State regulators could decide oil profits penalty

>> California Gov. Gavin Newsom said Wednesday he wants state regulators to decide whether to impose the nation's first penalty on oil companies for price gouging, pivoting after months of negotiations with legislative leaders failed to reach an agreement on a bill aimed at reining in the state's high gas prices.

Gas prices in California are always more expensive than the rest of the country because the state has higher taxes and fees than other states and requires a special blend of gasoline that is better for the environment but more expensive to make.

But last summer, the average price for a gallon of gas in California was more than $2.60 higher than the national average — a difference state regulators said could not be explained simply by taxes and fees. Meanwhile, oil companies recorded supersized profits.

Newsom, a Democrat, responded by asking state lawmakers to pass a law that would impose hefty fines on oil companies if their profits surpassed a certain threshold — with all of the money generated from the fines going back to drivers. The bill was so important to Newsom that he took the rare step of calling lawmakers into a special session to pass it, a maneuver that allows them to focus on just one issue instead of being distracted by hundreds of other bills in a regular session.

But the proposal never got traction in the Democratic-controlled Legislature, where the oil industry is one of the top contributors to lawmakers' campaign accounts.

Wednesday, the governor announced he was changing course and instead will ask lawmakers to empower the California Energy Commission to decide whether such a penalty is necessary and, if it is, how much it would be. The commission would be aided by a new, independent agency made up of experts, economists and lawyers that would have subpoena power to monitor the gasoline market and make recommendations.

“What we're asking for is simple: transparency and accountability to drive the oil industry out of the shadows,” Newsom said. “Now it's time to choose to stand with families or with Big Oil in our fight to make them play by the rules.”

The modified proposal means it's possible California wouldn't penalize oil companies at all. But it would give Newsom more control over what happens because he appoints all five members of the California Energy Commission, who must also be confirmed by the Democratic-controlled state Senate.

“It sounds like the governor wants to create a new state agency and empower unelected bureaucrats to impose more taxes and increase costs,” said Kevin Slagle, spokesperson for the Western States Petroleum Association, a nonprofit trade association that represents the industry. “At the end of the day, this proposal does not solve Californians' gasoline supply problem and will likely lead to the very same unintended consequences legislators have reiterated to the Governor: less investment, less supply, and higher costs for Californians.”