California Governor Gavin Newsom’s ongoing battle with oil companies picked up a win Monday after legislative leaders struck a deal on a proposal to establish a year-round watchdog that will monitor oil company profits.
The proposal was authored by California State Senator Nancy Skinner (D-Berkeley) at the behest of the governor, who has publicly decried the soaring price of gasoline in California, for which he has accused big oil companies of price gouging consumers.
The proposal outlines the creation of a new independent watchdog group within the California Energy Commission that will be tasked with monitoring California’s petroleum market on a daily basis.
It would have access to new information that oil refiners would be legally required to report, as well as subpoena power to obtain other data. The hope, the governor says, is that the new watchdog group would make sure oil companies “play by the rules,” or face civil penalties or prosecution by the state’s Attorney General.
“Together with the Legislature, we’re going to hold Big Oil accountable for ripping off Californians at the pump,” Newsom said in a release. “Today’s agreement represents a major milestone in our efforts to drive the oil industry out of the shadows and ensure they play by the rules. This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging.”
Oil companies that have been found by the government watchdog to be price gouging could see a yet-to-be-defined penalty.
Newsom’s spat with big oil has been ongoing since the coronavirus pandemic but heated up last fall when he floated the idea of enacting a “windfall” tax on oil company profits.
At the time, gas prices reached a high of $6.42 per gallon in California, which was $2.61 higher than the national average — a record, the Governor’s Office says. The soaring prices came as crude oil prices dipped and no new taxes or fees were implemented at the state level.
The spike in gasoline prices resulted in refining companies netting profits of $63 billion in just 90 days, the Governor’s Office alleges.
To read the proposal in its entirety, click here.
Despite his ambitious goals to establish a new tax on those record profits, the governor’s team had to drop those plans when the pathway to passing the legislation appeared doomed to fail.
A pared-down proposal has been in the works for several weeks, with the tax on profits giving way to the government watchdog proposal.
Dana Williamson, Newsom’s chief of staff, told Calmatters that the audible was made after consulting with legislators for several months.
“We feel like this is stronger from where we started,” Williamson told the publication. “It is the only one of its kind in the country. And it’s really going to set up a watchdog entity that is going to watch the industry every single day.”
The exact timeline for when these new penalties will be established is murky, and the penalties for companies found to be price gouging are still to be determined.
The penalty will be established via a “public rulemaking process,” the Governor’s office says, with industry experts weighing in on the amount.