Gov, Newsom and Legislature Strike Deal on Price Gouging Penalty as CA Oil Drilling Permits Surge

By Dan Bacher | 

Los Angeles, CA –  Consumer Watchdog and the Governor’s Office just announced that Governor Gavin Newsom and California legislative leaders have reached a deal to move forward with a new oil refiner accountability law, including a price gouging penalty, before the legislature adjourns on April 1.

Governor Gavin Newsom’s special session proposal to hold Big Oil accountable, authored by Senator Nancy Skinner (D-Berkeley), is now in print.

“The measure includes a dedicated, year-round independent watchdog to root out price gouging by oil companies,” according to a statement from the Governor’s Office. “The language of the special session proposal can be found here. With this step, the bill can now move through the legislative process of committee hearings and votes”

“Together with the Legislature, we’re going to hold Big Oil accountable for ripping off Californians at the pump,” said Governor Newsom. “Today’s agreement represents a major milestone in our efforts to drive the oil industry out of the shadows and ensure they play by the rules. This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging. We’re getting the job done for California families.” 

“This is a landmark deal that will give California power to stop the price gouging at the pump that has plagued Californians for decades,” said Court. “This will make California the first state in the nation to have the power to impose a price gouging penalty on refiners and to demand this level of transparency from them. 

“The Governor and legislature are to be congratulated on a deal that gets needed information into the hands of regulators to prevent the price spikes that have targeted Californians and to arm the regulators with the power of penalty when price gouging occurs,” Court continued.

“This legislation will give regulators the ability to see behind the curtain of gasoline pricing in California and to punish oil refiners when they profiteer off Californians.  The California Energy Commission will need be on its game and Consumer Watchdog will be there to make sure it carries out these vital new functions effectively and efficiently,” Court concluded.

The agreement includes:

• A price gouging penalty on oil refiners when they make too much money per gallon at a level to be determined in a rule making by the California Energy Commission.
• New transparency over refinery shudowns, transactions that compose the crucial spot market where retail prices are set, export and import activity, pipeline activity, and other aspects of the industry that have been shielded from regulators for too long.
• A new division of the California Energy Commission dedicated to monitoring the market on a daily basis.

“Among the most important provisions of the law is the new ledger to be kept for transactions on the gasoline spot market. Regulators will have to be informed of all trades to make sure the crucial spot market — where the price retailers pay oil refiners for the gas is set — is not manipulated,” noted Court.

The Western States Petroleum Association and the big oil companies have been strongly opposing the price gouging penalty for California oil refiners.  

On March 16, Catherine Reheis-Boyd-Boyd, President of the Western States Petroleum Association and former Chair of the Marine Life Protection Act (MLPA) Initiative to create “marine protected areas” in Southern California, slammed the price gouging penalty, claiming it is “simply just another tax wrapped in unchecked and expensive bureaucracy.”

“We have not seen any details and are not aware of any ‘deal’ with legislators,” according to a statement on the WSPA website on March 16, before the deal was reached. “However, It sounds like the Governor wants to create a new state agency and empower unelected bureaucrats to impose more taxes and increase costs.”

“At the end of the day, this proposal does not solve California’s 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,” she claimed.

While the deal between the Legislature is a promising development, the Newsom Administration has continued to issue hundreds of neighborhood oil drilling permits. On March 17, climate activists with the Last Chance Alliance held a protest at noon outside the California Natural Resources Agency Building to draw attention to this overt example of environmental injustice on behalf CalGEM, the state’s oil and gas regulator.

The environmental justice advocates held banners proclaiming, “Rein In Rogue Regulators,” “Gov. Newsom: Climate Leaders Don’t Drill, “and “This Is An Emergency.” They also used props, including an oversized “rubber stamp” and “oil derricks,” to call out CalGEM for rubber stamping oil drilling permits in neighborhoods across the state.

A total of 649 permits have been approved since the start of the year by CalGEM, Of those, 389 permits (60%) were issued inside the health protection zones that would have been created by Senate Bill 1137, according to an analysis by Kyle Ferrar, Western Coordinator of the Fractracker Alliance.

This brings the total number of permits to an astounding 14,374 new and reworked oil drilling permits approved by CalGEM since Jan. 2019, when Newsom took office.

According to FracTracker’s analysis of data from state oil regulator CalGEM, permits were issued within 3,200 feet of Los Angeles, Ventura, Kern, Central Coast and Northern California communities. Download a map of permit approvals within the 3,200’ health protective zone.

Members of Last Chance Alliance sent a letter to Gov. Newsom last Tuesday asking him to rescind the permits, stating: “CalGEM approved these permits without any environmental review of the serious harms that are likely to result from these dangerous operations.”

“CalGEM issues rework permits to oil and gas operators who are modifying an existing well. Rework operations are significant sources of pollution that put frontline communities and sensitive individuals at elevated risk of health impacts,” the Alliance stated.

The California Independent Petroleum Association (CIPA) sponsored the referendum that has delayed the implementation of the setbacks law for two years. Filings with the California Secretary of State reveal that oil companies funneled over $20 million to the committee Stop the Energy Shutdown, a “Coalition Of Small Business Owners, Concerned Taxpayers, Local Energy Producers And The California Independent Petroleum Association.

“CalGEM issuing hundreds of permits to negligent oil companies so they can continue drilling in our communities just months after they released an emergency rule to block neighborhood drilling is exactly why we don’t trust them,” said Cesar Aguirre, organizer with Central California Environmental Justice Network. “This is exactly the free-for-all that California’s oil industry wanted when they bought their way onto the ballot and forced the stay of SB 1137.”

Today’s announcement of deal between the Governor and Legislature comes in the wake of a campaign by the Western States Petroleum Association (WSPA) to fund dinners and awards for journalists. On March 16, the Sacramento Press Club announced in a tweet that WSPA is the new “Lede Sponsor” of the Sacramento Press Club’s Journalism Awards Reception.

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