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Newsom proposes a ‘civil penalty’ on oil companies: ‘Either Big Oil reins in the profits and prices, or they’ll pay a penalty’

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Photo by Justin Sullivan/Getty Images

California Governor Gavin Newsom (D) requested a special session of the state legislature on Monday to introduce a proposal with Democrat Senator Nancy Skinner that would penalize big oil companies with “excessive” profits.

Newsom, who called the special session to encourage lawmakers to focus on the issue of gas prices, insisted that big oil companies are gouging Californians and that there is no other way to explain the record-high prices at the pump.

“California’s price gouging penalty is simple – either Big Oil reins in the profits and prices, or they’ll pay a penalty,” said Newsom. “Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done.”

The proposal would make it illegal for oil companies to charge “excessive” profits. Companies found to be in violation of the proposal would be fined a civil penalty by the California Energy Commission. Fines collected by the CEC would go into a Price Gouging Penalty Fund and be “given back to Californians.”

“Putting the Governor’s proposal in print allows the Legislature and the public to begin discussions on this important issue,” said Skinner. “No one can deny that California’s gas prices were outrageously high compared to other states. And those high prices hurt California consumers and businesses.”

The proposal failed to define the maximum profit margin and penalty amounts. Instead, those amounts “will be determined through the legislative process,” according to a Monday press release from Newsom’s office.

Gas prices in California are impacted by taxes and fees associated with environmental regulations that other states do not have, KTLA reported. In October, gas in the state was $2.60 more than the national average.

The proposal indicated that the penalty is a fine, not a tax, requiring only a simple majority to pass. Alternatively, the proposal would require a two-thirds majority approval to raise a state tax.

Kevin Slagle, a spokesperson for the Western States Petroleum Association, told KTLA, “Whatever Gov. Newsom wants to call it, this is a tax and it’s going to have the same impact that all taxes do on consumers, and that is to raises costs, not bring them down.”

“We think the governor should be honest about what this is and let the legislators vote on a tax and sell it to the California public as a tax and see how people feel about it,” Slagle added.

A supporter of Newsom’s proposal, Democrat Senator Ben Allen of Santa Monica, told the news outlet, “I don’t think anybody objects to (oil companies) having a business model that makes a profit, but the extent to which they’re taking advantage of people really does appear to be unfair.”

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