How Newsom didn’t hit the oil penalty he wanted but still scored a political victory

Governor Gavin Newsom called last fall for a special legislative session to penalize the profits of California oil companies.

The narrative, woven into news articles across the country, almost read: The Democratic Governor was launching a new offensive in his war with Big Oil.

The battle, however, did not go as planned.

State lawmakers in his own party balked at his idea of ​​capping industry profits. In the legislative hearings, some said they found no “irrefutable weapon” to back up Newsom’s intentional price-hitting claims.

The final version of the bill sought to require more transparency from the industry. Instead of enacting a cap and penalty on oil refinery profits, Newsom and lawmakers gave state regulators the option — but not a mandate — to do so in the future. Consumer advocates hailed the new law as a game-changing tool that could prevent gasoline prices from escalating.

But even if the law falls short of the policy he originally said he wants, it still gives the governor a political victory over the oil industry. The act allows Newsom to position himself as a cutting-edge leader who has won a victory against a politically powerful industry that many progressives view as a bogeyman.

During a bill signing on Capitol Hill on Tuesday, Newsom stood with Democratic lawmakers and praised their cooperation as he conducted another dig into the oil industry. He argued that the final legislation is stronger than his original idea because it creates a new division within the California Energy Commission to act as a watchdog over oil companies.

“Finally, we are able to look our constituents in the eye and say that we now understand better why you are being taken advantage of,” Newsom said.

“There’s a new sheriff in town in California, where we’ve brought Big Oil to its knees. And I am proud of this state.

Yet Newsom also acknowledged that it would take time for Californians to feel the effects of the law: “Nothing is going to happen in the short term,” he said. “Gas prices are not going to come down immediately.”

David McCuan, chairman of the Sonoma State Department of Political Science, said the special session was emblematic of Newsom’s strengths and weaknesses.

Newsom tends to try to “go it alone” and drive an agenda before crafting policy, which often forces him to backtrack, McCuan said.

When the governor announced in October his intention to call a special session in December, he told reporters he was still battling what he later described as a plan to impose a tax on companies oil companies.

Yet even as he jumps ahead with political statements that lack political detail, Newsom has shown a knack for grabbing headlines and getting ahead of other politicians.

His timely words announcing the extraordinary session drew attention across the country. The governor blamed the oil industry, just a month before his re-election, as voters in Golden State were steam-pressed by near-record gas prices that topped $6 a gallon.

“It’s token politics over substantive politics,” McCuan said of Newsom’s special session.

Newsom’s aides disagree with criticism that the governor stepped down. According to them, the legislative process worked as expected and resulted in the best possible policy. The new plan also gives more power to the Energy Commission, and all five members were appointed or reappointed by the governor.

After reviewing his brainchild, California executives learned they needed more information and transparency from the industry in order to understand the market and determine whether a sanction was necessary.

Anthony York, the governor’s spokesman, also argued that the policy is more than symbolic. Newsom’s efforts to call out the oil industry are a key part of his political agenda.

“California has been a world leader in clean energy, and our success in this transition depends in large part on our ability to weaken the political power of the oil lobby,” York said. “We need to end the stranglehold they have had on our politics for decades.”

State Sen. Nancy Skinner (D-Berkeley), who drafted the bill, called it “the nation’s strongest and most effective transparency and oversight measure.”

“This landmark law will allow us to hold oil companies accountable if they increase their profits at the expense of hard-working families,” she said at the bill signing ceremony.

While Newsom may not have gotten everything he wanted from the Legislative Assembly, he deserves a victory lap for what he has achieved, said Roger Salazar, a Democratic political consultant and former aide. statement from Governor Gray Davis.

“Sometimes when you shoot for the stars, you get the moon. And that seems to be the case here,” Salazar said.

“He obviously wanted to make a bold statement about the oil industry at a time when many Californians were feeling its effects. … But I think he’s also pragmatic and realistic. And given the limits of what was possible, I think he’s going to be right to describe it as a success.

Salazar said the legislation could serve to give Newsom national bragging rights.

“That kind of achievement, while perhaps not what he was aiming for, is a few steps further than most other states have been able to achieve,” he said.

Environmental advocates expect Newsom to use the new transparency law to tout his good faith as a warrior against Big Oil – and see it as an opening to push him to further restrict oil drilling in California .

Newsom administration officials continued to approve permits for oil drilling projects near homes and schools. The governor signed legislation banning new oil and gas wells in such sensitive locations, which is now on hold until voters decide on a referendum next year.

“There’s a big gap here in terms of how they publicly hold the oil and gas industry accountable versus what the agency actually does,” said Brandon Dawson, director of Sierra Club California, which supports the new law on transparency.

“It’s a strange and unique balance, but how he uses it politically will not be without scrutiny from the environmental community. I can tell you that.”

Mary Creasman, executive director of California Environmental Voters, said the bill puts the state on a path to regulating industry and limiting oil profits, which she called “game over.” .

“This is a really big step and shines a light on a corrupt industry in order to protect consumers, and there are more steps in the process,” Creasman said. “There is more work to do.”

The powerful oil industry lobbied against the proposal, arguing it would only make it harder for refiners to operate in California.

GOP Assemblyman Vince Fong, who represents the oil-rich region of Bakersfield, called on lawmakers to defeat the bill on Monday before Democrats send it to Newsom. Fong criticized the approach, saying that the policies “that we adopt in this body must be based on economic reality, not to grab political headlines.”

McCuan said Newsom could get away with over-promising and under-delivering in California, where the governor has no serious political challengers and Democrats in the Legislature are widely looking to come to terms with him.

But McCuan said that would start to change if Newsom looked beyond California and faced competition for his next step. Although Newsom has repeatedly denied any interest in the White House, McCuan and others believe he is presenting himself as a backup option in case President Biden does not seek re-election.

“What I would say is they come up against a legitimacy factor,” McCuan said of Newsom and his team. “Their gimmicky approach and their approach to political sorcery doesn’t necessarily get you into the hearts and minds of early primary voters.”

Sean Clegg, Newsom’s top political strategist, said the bill gives state regulators “the hammer to hit” oil companies when they cross the line. And that’s more than any other state has done.

“When you take big transformative swings, you have to lead from the front,” Clegg said. “He’s going to be the first US governor to hold the oil industry responsible for rising prices.”

Americans can expect to hear more.