Despite Big Oil spending over $34.2 million on lobbying the Legislature over the past two years and millions of dollars more over the past three months, a bill backed by Governor Newsom to create a new state watchdog with power to prevent price gouging at the gas pump cleared the California Assembly by a vote of 52 to 19 Monday.
The bill is now awaiting the Governor’s signature. Although the bill doesn’t authorize the tax on Big Oil windfall profits that was originally envisioned, Consumer Watchdog and other advocates say it is a “landmark measure” to rein in skyrocketing California gasoline prices in the future.
Authored by Senator Nancy Skinner (D-Berkeley) and co-sponsored by Attorney General Rob Bonta, the measure creates “a dedicated, 24/7 independent watchdog” to root out price gouging by oil companies and authorizes a penalty for price gouging, according to a statement from the Governor’s Office.
"It's a big day for consumers, a big day for mother nature, a big day for this country, not just this state," Newsom told reporters in the hallway of the state capitol on Monday. "When you take on big oil, they usually roll you. That's exactly what they've been doing to consumers for years and years and years."
Senator Skinner also celebrated the passage of the bill, describing it in a tweet as “groundbreaking legislation that includes the strongest transparency and oversight measures in the nation so we can look under the hood and hold #BigOil accountable for obscenely high gas prices.”
“In 2022, while oil companies were hauling in more than $200 billion in profits, Californians were being hit at the pump with record high gas prices -- $2.61 per gallon higher than the national average,” said Skinner in a statement after the measure’s passage by the Senate last week. “Those sky-high prices came at a time when the cost of crude oil was down and there were no changes to our state taxes, fees, or regulations.”
In addition, consumer, environmental justice and climate groups were pleased with the victory over Big Oil companies.
“Californians now will have a watchdog with real teeth on their side to protect them from the gouging at the gas pump that they endured during 2022,” said Jamie Court, president of Consumer Watchdog. "Californians will no longer be powerless and forced to pay $2 more than US drivers for their gasoline without recourse.”
“Armed with a price gouging penalty, California’s new watchdog bureau will have the power to take action against price gouging and more importantly take precautions to deter it from occurring in the first place. The sunlight that this new law will shed on the hidden workings of the gasoline market should be the best deterrent to preventing the 2022 price spikes from occurring again,” he stated.
Court said SBx1 2 (Skinner) gives the California Energy Commission the power to create a price gouging penalty on oil refiners when they make too much money per gallon at a level to be determined in a rule making.
“The legislation creates new transparency over refinery shutdowns, transactions that compose the crucial spot market where retail prices are set, export and import activity, pipeline activity, and other aspects of the industry that have been shielded from regulators for too long,” said Court. “The bill also creates a new division of the California Energy Commission dedicated to monitoring the market on a daily basis.”
“Among the most important provisions of SBx1 2 is the new ledger to be kept for transactions on the gasoline spot market. Regulators will have to be informed of all trades to make sure the crucial spot market — where the price retailer pay oil refiners for the gas is set — is not manipulated,” Court noted.
However, Jeremy White, a reporter for Politico, noted in a tweet that the bill doesn’t mandate price gouging penalties, as many had hoped for.
“This bill allows but doesn't mandate profit cap/penalty. And it requires @CalEnergy to determine benefits to consumers outweigh harm, a safeguard that reassured a lot of jittery #CALeg Democrats,” he tweeted after the bill’s passage.
The oil industry, which strongly opposed with the legislation, said it is not happy at all with the passage of the bill.
“The focus of this special session should have been consumers and a thorough examination of 30 years of public policies that caused California’s unique energy isolation and higher price,” said Catherine Reheis-Boyd, President of the Western States Petroleum Association and former Chair of the Marine Life Protection Act (MLPA Initiative Blue Ribbon Task Force to create “marine protected areas” in Southern California, in a statement. “Price caps, taxes, and tax-like penalties do not increase supply or reduce prices, but instead can have the opposite effect – less investment, less gasoline supply, and ultimately higher costs for Californians.”
“With this politicized process behind us, it’s time for serious discussion about what it will take to ensure an affordable, reliable and safe fuel supply for the years ahead,” she claimed.
The oil industry may file a lawsuit against the litigation or start a signature gathering campaign for a referendum campaign in the future to block the implementation of the law.
While environmental justice advocates welcomed the passage of the bill by Legislature, they pointed out that the Newsom Administration has continued to issue hundreds of neighborhood oil drilling permits since the beginning of the year.
On March 17, climate activists with the Last Chance Alliance held a protest at noon outside the California Natural Resources Agency Building to draw attention to this overt example of environmental injustice on behalf of CalGEM, the state’s oil and gas regulator.
The environmental justice advocates held banners proclaiming, “Rein In Rogue Regulators,” “Gov. Newsom: Climate Leaders Don’t Drill, “and “This Is An Emergency.” They also used props, including an oversized “rubber stamp” and “oil derricks,” to call out CalGEM for rubber stamping oil drilling permits in neighborhoods across the state.
A total of 649 permits have been approved since the start of the year by CalGEM, Of those, 389 permits (60%) were issued inside the 3200 foot health protection zones that would have been created by Senate Bill 1137, according to an analysis by Kyle Ferrar, Western Coordinator of the Fractracker Alliance.
This brings the total number of permits to an astounding 14,374 new and reworked oil drilling permits approved by CalGEM since Jan. 2019, when Newsom took office.
According to FracTracker’s analysis of data from state oil regulator CalGEM, permits were issued within 3,200 feet of Los Angeles, Ventura, Kern, Central Coast and Northern California communities. Download a map of permit approvals within the 3,200’ health protective zone.
The California Independent Petroleum Association (CIPA) sponsored the referendum that has delayed the implementation of the setbacks law for two years. Filings with the California Secretary of State reveal that oil companies funneled over $20 million to the committee Stop the Energy Shutdown, a “Coalition Of Small Business Owners, Concerned Taxpayers, Local Energy Producers And The California Independent Petroleum Association.
"CalGEM issuing hundreds of permits to negligent oil companies so they can continue drilling in our communities just months after they released an emergency rule to block neighborhood drilling is exactly why we don't trust them,” said Cesar Aguirre, organizer with Central California Environmental Justice Network. “This is exactly the free-for-all that California's oil industry wanted when they bought their way onto the ballot and forced the stay of SB 1137."
The oil and gas industry spent over $34.2 million in the 2021-22 Legislative Session against SB 1137 and other bills they were opposed to. Although the fossil fuel industry spent a big gusher of money in the latest session, it wasn’t a record session for Big Oil spending in Sacramento. The record session was in 2015-16 when Big Oil spent $36.1 million lobbying.