The Senate Education Committee last week approved a $2 billion tax hike on California’s oil industry that critics say would drive up energy costs and push businesses out of state. Proponents of Senate Bill 1017 tout the additional revenue it will provide for higher education, parks and social services.

“I’m authoring this bill because California is the only major oil producer in the world which does not collect taxes on oil production,” Sen. Noreen Evans, D-Santa Rosa, told the committee on April 24. “As a result, California is losing out on billions of dollars in revenue, amounting to massive subsidies for big oil companies. And as result, our children are suffering.

“I’m authoring the bill because California can no longer afford to leave revenues on the table when the exploitation of California resources by oil companies is reaping huge profits for them. And this is a time when we are forcing our children into debt to pay for their own education. And it is indefensible for California to continue subsidizing the oil companies.”

Taxes on top of taxes

The bill imposes a 9.5 percent tax on oil and gas extracted in California.

Evans said that the total taxation on the oil industry in California was $4.20 per barrel, versus $14.33 in Texas, according to 2011 data from the Franchise Tax Board and the Board of Equalization.

The current global market price of crude oil is just under $100 a barrel.

She argued that the tax will not be passed on to consumers because “oil prices fluctuate according to the global market. The fact is that this bill will not affect prices at the pump.”

Evans acknowledged that Californians recently agreed to tax themselves extra through Proposition 30, but pointed out the tax ends in 2017.

“It is not a permanent solution to California’s revenue problem,” she said of Prop. 30. “One of the solutions is in this bill. Enact an oil severance tax on large oil companies to help strengthen our economy. Oil companies had a record profit of $137 billion in 2011. And it is time for them to pay their fair share.”

However, opponents of the tax point out that oil drillers already are paying sales, property, business income and ad valorem taxes. And such taxes are among the highest in the country. So when all those taxes are added up, today the state is in the middle of the pack for oil taxation among the country’s 10 largest oil-producing states, according to a 2008 study. A 9.9 percent oil severance tax would shoot California to the top of the oil taxation list.

Education cuts

The bill lays out the need for increased funding for higher education in California:

• “Since the budget cuts enacted in 2010, over 32,000 teachers and faculty have been laid off. This has resulted in cuts in classes being offered, an increase in the ratio of students to teachers, and a reduced quality of education in the state.
• “Moreover, University of California student fees have almost doubled in the last five years alone, while California State University student tuition fees have risen 80 percent, and California Community College student tuition fees have risen 130 percent.
• “As a result, over 750,000 students are no longer seeking to attain an advanced degree in California.”

Jefferson McGee, representing the Sacramento chapter of the Alliance of Californians for Community Empowerment, spoke against Big Oil.

“Taxing  Big Oil is the right thing to do,” he said. “California is the fourth largest oil-producing state, and the only major oil producer to not tax Big Oil for extraction. For some reason Big Oil has been given a pass here. Especially frustrating is the fact that California is a major profit center for Big Oil. They made nearly $20 billion in profit in California last year alone.

“The oil industry with their immense profits should be required to pay for our natural resources and also reinvest in the state that allows them to make so much profit. We know the oil lobby in California is strong. And they aren’t afraid to spend money to keep their profits high and their taxes as low as possible. I would like to urge all of the senators to stand with their constituents who desperately need the $2 billion in revenue this tax would provide.”

Several students asked the committee to support the bill.

“For many middle-class students such as myself, the CSU is really the only financially viable way for us to obtain the degree that many of the jobs in our state’s workforce will require us to have,” said Shawn Kiernan, a senior at CSU Fresno.

Opponents of the bill agreed with the need for more education funding. But they said it shouldn’t come at the expense of the oil industry.

Kern County would be hard hit

Opponents also pointed out the tax would come at the expense of one area, Kern County, which produces more than 70 percent of California’s oil and more than 60 percent of its natural gas, according to Kern County Supervisor David Couch. He said 12,000 people are employed in the oil industry in his county.

“Not only is Kern County’s oil and natural gas important to California, it is the lifeblood of Kern County and our economy,” said Couch. “The nearly 10 percent severance tax would cost thousands of jobs in California.

“Besides the loss of good paying jobs, the tax proposed in SB1017 would depress the value of the petroleum properties by approximately $2.7 billion. Meaning county government and local schools would suffer reduced property taxes each year of about $27 million. We do not think it’s fair to ask the people in Kern County to shoulder the burden of financing these statewide institutions that benefit all Californians.

“We are not opposed to more funding for education. We are opposed to the mechanism. It’s very similar to the so-called ‘sin taxes’ on alcohol and tobacco. Except that in Kern County our sin is apparently producing the oil and gas on which 96 percent of California vehicles depend.”

The tax would definitely impact California’s oil industry, said Eloy Garcia, representing the Western States Petroleum Association.

“The idea that we can add a 10 percent tax and all things will remain the same – the level of production, the level of investment in California – is fundamentally wrong,” he said. “There are right now in the United States, domestically, a number of opportunities that are available to oil producers.”

Oil schizophrenia

Garcia suggested that state legislators may be conflicted over oil.

“We have a bit of schizophrenia over oil production in California,” he said. “We don’t want it, but we want the revenue. You can’t have both. That is our basic concern with this approach is we want more money, but we are not looking at the regulatory structure, the cost of producing oil in California. Those all have to be considered together.

“The oil industry pays the state … to the tune of about $500 million a year coming to the General Fund in the way of tide and oil revenues. Where the oil producers don’t own the mineral rights, they pay royalties for those mineral rights. Those are substantial payments, substantial investment from the oil industry in California.”

John Kabateck, executive director of the National Federation of Independent Business/California, told the committee that the oil tax would add “to the uncertainty on Main Street. Small business owners … right now are facing not only the highest gas taxes but the highest sales and income taxes and most egregious regulations in the state and lawsuit abuse. So uncertainty is understandable. A new tax right now, this is not just hitting the Big Oil community. This is absolutely passed along to small businesses.

“Right now, what small businesses need is job creation. There are 2 million people already out of jobs. Many of our small business owners are big supporters of employment. But they can’t do that if they are inhibited with a tax burden time after time after time, when we are the leader in tax burden in California.”

Tax sends wrong message

Dorothy Rothrock, representing the California Manufacturers and Technology Association, said the oil tax sends the wrong message to business.

“We’ve seen manufacturing investment and employment decline severely over the past several decades,” she said. “Part of the reason is high energy cost, high tax rates. This new tax is unnecessary. We need to send the signal to investors out there that California is the place you want to come and put your money in the ground. We want to rebuild the industrial base of the state. This bill goes in the wrong direction.”

The committee discussion was dominated by Sen. Bob Huff, R-Diamond Bar.

“It’s a noble issue to find a dedicated source for education,” he said. “But this is also deemed by the Legislative Analyst as a volatile source of revenue. We already have a volatile source of revenue, which is the basis of our whole budget – we tax the top 1 percent [of income earners] very high. We tax other things that are volatile, capital gains. So it gives us that boom-bust that makes it very difficult to feed a government program one year and then have to cut it back the next. This would exacerbate that problem.”

He was referring to a 2011 LAO analysis, which found, “A wide range of revenues, however, is possible due to the wide fluctuation in oil and gas prices.”

Huff continued, “I believe higher education is something that we need to figure, ‘Is this a priority? Are we going to fund it at a higher level than we are now?’ And if the answer is yes, then … we work on growing jobs, we work on creating revenues in ways that creates a growing job base, growing revenue base, rather than punishing a single industry and driving oil production out of state.”

Democrats on the education committee supported the bill’s cash infusion for higher education, voting 5-3 to approve SB1017. Sen. Cathleen Galgiana, D-Stockton, was the only Democrat to join Huff and Sen. Mark Wyland, R-Escondido, in opposition.

The oil severance tax bill has become a legislative perennial over the past six years. Previous incarnations have either not made it out of committees, failed passage in the Assembly or been vetoed.

SB1017, if it makes it through the Legislature this year, could also wind up on the chopping block if Gov. Jerry Brown follows through on his response to a question about the oil severance tax at a Jan. 9 press conference.

“I don’t think this is the year for new taxes,” he said. “I went up and down the state campaigning for Proposition 30. I said it was temporary. It is going to be temporary. And 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.”

Brown is running for re-election and the June primary is a month away.

SB1017 next goes to the Senate Governance and Finance Committee.

June 1, 2013

By Chris Reed

There’s beginning to be almost a sense of inevitability about fracking spreading throughout the United States. Green objections are being overwhelmed by the economic benefits of the newly efficient energy-exploration process, by its positive effects on air pollution and by the dawning awareness that it’s just another heavy industry — not the devil depicted by enviros who are furious that their “peak oil” theory is now laughable.

The latest state where this sense of inevitability has sunk in is the one with a political profile remarkably like California’s. It’s Illinois, in which unions and trial lawyers and urban professionals who live near water (Lake Michigan) dominate politics and team with minority voters to marginalize folks in suburbs and rural areas.

There, the revenue-starved Legislature has come around to fracking’s big upside and is preparing to enact moderate regulations that won’t impede massive energy exploration in the southern part of the state — specifically, in the New Albany Shale, a potentially huge source of energy underneath parts of Illinois, Indiana and Kentucky.

This is from a Wednesday report by AP:

“State records indicate that high-volume oil drilling already has begun in Illinois, where lawmakers and others are scrambling to pass a bill to establish regulations for a practice that has generated intense national debate as energy companies push into new territory.

“Carmi, Ill.-based Campbell Energy LLC submitted a well completion report last June to the Department of Natural Resources, voluntarily disclosing that it used 640,000 gallons of water during hydraulic fracturing, or ‘fracking,’ of a well in White County.

“A regulatory bill awaiting an end-of-session vote by state lawmakers, which wasn’t yet written at the time the well was drilled, defines ‘high-volume’ as using 300,000 gallons or more of fluid during all stages of fracking.”

Is the Golden State coming around, too?

Is there beginning to be a sense of inevitability in California as well?

Maybe.

Reasonable pieces about fracking are popping up in unusual places, even the San Francisco Chronicle.

And it also appears to be dawning on Democratic lawmakers that they could see a revenue gusher if fracking is encouraged in California. Consider these remarks from a staunchly green Democratic lawmaker in the Los Angeles Times:

“Sen. Noreen Evans (D-Santa Rosa) said she would turn her oil severance tax bill into a two-year measure that can be taken back up in January. The measure would raise $2 billion a year for education and state parks with a 9.5% tax on oil pumped from the ground in California, including when hydraulic fracturing or fracking is used.

“’It’s not going away,’ she said about SB 241. ‘If we as a state are going to expand fracking operations, we ought to tax it.’”

That’s not the over-my-dead-body rhetoric of the California branch of the Natural Resources Defense Council or the state’s Sierra Club. That’s a politician sizing up how she can take advantage of a pending development — one who is a Bay Area lawyer, Coastal Conservancy member and “smart growth” advocate. Seems pretty telling.

Fracking watch: Previous posts

No. 1: Germany

No. 2: China

No. 3: Russia

No. 4: Saudi Arabia

No. 5: Brazil

No. 6: Canada

No. 7: Argentina

No. 8: Mexico

No. 9: South Africa

No. 10: Poland

No. 11: Algeria

No. 12: Indonesia

No. 13: Great Britain

By Dave Roberts

California state laws from the past occasionally crop up and need to be amended. That happened last week when the Senate Public Safety Committee unanimously approved SB 59, which is designed to close a loophole that allows a man to get away with rape by impersonating a woman’s boyfriend. Current law states that a rape occurs if a woman is married and the rapist impersonates her husband. But there is no rape if she’s not married and the rapist impersonates her boyfriend.

In January, the Second District Court of Appeal in Los Angeles overturned the rape conviction of Julio Morales, who admitted to police that he had sex with a sleeping woman who probably thought he was her boyfriend. The incident occurred at a party in Cerritos in 2009 after the woman, who had had three to five beers, went to bed and her boyfriend left the party. She awoke in the middle of the rape, screamed and pushed Morales away. He was convicted and served a three-year sentence. He will face a retrial, although he probably would not do any more time if convicted.

“Justice should not be conditioned on a victim’s marital status or sexual orientation,” the bill’s author, Sen. Noreen Evans, D-Santa Rosa, told the committee. “This bill substitutes and defines the new term ‘sexual partner’ in place of the outdated word ‘spouse’ in the rape statue.”

She was supported by Katie Donahue, with the California Coalition Against Sexual Assault, which represents 84 rape crisis programs in the state.

“Women are currently vulnerable to this loophole in the law,” she said. “The criminal justice process can be a difficult, emotionally fraught experience for survivors. For any woman to have her rapist’s conviction overturned, despite the evidence against him, is revictimization. In this modern age, justice should not be tied to the marital status of the survivor.”

SB 59 is similar to AB 56. The main difference is that SB 59 changes the definition of rape from impersonating a “spouse” to impersonating a “sexual partner.” While AB 56 changes impersonating a “spouse” to impersonating “someone other than the accused.” Evans argued that AB 56 is overly broad.

“It basically becomes rape by misrepresentation,” she said. “The example might be somebody who is picking up a date in a bar, misrepresents who he or she is, misrepresents things about themselves that then induces the victim to have sexual relations with the perpetrator. I don’t think that’s where we want to go. The intent of the language in my bill is to address that issue where there already is an existing relationship and that is being used to perpetrate a rape.”

Keeping a lid on sentencing

The meeting began with Committee Chairwoman Loni Hancock, D-Oakland announcing that the committee’s six-year policy of “holding in committee bills that would increase felonies and the sentences connected with them” would continue in order to meet the court order to reduce state prison overcrowding.

“We recognize as legislators and as public advocacy groups, we care about the safety of our population,” she said. “And often times when a problem arises, all we can think of is an increased sentence or an additional felony. But there are other ways to think about solving these problems. States as diverse as Texas and Washington have made a decision that they cannot afford more prisons. They have adopted smart-on-crime policies, and we can do it here.”

Responded Sen. Joel Anderson, R-San Diego, “On behalf of Republicans on the committee we are committed to working for public safety. Public safety is paramount to California. If you can’t walk our streets and feel safe, then you’re not living in a free society. I would ask that the committee be very thoughtful in its approach and not allow this to become a partisan policy where Republicans always [have their bills held in committee] and Democrat bills don’t.”

By Joseph Perkins

A pair of Northern California lawmakers unveiled a proposal this week to avert the scheduled July 1 closure of 70 state’s 278 parks, casualties of last year’s budget-cutting by the Legislature.

“The notion of closing 70 parks is ill-conceived,” said state Sen. Joe Simitian, D-Palo Alto. “The state has never closed a state park, not even during the Great Depression,” said state Sen. Noreen Evans, D-Santa Rosa.

The lawmakers say their so-called “Sustainable Parks Proposal” would keep the gates open at up to 50 of the parks this year — those that have not already been spared by takeover by the U.S. Forest Service, transfer to a non-profit organization or funding by a wealthy donor.

To pay for their proposal, which was heard Wednesday by a Senate budget subcommittee, Simitian and Evans propose to tap the state’s Clean Water Revolving Loan Fund, Motor Vehicle Account and Local Assistance Fund, none of which are supposed to be used for parks.

But there’s a better way for lawmakers to save the parks without robbing Peter to pay Paul: Privatize them.

Just last month, the state Legislative Analyst’s Office issued a report in which it recommended that private for-profit companies be allowed to operate at least some state parks.

The LAO estimated that privatization would yield the state government annual savings in the low tens of millions of dollars. Another dividend, the report noted, is that private companies would procure new equipment and implement new projects more quickly than the state.

That matters not to Sens. Simitian and Evans. They continue to press ahead with their “Sustainable Parks” plan, which would have the budget-constrained state government continue to spend money it doesn’t have to maintain operations at all 278 state parks.

“Once you privatize a park,” said Evans, in remarks published in the Huffington Post, “you change the essential mission of the park. It becomes about making a profit.”

But the state Department of Parks and Recreation, itself, sees things differently.

“There are private companies in the Parks and Rec business that do it well,” DPR Deputy Director Roy Stearns told the Post. “People shouldn’t see private enterprise as a dirty word.”

In fact, DPR currently has about 200 concession contracts with private corporations, partnerships, associations and individuals that generate $12.5 million a year in state revenue.

The contractors provide a range of park amenities, including food service, recreational gear rentals, retail shopping, golf courses, marinas and lodging.

The state park system’s 70 million annual visitors are quite pleased with the quality and price of services and amenities provided by private concessionaires. There’s little reason to think they would be any less pleased if they visited state parks fully operated by private sector.

Last August, state Sen. Pat Wiggins, D-Santa Rosa, announced that she would not seek re-election in 2010 – shortly after announcing that she would run for re-election.

Her announcement occurred soon after she made an inappropriate comment at a hearing to discuss global warming to a pastor who was testifying, leading many to question Wiggins’ rationality. She called the pastor’s arguments “bullshit.” A video of the exchange was posted on YouTube. While drawing widespread condemnation for her outburst, Capitol observers are wondering whether Wiggins is suffering from some type of illness.

While the health of Sen. Wiggins is in many respects a personal issue, Wiggins has been observed publicly and in Senate hearings making inappropriate comments, appearing confused, and using prepared scripts in meetings and when speaking, according to published reports and Capitol sources. This has led to various public-policy and political concerns.

Two of her district’s newspapers, The Santa Rosa Press Democrat and The Napa Valley Register, reported on her erratic behavior and outbursts, and apparent disorientation. “Speculation about Wiggins’ health and political future had intensified in recent months amid outbursts, odd displays of affection and the 69-year-old senator’s apparent inability at times to focus or remember things,” reported the Press Democrat in August. “In making her announcement, Wiggins acknowledged she had faced physical disabilities throughout her career. But she did not specifically address why she was not seeking another term … .” Her staff denied that she has a medical issue that impairs her ability to do her job.

Wiggins’ colleagues and friends were quoted as saying that her outbursts are uncharacteristic. Sen. Wiggins has been present for votes as recently as Nov. 4, 2009. The governor recently signed five of Wiggins’ seven authored bills. Given the recent work emanating from her office, the question remains, if Sen. Wiggins is suffering from an illness, who is performing her work? This is a question for Democratic Party leaders to address in the coming weeks.

With the Legislature preparing to start a new session on Jan. 4, 2010, and the continuing accounts of her declining health, the question of how to manage the remaining year in her Senate term is a question no one connected with Wiggins appears willing to answer.

Calls and messages left at Wiggins’ office were not returned.

When asked if there is precedence for this situation, Democratic political consultant Steve Maviglio explained, “I can’t speak to this particular situation but it’s my understanding that Wiggins continues to vote and participate in Senate deliberations.”

Senate Leader Darrell Steinberg’s office did not return calls about whether Wiggins will remain office or about holding a possible special election for Wiggins’ Senate seat.

When asked his opinion about why Senate leadership does not want to have a special election to replace Wiggins even though it appears that her district is strongly Democratic, Maviglio explained, “It’s up to the senator to decide if she wants to resign; it’s not something that they can be forced to do by the Senate pro Tem or anyone else.” Maviglio confirmed that it is a “safe” Democratic seat.

Immediately after Wiggins announced her decision not to run for re-election, Assemblywoman Noreen Evans, D-Santa Rosa, announced her candidacy for Wiggins’ Senate seat. Evans has served five years in the state Assembly. Assemblywoman Evans’ office referred requests for information to her Senate campaign. The campaign did not return our calls.

Maviglio added, “In the Assembly, the only member I can recall being sick for a long period was Assembly member Nell Soto. She was out for an extended period upon doctor’s orders. She hoped to recover but didn’t, and decided not to run for re-election.”