Oil spends millions at California Capitol. Did it weaken Newsom crusade against high gas prices?

Five months ago, Sacramento Sen. Angelique Ashby won her election with millions of dollars in support from an oil industry political action committee.

On Tuesday at the Capitol, she stood next to a “Holding Big Oil Accountable” sign, joining lawmakers in celebrating Gov. Gavin Newsom’s signature on the bill that could penalize the industry for high California gas prices.

Ashby never accepted direct oil contributions and denounced the PAC’s independent expenditure ads. But her embrace of the bill, alongside colleagues who also benefited from significant sums of oil cash, was a stark demonstration of the limits to the industry’s power.

“I really haven’t changed my position,” Ashby said. “I said back when the governor called for the special session that it was a really good idea. For me, the focus here isn’t the oil companies and it isn’t a campaign that’s over with and it isn’t the governor. It’s the people of California. The gas prices were too high. It happens each year. We need to do something about it.”

So did the millions in oil money and lobbying have any impact on the final version of Newsom’s oil accountability bill? Depends who you ask. Industry representatives say they were ostracized. Consumer advocates see oil’s fingerprints on the final product.

Oil money flows

During the last four years, oil and gas companies and their interest groups spent nearly $72 million lobbying the state government — primarily the legislature — records from the California Secretary of State’s office show.

Fifteen large oil companies gave about $3 million to individual state Assembly and Senate candidates from 2019 through 2022, according to a Bee review of Secretary of State campaign finance data. The selected companies contributed to more than 110 different candidates, donating at least $5,000 to most.

Dozens of lawmakers received more than $30,000 during the 2019-2020 and 2021-2022 election cycles, and a handful got more than $80,000.

The Western States Petroleum Association alone spent nearly $25 million lobbying during this period. Chevron and its affiliates spent nearly $19 million. All told, 11 different oil and gas companies or organizations spent at least $1 million each lobbying state government.

Those figures largely exclude additional tens of millions spent on committees created primarily to support or oppose ballot measures. Millions more were donated to political action committees or political parties not tied to particular candidates.

But oil dollars did not stop the governor from attacking oil companies after Californians struggled with especially high gas prices during the summer and fall of 2022.

Newsom last October called for a special legislative session to pass a windfall tax on oil companies for allegedly collecting excessive profits while Californians suffered from high gas prices. But, along the way, his anti-oil crusade was pruned back to focus on requiring transparency from the industry.

Rather than enacting a cap and penalty on oil refinery profits, the law instead creates an independent watchdog group at the California Energy Commission and demands more information from the industry.

Oil companies will be subject to extensive reporting requirements, including information on refinery maintenance. The Division of Petroleum Market Oversight will have the authority to establish penalties if maximum profit margins are exceeded.

Oil stains on the bill?

The oil industry is one of the California Capitol’s biggest spenders, but the evolution of Newsom’s accountability legislation shows a mixed picture of its influence.

Newsom kicked off the special session in late 2022. But initial language for Senate Bill X1-2, authored by Berkeley Sen. Nancy Skinner, was vague and contained no specific numbers for a profit cap or penalty.

The Newsom administration came together with Senate and Assembly working groups to hammer out the bill behind the scenes during the ensuing months. Those negotiations ramped up in recent weeks.

The full Legislature first saw the final language on March 20, and Newsom signed the bill just over a week later.

Western States Petroleum Association (WSPA) president and CEO Catherine Reheis-Boyd said her organization and other industry players were entirely excluded in recent weeks. She said the reporting requirements and refinery restrictions will impose undue burdens, and the association is developing amendments for future consideration.

“This is something that the governor wanted and got (legislative) leadership and the deal was done,” Reheis-Boyd said. “The whole process occurred with no input from us in a very short amount of time.”

Yet Reheis-Boyd acknowledged playing a key role in scuttling Newsom’s initial idea for a windfall tax. The governor’s office and lawmakers pushed the final version through quickly to avoid a “propaganda misinformation campaign,” said Jamie Court, Consumer Watchdog president.

The industry had its way in some respects, he said. Production data will be kept from the public eye and companies will have the opportunity to air concerns at Energy Commission hearings. Even lawmakers sympathetic to the industry’s point of view said companies simply charged too much last year, at a time when high gas prices could threaten progress on state climate goals, Court said.

“The oil industry spends an inordinate amount of money on both campaign contributions and lobbying,” Court said, suggesting that has kept the oil industry more opaque than other key markets like electricity and natural gas.

“It completely influences debate because they just now got to the place they should have been 10 or 12 years ago, when we first started to see this gap with U.S. gas prices. Now their influence is being limited. Currently, they’re not getting everything they want.”

Limits of oil influence

Experts and lawmakers who worked on the bill say oil industry input was limited, and they are happy with the final product.

Severin Borenstein of UC Berkeley’s Energy Institute, considered the state’s leading independent analyst of gasoline price trends, said the evolution of a profits cap to transparency law indicated that lawmakers were trying to avoid unintended consequences, not industry influence.

“I don’t think this is a case of them squashing a good idea with their political might,” he said of the oil industry. “I think there was a debate and most of the Legislature came to the conclusion that going straight into a price-gouging penalty written in law would be a bad idea.”

Assemblyman Alex Lee, D-San Jose, in March 2022 attempted to establish an oil windfall tax by gutting and amending a bill from former Assemblyman Kevin Kiley, R-Rocklin, that would have suspended the state’s gas tax.

The bill did not advance. But Lee said he was surprised when he later heard Newsom push the idea of a “really aggressive proposal” like a windfall tax. Lee was a member of the Assembly working group that negotiated the final bill language, which included elements not in the governor’s original proposal, such as refinery monitoring.

Lee agreed Western States Petroleum was successful in pushing back against the original windfall tax, saying “people get very iffy about that.”

As for members who receive oil campaign contributions, that could make them “more reticent and more skeptical,” he said.

“I think it makes you more resistant to it,” Lee said. “But I really don’t think anything that WSPA wanted is in our bill.”