For the record:
9:19 a.m. March 16, 2023: An earlier version of this article reported that the deal between Newsom and lawmakers includes a requirement for oil refiners to report maintenance to the state in hopes of preventing rapid and unexpected declines in gasoline production in California. Newsom has not reached a deal with lawmakers on his oil regulation proposal.
Gov. Gavin Newsom is giving up his high-profile call for the California Legislature to set a cap on oil company profits and instead will ask lawmakers to increase transparency and oversight of the industry.
The governor's amended proposal, announced Wednesday afternoon, would give the California Energy Commission more authority to investigate gasoline price spikes and the option, through a public hearing process, to place a cap on profits and penalize oil companies, Newsom's aides said.
"What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows," Newsom said in a statement. "Now it’s time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”
Newsom called for swift passage of a penalty on oil companies in October when he announced his intent to convene state lawmakers into a special session to rein in the oil industry's excessive profits. He accused oil companies of price gouging at the pump after gasoline prices topped $6 a gallon.
But determining the level at which refinery profits should be penalized became a political hot potato in Sacramento. Democrats were concerned that the plan could potentially backfire because of the complicated nature of the oil markets, lack of transparency from the industry, and concern that it could carry unintended consequences on gasoline prices.
Newsom's office in December gave lawmakers an outline of his plan to cap the industry's profits when the special session convened, but left lawmakers to determine the limits on those profits.
Over more than three months, the Legislature held only one hearing on the proposal. State senators appeared apprehensive about the plan, and experts encouraged the state to take more time to investigate and understand the problem before passing a solution.
Newsom's new proposal would shift that responsibility to the Energy Commission, but his aides acknowledged there will be no requirement for regulators to cap profits or penalize the industry. All five members of the commission have been either appointed or reappointed by Newsom.
Assembly Republican leader James Gallagher of Yuba City criticized Newsom's choice to place the decision in the hands of the commission.