Gov. Gavin Newsom called California lawmakers into a special session Saturday after Assembly Democrats rebuffed his request to approve new requirements on oil refineries in the final days of the regular legislative session that ends Saturday night.
The unusual move effectively forces the legislature to work overtime to address the complex and politically sensitive issue of energy affordability as campaigning heats up ahead of the Nov. 5 election.
Newsom’s order requires lawmakers to formally open a special session today, but it’s unclear when they plan to hold hearings to consider the bills or how long the session will last. Lawmakers were scheduled to leave Sacramento this weekend for a four-month stint in their home districts.
“It should be common sense for gas refineries to plan ahead and replenish their reserves when they are shut down for maintenance to avoid price spikes. But these price spikes are actually profit spikes for Big Oil, and they are using the same old scare tactics to maintain the status quo,” Newsom said in a statement.
“Calling the session now allows the Legislature to begin this work immediately so the state can address this important issue now to establish the rules needed to prevent price spikes next year and beyond.”
This is the second time in two years that Newsom has called a special session focused on the economics of the oil industry, a topic that has divided Democrats as they mix their desire to combat climate change with ambitions to lower prices at the pump. Newsom has blamed high gasoline prices on the industry, which he has accused of gouging consumers. Oil companies point to climate change and state tax policies as factors in the rising prices.
Two weeks ago, Newsom announced a proposal to require oil refiners to maintain stable inventories to avoid fuel shortages and price spikes when refinery equipment is taken offline for maintenance.
As the oil industry lobbied hard against the proposal, Democrats in the Assembly and Senate sparred over how to proceed. Lawmakers said they were frustrated by Newsom’s attempt to ram the plan through the Capitol at the last minute.
In a statement Friday, Assembly Speaker Robert Rivas (D-Hollister) said his group agreed with the governor on the urgent need to address affordability and would get results if a special session were called. But he declined to bring the bills to a floor vote before Saturday’s deadline.
“I’m not going to pass bills that haven’t been adequately vetted in public hearings,” Rivas said. “That could have unintended consequences on Californians’ pocketbooks.”
Assembly Speaker Robert Rivas said he would not rush Newsom’s energy proposal through the Legislature.
(Rich Pedroncelli/Associated Press)
Newsom’s office began discussing with the Senate and Assembly earlier this summer legislation that would allow his administration to require oil refiners to maintain stable inventories to avoid fuel shortages in California.
After gathering more information on prices from laws passed during a previous special session on oil that ended last year, state regulators reported that pump fees increase when oil companies don’t keep enough refined gasoline on hand to fill production shortfalls or protect against the impact of unplanned maintenance.
Leaders of the Western States Petroleum Assn. said the governor’s refinery proposal would drive up fuel costs in California and reduce supplies to Arizona and Nevada. That argument has raised political concerns: State politics could become a national headache for Vice President Kamala Harris and other Democrats in a crucial election year.
“It is remarkable that lawmakers are considering such radical energy policies at a time when the nation is taking a hard look at the impact of the ‘California model’ on their families and their wallets,” Catherine Reheis-Boyd, CEO of the Western States Petroleum Assn., said in a statement this week.
The warning from WSPA, Chevron and other industry players spooked Assembly Democrats, who were also angered by the proposal’s late introduction.
In an effort to reach a deal with Democratic lawmakers, the proposal was bundled with other bills in the Senate and Assembly during negotiations with leaders of both chambers. But environmentalists opposed some of those proposals, leaving Democrats with a series of bills that have drawn ire from both ends of the environmental policy spectrum.
One of the Assembly bills, which would have slashed energy and climate programs that fund HVAC upgrades in schools, energy storage and generation technologies in vulnerable communities, and solar energy systems on affordable multifamily housing in order to get a meager one-time customer credit on electric and gas bills, drew widespread opposition from a coalition of environmental, education, housing and energy groups. Another bill, backed by ratepayer advocates, would have required the Public Utilities Commission to develop a framework for analyzing total annual energy costs for residential households.
The bills didn’t provide enough incentive for Assembly Democrats to pass the plan this week. They were also disappointed by efforts by Senate President pro tempore Mike McGuire (D-Healdsburg) to use the opportunity to pass Senate bills that would speed up environmental reviews of clean energy and hydrogen projects, save taxpayers money by reducing requirements for utilities’ wildfire mitigation plans and make it harder for companies to cut off utility services to customers.
The drama marked another effort by a governor in the final two years of his second term to push last-minute bills through a legislature led by two new leaders. Earlier this summer, lawmakers also balked at a bill that would have put his measure targeting retail crime on the ballot.
Newsom’s decision to call a special session also marks the second time he has sought to toughen California’s oil laws outside the usual two-year process for considering bills, which runs from January to August or mid-September each year.
Two years ago, the governor called a special session to penalize oil companies for excessive profits as gasoline prices soared. But lawmakers were ultimately reluctant to pass a penalty, and Newsom narrowed his request to instead demand more transparency from the industry.
Instead of imposing a cap and penalties on oil refinery profits, Newsom and lawmakers gave state regulators the ability to do so in the future. Consumer advocates and the governor hailed the resulting law as a game-changing tool that could keep gasoline prices from rising.
But Nevada Republican Gov. Joe Lombardo joined the industry and his party in May when he sent Newsom a letter warning that a cap could “further increase gas prices for both of our constituencies” because his state’s gas comes largely from California refineries.
On Friday, Andy Walz, Chevron’s president of Americas products, sent a letter to the California Energy Commission, saying Newsom’s new refinery proposal “endangers the safety of refining operations, the proper functioning of markets and would leave industry and labor experts without a voice in key policies.”
“The physical, operational and financial constraints of maintaining unnecessary inventory are also concerning,” he wrote. “Building just one new storage tank could take a decade and cost $35 million. Those costs would likely be passed on to the consumer. And given the current regulatory regime, with permitting constraints and a ban on the sale of gasoline-powered vehicles, there is no opportunity to recoup the capital invested in building additional tanks, which could be the ‘last straw’ for investors in the state’s energy market.”
The timing of a second special session on oil regulation could work in Newsom’s favor if lawmakers get to work immediately.
Newsom will have finished signing the bills on his desk by Sept. 30, meaning he could have the political advantage if the special session begins before that time. If the special session begins after the bills are signed, the governor could lose some of that advantage.
But when, and if, they ultimately pass new mandates on the oil industry or cut electricity bills could also affect the election.
Laws that save consumers money could give them a selling point to their voters. Laws that could raise gasoline prices could be used as a weapon in California elections or national contests.
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