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Newsom’s oil industry crackdown proposal will get its first hearing

A gasoline price board is displayed at a gas station in San Francisco, Tuesday, July 19, 2022.
Jeff Chiu
AP Photo
A gasoline price board is displayed at a gas station in San Francisco, Tuesday, July 19, 2022.

A revised proposal by Governor Gavin Newsom will get its first hearing in a Senate committee Wednesday, six months afterhe first proposed capping profits to reduce dramatic price spikes at the pump.

It’s pedal to the metal for California state lawmakers on a proposal to crack down on oil industry profits.

Several people working on the issue say the goal is for lawmakers to deliver the bill to Newsom’s desk for his signature before the Legislature’s spring recess, which begins March 31.

“We’re going to hold Big Oil accountable for ripping off Californians at the pump,” Newsom said in a news release announcing the “deal” between him and legislative Democrats. “This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging.”

During an informational hearing last month on the governor’s proposal for a “price gouging penalty,” some lawmakersbalked at implementing a new tax on the industry. The bill’s newest version would hand that responsibility to state regulators.

The updated legislation would bolster reporting requirements for the oil industry – including refiners’ monthly profit margins – and create a new division within the California Energy Commission to continuously monitor industry activity and pricing.

“We collect this kind of information for all the state’s utilities that provide essential services like electricity and natural gas,” said Tyson Slocum, director of the Washington DC-based consumer rights organization Public Citizen. “So, it really shouldn't be controversial to extend similar types of transparency and disclosure on the state's significant petroleum industry.”

SBX1-2 would also allow the energy commission to create rules authorizing a civil penalty against companies that engage in price gouging.

The proposed Division of Petroleum Market Oversight would be made up of a director appointed by the governor, economists, petroleum market experts and investigative staff. The group would also have subpoena powers and the ability to refer violations to the Attorney General.

California drivers have long paid more on average for a gallon of gas than the rest of the country, due in part to the state’s isolated fuels market, environmental regulations and a 54-cent gas tax. But energy economists say there is a roughly 40-cent “mystery surcharge” on California gas which can’t be explained by taxes and regulations.

According to UC Berkeley energy economist Severin Borenstein, that surcharge cost California drivers $8 billion in 2022.

Oil industry groups have been fighting the proposal since last fall, when Newsom announced his intent to crack down on high gasoline prices while companies reported record profits.

“Unfortunately for Californians, the bill is now more expensive and onerous than the original plan,” said Kevin Slagle, spokesperson for the Western States Petroleum Association, which represents the oil and gas industry in California and other states.

Slagle added the proposal “does nothing on fuel supply policy, which is how to address costs.”

The proposal is scheduled for a hearing in the Senate Energy, Utilities and Communications Committee at 1:30 p.m. on Wednesday.

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