How Newsom fell short of the oil penalty he wanted but still scored a political win

Governor Gavin Newsom last fall called a special legislative session to punish California oil company profits.

The narrative, woven into news articles across the country, almost wrote itself: The Democratic governor launched another offensive in his war with Big Oil.

However, the fight did not go as planned.

Lawmakers in his own party rejected his idea of ​​capping the industry’s profits. At legislative hearings, some said they had not found a “smoking gun” supporting Newsom’s claims of deliberate price gouging.

The final version of the bill focused on demanding more transparency from the industry. Rather than impose a cap and penalty on oil refiners’ profits, Newsom and the legislature gave state regulators the ability — but no mandate — to do so in the future. Consumer advocates have hailed the new law as a pioneering tool that could prevent gas price increases.

But while the law falls short of the policies he originally wanted from it, it still gives the governor a political victory over the oil industry. The law allows Newsom to position itself as a front runner who has clinched a victory against a politically powerful industry that many progressives regard as a bogeyman.

At a law signing in the Capitol on Tuesday, Newsom stood alongside Democratic lawmakers and hailed their cooperation as he revisited the petroleum industry. He argued that the final legislation was stronger than his original idea because it created a new division within the California Energy Commission to act as a watchdog over oil companies.

“Finally we’re able to look our constituents in the eye and say that now we better understand why they’re being exploited,” Newsom said.

“There’s a new sheriff in the town in California where we brought Big Oil to its knees. And I am proud of this state.”

However, Newsom also acknowledged that it would be some time before Californians felt the impact of the law: “Nothing is going to happen in the short term,” he said. “Gas prices will not fall immediately.”

David McCuan, chair of Sonoma State’s Department of Political Science, said the special session was symbolic of Newsom’s strengths and weaknesses.

Newsom tends to try to “go it alone” and push an agenda before he’s developed a policy, which often forces him to back down, McCuan said.

When the governor announced in October his intention to call a special session in December, he told reporters he was still getting his “ducks in a row” over a plan he described at the time as a plan to introduce a tax on oil companies.

But even when he comes to the fore with political statements without political details, Newsom has shown a knack for making headlines and staying ahead of other politicians.

His well-timed words announcing the special session drew national attention. The governor blamed the oil industry just a month before his re-election as Golden State voters were muted over near-record gas prices of over $6 a gallon.

“This is symbolic politics over material politics,” McCuan said of the Newsom special session.

Newsom staff disagree with criticism that the governor has resigned. The legislative process, they argue, worked as intended and resulted in the best possible policy. The new plan also gives the Energy Commission more powers, and all five members have been either appointed or reappointed by the governor.

After reviewing his original idea, California executives learned they needed more information and transparency from the industry to understand the market and determine if a penalty was needed.

Anthony York, a spokesman for the governor, also argued that politics is more than just symbolic. Newsom’s efforts to challenge the oil industry are a key component of his political agenda.

“California has been a global leader in driving clean energy, and our success in this transition depends largely on our ability to weaken the political power of the oil lobby,” York said. “We must end the vise they have been putting on our politics for decades.”

State Sen. Nancy Skinner (D-Berkeley), who authored the law, called it “the strongest and most effective measure of transparency and oversight in the nation.”

“This landmark law will allow us to hold oil companies accountable when they boost profits at the expense of hard-working families,” she said at the signing ceremony.

Though Newsom may not have gotten everything he wanted from the Legislature, he deserves to take a lap of honor for what he accomplished, said Roger Salazar, a Democratic political adviser and former press secretary for Gov. Gray Davis.

“Sometimes when you reach for the stars, you get the moon. And that seems to be the case here,” Salazar said.

“He obviously wanted to make a bold statement about the oil industry at a time when many Californians were feeling the effects of the crisis. … But I think he’s also pragmatic and realistic. And given the limits of what’s possible, I think he’s right to call it a success.”

Salazar said the legislation could be used to give Newsom the right to disclose at the national level.

“While this type of achievement isn’t what he set out to do, it’s a few steps further than most other states have been able to achieve,” he said.

Environmentalists expect Newsom to use the new Transparency Act to portray himself as a warrior against Big Oil — and see it as a way to pressure him to further restrict oil drilling in California.

Newsom administration officials have continued to approve permits for oil drilling projects near homes and schools. The governor signed legislation banning new oil and gas wells in such sensitive locations, which is now on hold until voters hold a referendum next year.

“There’s a huge disconnect here in terms of how they publicly hold the oil and gas industry accountable and what the agency is actually doing,” said Brandon Dawson, director of the Sierra Club California, which supports the new transparency law.

“It’s an odd, unique balance, but how he uses it politically will not go without scrutiny from the environmental community. I can tell you that.”

Mary Creasman, executive director of California Environmental Voters, said the law puts the state on a path to regulate the industry and limit oil profits, which she called “the endgame.”

“It’s a really important step and sheds a really important light on a corrupt industry to protect consumers and there are other steps in the process,” Creasman said. “There is still more to do.”

The powerful oil industry lobbied against the proposal, arguing that it would only make it more difficult for refiners to operate in California.

GOP Rep. Vince Fong, who represents the oil-rich Bakersfield region, urged lawmakers to reject the bill Monday before Democrats sent it to Newsom. Fong criticized the approach, saying that the policies “we adopt in this body must be based on economic reality, not to make political headlines.”

McCuan said Newsom can get away with over-promising and under-delivering in California, where the governor has no serious political challengers and Legislative Democrats are largely trying to get along with him.

But McCuan said that would change as Newsom looked beyond California and faced the competition for its next stage. Though Newsom has repeatedly denied any interest in the White House, McCuan and others believe he is positioning himself as a back-up option in the event President Biden does not seek re-election.

“I would argue that they run into a legitimacy factor,” McCuan said of Newsom and his team. “Your approach to giving in to gimmicks and your approach to political magic doesn’t necessarily get you into the hearts and minds of early primary voters.”

Sean Clegg, Newsom’s top policy strategist, said the bill gives state regulators “the hammer to hit oil companies when they cross the line.” And that’s more than any other state has done.

“When you make big changes, you have to lead from the front,” Clegg said. “He will be the first governor in America to hold the oil industry accountable for price gouging.”

Americans can expect to hear more about it.