Newsom promise to punish Big Oil so far is just talk

Since early fall, Gov. Gavin Newsom has been loud and adamant about punishing “greedy Big Oil” for its “windfall” profits. But talk is cheap. He still hasn't produced a detailed plan.

And the Legislature, which must approve any plan, hasn't shown much enthusiasm.

Newsom dramatically called a special session of the Legislature in early December to slap oil companies with a windfall profits tax.

The “T” word ultimately was switched to “penalty” to make it seem more like a fee.

A tax would require a two-thirds majority legislative vote, and that would be practically impossible to obtain. Regardless of their supermajority and liberal bent, even Democratic legislators in blue California are leery of anything dubbed a tax increase.

A fee — called a “civil penalty” in this case — requires merely a simple majority vote.

One bill, SB 2, has been introduced by Sen. Nancy Skinner, D-Berkeley. It currently contains only language denouncing the oil industry and expressing the Legislature's intent to empower the state Energy Commission with more regulatory authority over refineries and the ability to fine them for excessive profits.

Under the bill, the state would establish an annual profit cap — a “maximum gross gasoline refining margin.” Refineries that exceeded it would be socked with a “civil penalty.”

The money would go into a “price gouging penalty fund” and “refunded” to California residents, including presumably people who don't own a vehicle.

That's really about all we know.

The purpose of a special session — usually run concurrently with a regular session — is to cut corners and expedite action on legislation. But there hasn't even been a committee hearing on SB 2.

The Senate Energy, Utilities and Communications Committee, however, intends to hold its first hearing in a week or two.

Hopefully by then, Newsom will have crafted a specific plan — he promised one months ago — and Skinner will have added some details into her bill. But don't count on it.

Neither the governor nor the Legislature has been rushing into this, despite Newsom's oratory.

The inaction is not because the Legislature is beholden to the oil industry for political favors, although some lawmakers are, undoubtedly.

It's because neither the governor nor any legislator has figured out exactly how to punish the industry.

How do you determine what's an excessive profit?

How much do you penalize the profiteers?

This can be called a “penalty,” but how do you craft the thing so the courts don't see it as a tax?

What's to prevent gas stations from raising prices at the pump anyway?

They wouldn't be penalized.

Is it really a good idea to tell a business how much profit it can make? A utility, OK.

The government grants it a monopoly. But oil companies compete against each other.

If we penalize them, when do we start taxing drug companies' windfall profits?

Meanwhile, Newsom faces a new potential hurdle besides the Legislature and inevitable lawsuits in his attempt to punish oil profiteers.

It's an anti-tax initiative that qualified last week for the 2024 ballot.

If it passes, the measure will require voter approval of any state tax increase enacted after Jan. 1, 2022.

That could include the refinery profits penalty, depending on court interpretation.

“The windfall profits tax is a tax. We along with everyone else in California know it's a tax,” says Brooke Armour, executive vice president of the California Business Roundtable, a co-sponsor of the initiative.

“We think a penalty on profits is not going to stand up in court either,” says roundtable President Rob Lapsley.

The governor keeps promising to stop extreme gas price spikes. But he hasn't figured out how to deliver.