Legislation to Monitor Gasoline Prices and Impose Penalties on Refiners Passes Senate
Legislation to implement Newsom’s recent amended proposal for an oil profits penalty heads to the state Assembly.
Reader note: For more in-depth coverage of California energy policy, see The California Energy Transition.
Legislation to create a watchdog to monitor gasoline prices with the authority to impose a penalty on refiners passed the California State Senate March 23, 2023. The bill, SBX1-2, would also impose new reporting requirements on pipelines, port operators, and refiners. The legislation follows Newsom’s March 15, 2023 amended proposal for an oil profits penalty. (see Newsom Amends Oil Profits Penalty Proposal.)
The bill “represents a major milestone in our efforts to drive the oil industry out of the shadows and ensure they play by the rules,” Newsom said in a statement earlier in the week. “This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging.”
Division of Petroleum Market Oversight
The legislation would establish the Division of Petroleum Market Oversight within the California Energy Commission (CEC) with a director appointed by the governor and subject to Senate confirmation. The division would operate with authority independent of the CEC.
The division would provide guidance and recommendations to the governor and the CEC on issues related to transportation fuels pricing and “transportation decarbonization.” The bill would establish the Independent Consumer Fuels Advisory Committee to advise the CEC and the division.
The new division would have access to new information required to be reported by refiners (see below) along with subpoena power to compel refiners to produce additional data and records that could show patterns of misconduct or price manipulation. It would also have the authority to refer violations of the law to the California Attorney General’s Office for prosecution.
The legislation also authorizes the CEC to begin a rule-making process to create a penalty structure for price gouging. The structure would impose a civil penalty on refiners who charge more than a maximum allowable margin for the price of gasoline.
Reporting Requirements for Pipeline and Port Operators
The bill would impose new reporting requirements on pipeline operators and operators of ports through which refined gasoline is imported. The bill would require pipeline and port operators to report annually their capacities for all pipelines and ports used to transport refined gasoline; all importers of refined products and renewable fuels via marine vessel would be required to submit reports to the CEC; non-refiners that commercially trade in gasoline, gasoline blending components, diesel fuel, or renewable fuel inventory would submit weekly reports to the commission; refiners and non-refiners that consummate spot market transactions would submit a daily report to the CEC containing certain information for each transaction occurring in the preceding day; and refiners would report planned and unplanned maintenance activities.
Reporting Requirements for Refiners
This bill would require operators of refineries to report additional information, including the net gasoline refining margin per barrel of gasoline sold in that month. The CEC would be required to post on its internet website certain information related to the net gasoline refining margin.
Annual Report to the Legislature
This bill would require the CEC, in cooperation with the California Department of Tax and Fee Administration, to submit an annual report to the legislature that reviews the price of gasoline in California and its impact on state revenues for the previous calendar year. The CEC would be authorized to request from any person certain records to facilitate the report or to assist the commission.
This bill would also require the CEC, on or before January 1, 2024 and every three years thereafter, to submit an assessment to the governor and the legislature on ensuring a reliable supply of affordable and safe transportation fuels in California. It would require the CEC to use reasonable means necessary and available to seek and obtain information from any sources for purposes of preparing the assessment and would authorize the commission to impose a civil penalty if a person fails to timely provide information necessary for preparing the assessment. The CEC and the California Air Resources Board (CARB) would be required to prepare a Transportation Fuels Transition Plan on or before December 31, 2024.
Prospects of Enactment
The Senate voted 30-8 to send the bill to the Assembly after it quickly passed the Senate Energy, Utilities and Communications Committee and the Senate Appropriations Committee. The Assembly could vote on the bill next week.
Newsom originally proposed a windfall profits tax on oil companies. (see Newsom Opens Special Session with Proposed Oil Profits Penalty.) Legislation to implement that proposal would have constituted the imposition of a new tax and required a two-thirds majority to pass. The revised bill to impose a penalty structure requires only a simple majority for passage.