Gavin Versus Gas
The cold war between Governor Gavin Newsom and Big Oil is heating up this week.
The battle-lines for the next skirmishes are already drawn:
Big oil is putting down stakes and gathering signatures for a ballot measure to undo the Governor’s crowning climate legislative achievement—a best in the nation “setback” law that bars oil companies from drilling new wells near schools, hospitals, or residential neighborhoods.
The governor is calling for a windfall profit tax on big oil, and announced that he’ll call for a special session of the legislature in December to press the issue.
But it’s the contours of the broader fight between Newsom and the oil industry, and the looming potential for redrawn political alignments that comes with these kinds of clashes between some of the most powerful and monied forces in the state, that has Sacramento buzzing. Among the big questions whispered around the capitol:
How will the Governor’s handling of this fight impact his presidential ambitions?
Will Democrats with campaign war chests heavily funded by big oil side with the Governor or thwart him by lining up with Republicans in the legislature?
Will the California Building Trades side with big oil; and, if so, is this the sin that will finally rip apart the tattered relations between The Trades and other powerful labor groups?
Are these the last ditch efforts of a politically weakened oil industry unable to meaningfully oppose progress on climate legislation in the state? Or can the industry flex its muscles enough to put the fear of electoral defeat into state officials and buy California’s fossil fuel dependence more time?
Golden State Grid is tracking these questions, and we’ll bring you the intelligence you need to stay on top of the shifting power dynamics and alliances as the drama unfolds over the coming weeks and months.
For this week, here are three things to read that capture what the media and political insiders are saying out loud on Gavin versus Gas:
1. $$$. The oil industry has raised over $8 million dollars since announcing the proposed ballot measure to undo the setback bill:
That $8m is significantly more than half of the $12-15 million needed to secure enough signatures to appear on the ballot. And, remember, getting on the ballot is the point here because doing so means at least a two year pause on the law’s implementation (not including any litigation related delays) even if voters ultimately reject the measure. That’s two more years of profits for the industry—or, in starker terms: a good return on investment for big oil in terms of both their bottom line and deflating Newsom’s balloon.
2. Newsom leads, Biden follows. As reported in Politico California Playbook yesterday, President Biden, too, appears to be shifting to offense on gas prices, calling out the oil industry for amassing record profits as Americans struggle to afford to fill their gas tanks:
Both Gov. Gavin Newsom and President Joe Biden have argued that a profit-hoarding energy industry is responsible for higher costs. Biden made that point repeatedly in a speech yesterday warning that fossil fuel companies were channeling profits to shareholders rather than consumers as the per-barrel cost declines. “You should be using these record-breaking profits” to bolster production and “bring down the price you charge at the pump to reflect what you pay for the product,” Biden said. That earned a shoutout from the governor. Newsom has taken an even more aggressive stance, repeatedly assailing “greedy oil companies” as he pushes the Legislature to enact a tax on windfall profits.
3. Republicans, too, want a special session to address gas prices. Over two dozen Republican Members of the Senate and Assembly signed a letter calling for a special session to be convened “immediately” (not in December) to consider (not a windfall profit tax, but) “legislation to suspend the state gas tax.”
Here’s how to unpack that request:
It’s not going to happen. Newsom opposes suspending the gas tax, and Speaker Rendon and President Pro Tem Atkins have voiced serious reservations in the past. Why? Three reasons: First, Dems say it’s a red herring—.54 cents-per-gallon when the average price-per-gallon is $2.50 more in California than in the rest of the country. Second, the revenue from the tax funds vital services. And, third, as Newson emphasized recently, oil companies could pocket much of the savings rather than passing it on to consumers.
Tight margins on a windfall tax. Newsom needs to marshal two-thirds of the Assembly and the Senate. He can’t count on any Republican votes, as their caucus letter makes clear. That’s normally not a big deal. After all, Democrats have a supermajority in both the Assembly and Senate. But two considerations here that make it more difficult: 1) bills that increase taxes have a way of peeling off support (though, the dynamics around a windfall profit tax on big oil could present a different calculus); and 2) when it comes to votes against the interests of the oil industry, the Democratic caucus isn’t always a united front. As Newsom put it recently, the legislature “may be dominated by Democrats, but many of us are wholly owned subsidiaries of the fossil fuel industry.”
And that brings us to December. The Republicans want the special session now because it allows them to grandstand and garner media attention connecting Democrats to the high prices at the pump before the midterm election. Newsom wants the special session in December because it eases the electoral stress on Democrats facing election in November, especially the ones still doing call time to ask those oil executives for a few more checks before November 8th.