Little progress on California's plan to penalize oil profits

By AP News

California lawmakers are having their first public hearing on a proposal to penalize some oil company profits

California Oil Profits

SACRAMENTO, Calif. (AP) — After gas prices in California spiked to more than $6.40 per gallon last summer, Gov. Gavin Newsom led a charge against an industry he says is “ripping you off."

Months later, it's not clear if California's Legislature is following him.

Newsom, a Democrat, called lawmakers into a rare special session in December to pass what could be the nation's first penalty on oil company profits. But the bill is still sitting in the Democratic- controlled Legislature three months later, with no details on how much the penalty would be or when oil companies would have to pay it. Newsom and legislative leaders have been meeting privately to negotiate the terms.

The proposal, which would broadly apply a fee to oil company profits in excess of a certain amount, will get its first public hearing Wednesday in the state Senate. But it's informational only, meaning lawmakers will take testimony but make no decisions on how to move forward

The hearing will include testimony from the Newsom administration, environmental advocates and an oil industry trade group.

“I'm expecting forward progress of some kind,” said Jamie Court, president of Consumer Watchdog, a nonprofit group that Newsom has frequently cited when criticizing oil companies.

But other environmental advocates don't have high hopes for the hearing. Four of the witnesses scheduled to speak have ties to the oil industry, according to Elected Officials to Protect America, a group of current and former officials who advocate for the environment.

“The public hearing is stacked with people who have questionable ties with the fossil fuel industry in order to sway opinion,” said Heidi Harmon, co-chair of the group's leadership council and former San Luis Obispo mayor. “This is against the principles of our democratic system.”

Newsom said the reason it's taking so long to advance the bill is a “lack of transparency” from the big five oil refiners, which supply nearly all of California’s gasoline. Those companies — Valero, Phillips 66, PBF Energy, Marathon and Chevron — have declined to testify during public hearings.

The big question is how much profit would trigger the penalty. Consumer Watchdog wants that threshold to anytime oil company profits exceed 50 cents per gallon. One way to measure that would be to look at the difference between the wholesale cost of gas and the cost of crude oil. But that calculation isn't perfect, because it doesn't include oil company operational costs, Court, the group's president, said.

In the last 20 years, the big five oil refiners have average profits of 32 cents per gallon, Court said. The group says all of the big five refiners surpassed 50 cents in 2022. If that threshold had been law in 2022, Consumer Watchdog said it would have generated $3.3 billion in penalties.

Newsom said the Legislature has been an “incredible partner,” saying he's meeting with legislative leaders to discuss the proposal.

“I'm not going away. We're going to keep at this,” Newsom said.

The oil industry spent about $34 million lobbying the Legislature in the last two-year session and remains a powerful political force, particularly among Democrats who represent parts of the state where the industry provides jobs. The proposal would need support from a majority of lawmakers to pass.


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