the beating around the issue, it’s not there. At that point, no one was aware of it.”

It refers to the legislature. There’s a lot of talk in the oil industry. It runs an uncompromising opposition campaign, hires political advisers and runs television commercials.

Meanwhile, alongside the legislature and inevitable court cases, Newsom faces a new potential hurdle in its attempt to punish oil profiteers. It’s an anti-tax initiative that qualified for the 2024 vote last week.

If passed, the measure will require voter approval of any state tax increase enacted after January 1, 2022. This could include the penalty for refinery profits, depending on the court’s interpretation.

“The Windfall Profit Tax is a tax. We and everyone else in California know it’s a tax,” said Brooke Armor, executive vice president of the California Business Roundtable, a co-sponsor of the initiative.

“We believe that even a penalty for winnings will not stand up in court,” said Roundtable President Rob Lapsley.

Another measure qualified for the 2024 vote last week, affecting Newsom’s anti-oil war. The oil industry-backed referendum would overturn a 2022 state law banning new wells within 3,200 feet of homes, schools, parks and other public amenities.

“Big Oil knows California is going beyond fossil fuels, so on their way out these corporations are doing whatever it takes to squeeze profits while polluting our communities,” Newsom said in a prepared statement.

“We don’t stand for it… and it starts with passing our price cut penalty to prevent extreme gas price spikes.”

The governor promises that again and again. But he hasn’t figured out how to deliver.