It was just a few weeks ago that California Gov. Gavin Newsom called the oil industry the second most powerful force on earth, trailing only Mother Nature in its ability to bend the elements \u2014 both physical and political \u2014 to its will.
Yet on Tuesday, Newsom signed a new law that gives state regulators the power to penalize oil companies for making too much money, the first of its kind in the country. It\u2019s the type of legislation the oil industry might have crushed in the past. But on Monday, the bill cleared the state Assembly with only one Democrat voting against it.
\u201cWe proved we could finally beat big oil,\u201d Newsom said Tuesday after signing the bill.
The bill is the latest in a string of defeats for the oil industry in California, a state many don\u2019t think of as a fossil fuel powerhouse. But for decades, California was one of the leading oil producers in the United States with a bustling industry that was a key part of the state\u2019s economy. The state is now the nation\u2019s seventh-largest oil producer, according to federal data.
The oil industry doesn\u2019t mind a David vs. Goliath comparison \u201cas long as you think we\u2019re David and not Goliath,\u201d Kevin Slagle, spokesperson for the Western States Petroleum Association, said about the industry\u2019s influence at the state Capitol. \u201cJust look at the results the last couple of years on legislation.\u201d
Oil production has been steadily declining since the late 1980s from a combination of exhausting supplies and the state\u2019s changing policy priorities. A state law requires California to be carbon neutral by 2045, meaning the state would remove as many carbon emissions from the atmosphere as it emits. The state\u2019s plan to do so would reduce demand for liquid petroleum by 94% by 2045.
State regulators have banned the sale of most new gas-powered cars in California by 2035. And last year, the state Legislature approved a bill limiting where new oil wells can be drilled, providing buffer zones around homes, schools and other sensitive sites.
\u201cWe\u2019re never going to get it right, in terms of this transition (away from oil), unless we minimize and mitigate the power and influence of big oil in this country,\u201d said Newsom, now in his second term in office and widely seen as a potential presidential candidate beyond 2024. \u201cThey\u2019re the biggest impediment to a just transition.\u201d
While its influence in California might have diminished, the industry is still asserting itself. The Western States Petroleum Association spent $11.7 million lobbying lawmakers in the 2021-2022 legislative session, far more than any other single group. Chevron followed behind it, spending $8.6 million, according to state campaign finance filings. The next closest single spender was the California Teachers Association, at $7.1 million.
Likewise, the industry spent millions on campaign contributions in the 2022 election, supporting both Democrats and Republicans. More than a quarter of all 120 seats in the Legislature are newly elected members.
Those donations did not always translate to favorable votes. New Assemblymember Esmerelda Soria, a Democrat who represents parts of the Central Valley, was the top beneficiary of money from a Western States Petroleum Association-affiliated committee. Soria voted Monday to support the legislation despite industry opposition.
The only Democrat to vote against the potential oil profits penalty was Assemblymember Jasmeet Bains, whose district includes Kern County, home of the state\u2019s oil industry. Her vote appeared to irk the Newsom administration.
Bains, a family medicine and addiction doctor who was first elected in November, tweeted a picture of the vote, saying: \u201cStand alone if you must, but always stand for truth.\u201d
Dana Williamson, Newsom\u2019s chief of staff, replied: \u201cAlone and confused you shall likely remain.\u201d
Bains said she voted against the bill because during the height of the gasoline price spike last summer, the Newsom administration and legislative leaders refused to suspend the state\u2019s gas tax. They argued oil companies would not pass along the savings to drivers.
\u201cWhat\u2019s to stop them from passing on the cost of this new tax with high prices at the pump?\u201d Bains said. \u201cThat inconsistency is even more frustrating.\u201d
Though the industry couldn\u2019t stop the legislation, its presence could be felt in the final version, said Chris Micheli, a veteran California lobbyist who represents business clients but was not involved in the oil profits legislation. Newsom initially called for the Legislature to pass a new tax on oil company profits. Then he asked lawmakers to instead impose a penalty if oil company profits surpassed a certain threshold.
Finally, Newsom and lawmakers agreed to let the California Energy Commission decide, punting the decision to a five-person panel appointed by Newsom with the consent of the state Senate. The bill also creates a new state agency with the power to monitor the petroleum markets, including requiring oil companies to disclose lots of data about their pricing.
\u201cThe fact it took them three different substantive proposals to find something that would actually pass the Legislature I think goes to show the continued power and influence of the oil industry in this state,\u201d Micheli said.
Next year, the oil industry will be looking to exert its influence in another arena \u2014 public opinion. The industry is challenging a new state law that bans drilling new oil wells nearby homes, schools and other sensitive areas. Voters will decide in 2024 whether to uphold the law.
\u201cThe partisan numbers of the two houses of the Legislature have dramatically changed,\u201d Micheli said, referring to Democrats now having total control over state government. \u201cThe broader business community is going to have to go to the voters on some issues of public policy.\u201d
Newsom acknowledged Monday the importance of oil for the global economy, telling reporters: \u201cI\u2019m driving home tonight\u201d and \u201cI\u2019m flying this weekend.\u201d
\u201cOil has built the American economy, built the industrial economy, I get it,\u201d Newsom said. \u201cBut we are transitioning. And all I\u2019m asking for is don\u2019t rip us off anymore.\u201d<\/p>\n\n\n\n