By Ashley Zavala, KCRA NBC TV-3 Sacramento, CA
October 6, 2022
SAN FRANCISCO — Gov. Gavin Newsom is considering calling state lawmakers back to Sacramento for a special session in response to rising gas prices.
"We’re hoping to do more with this windfall profits tax to go after big oil," he said Thursday at a climate-related event in San Francisco.
The governor has requested the legislature approve a measure that would require oil companies to pay back excessive profits to consumers through a new tax. The legislature finished policymaking for the year on Aug. 31 and can’t begin action on proposals until January, unless the governor calls a special legislative session.
"We’re making that determination in real time," Newsom said. "We’re working with legislative leaders and working on a strategy to get it done, I’m quite confident we’ll achieve the result intended."
The governor has yet to provide specific details and a proposed timeline for the measure that would require approval from two-thirds of the legislature. Assemblymember Alex Lee (D-San Jose) proposed a similar measure in March that stalled soon after it was introduced. Although Newsom intervened in other, climate-related proposals toward the end of the legislative session, he did not get involved with Lee's.
Newsom’s latest policy push comes after California’s Energy Commission demanded answers from the state’s major oil companies in response to spiking gas prices. Oil groups have said the latest spike in the state is the result of supply and demand issues.
In a response letter to the state, PBF Energy’s Senior Vice President, Paul Davis, pointed to California's mounting restrictions that have made it harder to refine oil and import gasoline.
He also wrote that because of state and federal antitrust laws, the company could not respond fully to the state’s demand for answers because those laws prohibit refineries from coordinating planned maintenance and does not allow them to discuss existing or planned supply.
“Antitrust doesn’t prevent them from answering questions to the entity that regulates them,” said Alex Stack, a spokesman for Newsom’s office.
Newsom’s office and the CEC have said California’s gas prices have been climbing while the price of crude oil has fallen. At the end of August, crude oil prices were about $100 per barrel, and the average gas price in California was $5.06. The price of oil has dropped to $90 per barrel while California gas prices near a record high at $6.43 cents per gallon. As of Thursday afternoon, California regulators were still waiting for answers from three other gas retailers.
"Californians deserve to know why savings haven’t been passed down to the pump," Stack said.
"The truth will come out in third quarter investor reports released at the end of the month," said Jamie Court, president of Consumer Watchdog, who said a windfall tax could help rein in surging gas prices. "Historically, every gas price spike in California shows up as a profit spike as well."
Republicans said they would reject the tax proposal because it would further increase costs for consumers.
"It's a foolhardy approach, it’s a foolhardy proposal," said Assembly Republican Leader, James Gallagher (R-Yuba City). "If the Democrats want to get behind that, by all means, let everybody know that’s what they want to do."
A special session to impose a tax could be politically challenging for some state lawmakers hoping to retain their seats in the legislature this upcoming election. On the other hand, support in January may not be guaranteed for Newsom, with significant turnover expected in the Assembly and Senate because of vacancies related to term limits, redistricting and resignations. The leader of the Assembly may also change if lawmakers in that house choose to elect Robert Rivas as Speaker instead of Anthony Rendon.
Newsom made the special session remarks at an event in San Francisco where he joined the governors of Washington, Oregon and the British Columbia premier to sign a climate-related agreement to continue working together toward a low carbon future and, in part, reduce the use of oil and gas.
Shortly after the event Thursday afternoon, Newsom began campaigning off of the windfall tax proposal.
"Oil companies are ripping you off," his campaign email read. "And they are laughing all the way to the bank while making the planet uninhabitable for future generations. That ends now."