NARO California

Promoting and advocating for the rights of California’s oil and gas, mineral and royalty owners

Windfall Profit Tax in California May Come Back Via a “Penalty”

As if SB-1137 isn’t enough to fight against, in October 2022 Gavin Newsom wanted to bring back the Windfall Profit Tax to California’s oil and gas industry. Throughout the process of getting this approved, that tax changed into becoming a “civil penalty.” This may be thanks to Proposition 13, which requires two-thirds approval from California’s legislature.

The Windfall Profit Tax is essentially a “punishment” on companies making too much money, especially the oil and gas industry. Those around during the Carter era probably remember it being around will probably remember that it didn’t raise nearly as much money as promised. Oil and gas workers during that time may also remember that, ironically, the Windfall Profit Tax was calculated before profits were made. It can draw away investors, something almost always needed to build a new oil and gas well (they are expensive and time consuming to make, but people do so in hopes of raising a profit).

In addition, it probably isn’t the best time to do this since Windfall Profit Tax helps fuel inflation, a fact acknowledged by Biden’s Vice-Chair of the Federal Reserve Lael Brainard and Nobel Prize Winner Paul Krugman.

Anyone involved with oil and gas today knows that oil and gas has it’s ups and downs. No “boom” or “bust” has lasted forever. Oil and gas companies faced a low period during the 2020s, picked up again in 2022, and are now more stable as of today.

What’s ironic is that you don’t see a Windfall Profit Tax on companies making more money then oil and gas companies do, such as the Walt Disney Company, Apple, Meta, etc.

For more information about California’s penalty, read Jon Coupal’s opinion piece on the Tahoe Daily Tribune.

A fun fact, the National Organization of Royalty Owners (NARO) founder is Jim Stafford, a man who wanted to put an end to the Windfall Profit Tax. He called a rally held in Oklahoma City, inviting mineral, royalty, and working interest and its’ industry to attend. Over 500 people showed up, including Congressmen to hear Jim and others talk about defeating the tax.

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