Proposed tax plan could pay oil dividends to California residents
SAN JOSE, California (Bloomberg) -- Billionaire environmentalist Tom Steyer is lobbying for a new law in California that would force energy companies to share as much as $2 billion of the state’s oil wealth with residents.
The proceeds would come from an “extraction tax” -- fees producers would pay on their crude oil output. Similar taxes already exist in most major drilling states such as Texas and North Dakota, with California a longtime holdout.
The tax might be used to pay a dividend directly to California residents, such as the one paid to Alaskans from that state’s oil revenue, according to a proposal Steyer will unveil today in a town hall meeting in San Jose, California. It might also be used to fund savings accounts for newborns or middle class tax cuts. A 9.9% per barrel tax on California oil production would yield $1.5 billion to $2 billion annually, Steyer estimates.
The former hedge fund manager, who has pledged to raise and spend as much as $100 million on climate-related political advocacy this year, is focusing on drilling in California. Steyer’s campaign is poised to galvanize opposition to the oil industry as the state weighs the costs and benefits of accelerated drilling in the largest undeveloped crude formation in the U.S.
“We’re trying to do a grassroots campaign here,” Steyer said in an interview. “We’re trying to engage the people of California on this in a way that could make a difference.”
Steyer has been an active force in California politics, successfully backing a 2012 proposition to close a corporate tax loophole and a 2010 proposition that would have undercut state laws aimed at reducing greenhouse gas emissions.
His newest “Fair Shake” campaign includes a proposal to ban hydraulic fracturing unless two thirds of a county’s residents vote to approve it.
The energy industry has beaten back previous efforts to introduce a production tax in California, most notably in 2006 when a proposition backed by Hollywood producer Steve Bing was defeated by more than 700,000 votes.
That campaign was among the most expensive in state history, with both sides spending more than $140 million, according to the Institute of Governmental Studies at the University of California-Berkeley. Chevron Corp. spent more than $30 million to defeat the proposal.
“As the largest oil and gas producer headquartered in California, Chevron provides significant economic value to the state through taxes and royalties, investments and job creation,” said Kurt Glaubitz, a Chevron spokesman. “This proposal will hinder our state’s fragile economy, increase business and consumer costs and discourage job creation.”
California residents in some areas are showing increasing hostility to new drilling plans as companies such as Occidental Petroleum Corp. seek to tap the state’s vast Monterey shale. The formation, which stretches almost from Los Angeles to San Jose, may hold as many as 15 billion bbl of oil, according to a 2011 report from the U.S. Energy Information Administration.
The city of Carson and Santa Cruz County have temporarily halted drilling, and Los Angeles is weighing a similar proposal. More than 60 other communities in the state are considering such measures, according to CREDO, an activist group sponsoring and tracking petitions for moratoriums.
California Governor Jerry Brown, a Democrat, has introduced new regulations to govern the practice of fracing.
The town hall today in San Jose is meant to start a discussion on how funds from a potential extraction tax would be used, said Steyer, who spent millions last year through his political action committee NextGen Climate Action to oppose construction of the Keystone XL pipeline. Keystone XL, still awaiting U.S. approval, would carry crude from Canada’s oil sands to Gulf Coast refineries.
Steyer’s California campaign will first seek to push its initiatives through the state legislature. He declined to say whether he would consider a ballot proposition to force a statewide vote.
“When Californians have voted through elected representatives or direct democracy on this issue, they always reach the same conclusion,” said Tupper Hull, a spokesman for the Western States Petroleum Association in Sacramento. “It’s bad policy for the business climate in California, and bad policy for consumers.”
Thirty states have some form of an oil and gas production tax, including every major producer except California and Pennsylvania, according to the National Conference of State Legislatures. Texas uses its “severance” tax on production, which collected about $4.5 billion in revenue last year, to help fund public education.