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    Newsom’s oil profit penalty passes first test

    From CalMatters’ politics reporter Alexei Koseff

    During a hearing State senators discuss petroleum windfall profits penalties and whether Californians will get relief at the gas pump at the state Capitol in Sacramento on Feb 22 2023 Photo by Rahul Lal CalMatters

    Whatever lingering concerns legislative Democrats may have about Gov. Gavin Newsom’s recently revised proposal to punish oil companies for high gas prices, they seem ready to pass it anyway — and fast.

    The bill sailed through its first committee hearing Wednesday, a week after Newsom’s office announced major changes — including a provision that would empower the California Energy Commission to establish a maximum profit margin for oil refiners above which they could be penalized, rather than asking the Legislature to determine that cap — and just two days after the amended language went into print.

    The 13-2 party-line vote in the state Senate Energy, Utilities and Communications Committee followed hours of hand-wringing over how quickly the process is moving. But it set up the full  40-member Senate to pass the measure as soon as today, sending it to the Assembly for consideration before its spring recess at the beginning of April.

    During the hearing, the Western States Petroleum Association, which represents the oil industry in California, lambasted supporters of the bill for rushing into a new regulatory scheme without fully considering potential unintended consequences:

    • Eloy Garcia, lobbyist: “We cannot have both, on the one hand, a first-of-its-kind, never-been-done-before bill and expect it to be done right in 10 days. That just does not reconcile.”

    Yet aside from Sen. Shannon Grove, a Bakersfield Republican who represents a major oil-producing district and who grilled Newsom’s senior climate advisor Lauren Sanchez about definitions in the measure, there were few questions from the committee members about the proposal itself.

    Sen. Brian Dahle, the Bieber Republican who ran against Newsom for governor last year, called it “socialism. This is pushing the government to pick winners and losers.”

    The Democrats on the panel mostly used their time to monologue. Many of them lamented the speed at which everything was moving, then justified their votes by pointing to internal deliberations that had been happening for months, to how much better the new proposal was than its previous iteration, and to the urgency of acting on an issue that has slammed their constituents’ pocketbooks.

    Sen. Dave Min, a Costa Mesa Democrat, cast the proposal as a “moral obligation” to fix a system that, regardless of whether oil companies are actually colluding to gouge customers, has become completely warped to their financial benefit — to the tune of $700 million per day at the height of last year’s price spike that prompted Newsom to call a special session of the Legislature.

    • Min: “We don’t have actual proof of collusion here, but I also think that’s missing the point, because what’s become clear as we’ve looked into this is that this is a fundamentally broken market.”

    The lopsided vote in favor, pulling in even business-friendly Democrats who had expressed doubts about the governor’s original plan at an oversight hearing in late February, suggests Newsom has found a compromise that allows his party to score its political victory over a favorite liberal boogeyman without being too close to the fallout if prices at the pump soar again in the coming months.


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