Oil

Wednesday, Feb 19 2014 07:05 PM

New bill resurrects old oil tax idea

  1. 1 of 1

    By Felix Adamo/ The Californian

    An oil well approximately one mile north of Highway 46 and east of Highway 33 in a file photo.

    click to expand click to collapse
BY JOHN COX Californian staff writer jcox@bakersfield.com

Almost every year a politician in Sacramento proposes a new tax on California oil production. And every time -- so far -- it goes down in defeat.

State Sen. Noreen Evans believes this year is going to be different.

On Wednesday, the Santa Rosa Democrat hosted a press conference at Sacramento State promoting her new bill, SB 1017, which would levy a 9.5 percent "severance tax" on every barrel produced in California, and 3.5 percent on every equivalent amount of natural gas.

Half the estimated $2 billion in taxes generated by the bill would go to higher education, a quarter to state parks and a quarter to fund unspecified health and human services programs.

Evans has proposed the tax before -- last year, in fact, where it died in committee. So, why try again?

Because one day it's going to work, she said in a phone interview.

"This is one of these issues that takes some time to dispel the myths that are put out by the oil industry," she said.

Her approach is not new, and neither is each side's arguments, some of which are misleading at best. If there is something novel about her latest attempt, it's that it comes at a time of relative fiscal stability in Sacramento.

State Sen. Jean Fuller, R-Bakersfield, said the bill came as "a little surprise" given that the Legislature is expecting a budget surplus this year.

"If there's more revenue than predicted," she said, "that generally is not when people raise taxes."

It would appear Gov. Jerry Brown agrees. At a January news conference on the state budget, he told a reporter he didn't think 2014 was a year for new taxes.

"I just think we ought to do everything we can to learn to live within our means before going back again and trying to get more taxes," the governor said.

Evans disagrees. There have been so many budget cutbacks in recent years that deferred maintenance and other projects require immediate action.

"We've dug ourselves a deep hole over the last five years. We've been disinvesting," she said. "I mean, you name it, we've deferred it."

There have been at least 13 oil severance taxes proposed in the state since 1994. Each time the people leading the charge claim California is the only top 10 domestic oil producer without a severance tax.

That's true, but it's not the whole story.

California has something other states lack: an "ad valorem" property tax that imposes a levy on barrels of oil while they're still in the ground.

The oil industry and its supporters maintain that hiking taxes on petroleum will increase gasoline prices consumers pay at the pump.

That's not necessarily the case. Oil is a global commodity, meaning its price is set on world markets. An oil producer can't simply raise the price it charges refiners when its costs increase.

What is clear is that the tax would have a greater effect in Kern County -- California's top oil producer by a long shot -- than anywhere else in the state. How much of an effect might be debatable.

Same as last year's bill, SB 1017 would exempt "stripper wells" that produce less than 10 barrels of oil per day. It would also give local governments such as Kern "backfill" payments to make up for lost property tax revenues.

Problem is, that doesn't account for the jobs that will leave Kern County and the rest of California as oil producers shift their investments to assets in other states, said Rock Zierman, CEO of the trade group California Independent Petroleum Association.

"The state can't backfill Kern for production losses," he said.

Evans doesn't buy that argument. Oil companies can't just pick up and move their oilfields, she said, asserting that industry layoffs are an empty threat.

Instead, she sees the bill as creating new jobs as universities invest oil tax revenues on new construction.

Already the new bill is gaining support among college students, said Jack Tibbetts, a political organizer and undergraduate political science student at the University of California, Berkeley.

"They like the concept of making oil companies pay their fair share," he said. "They think it's a fair tax."

Have something to share? Comment on this story
Today's Daily Deal
from
Bakersfield.com
$10
Daily Deal Image
La Mina Cantina
$20 of food for only $10
  • Value
    $20
  • Savings
    $10
  • Bought
    16
Buy Now