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Key Democrats Plan New Push for Oil Severance Tax

Thursday, August 6th, 2009

johngaramendiGov Lite John Garamendi and Assemblyman Pedro Nava tell Calbuzz they are preparing a new political offensive to push aggressively for a 9.9 percent per barrel severance tax on oil producers in California.

Having led the charge to defeat the governor’s proposal for a lease authorizing oil drilling in state waters off the coast of Santa Barbara, the two are seeking to harness the momentum built by the statewide coalition of environmental groups that quickly mobilized in that fight.nava

“The taxpayers have been giving their oil free to the oil companies for 100 years, and it’s time for the oil companies to start paying it back,” Garamendi, who’s running for congress, told us. “The environmental community, having rallied to defeat (Schwarzenegger’s offshore leasing plan) is very engaged on this.”

Nava, who’s seeking the Democratic nomination for attorney general, said in an interview that he is also working with environmental groups “invested in opposition to offshore drilling” as he puts together legislation for a severance tax to raise $1-1.5 billion a year.

“Do the math,” Nava told us. “The governor was willing to sell of the coast for $100 million – this would raise over $1 billion a year.”

Torrico-AlbertoA proposal to impose such a tax and earmark the money for higher education, by Assemblyman Alberto Torrico – who’s also running for attorney general – is pending in the Legislature. Nava said his bill would not restrict the use of new revenue within state government: “Earmarking the money divides people,” he said.

Because California is the only oil-producing state that does not impose a severance tax, such a proposal could gain political traction, at a time when Democrats insist they will not support further education and social welfare cuts after joining in passing a red-ink budget that slashed many programs.

Passing a tax increase would be an uphill fight because it requires a two-thirds vote in both houses. However, the public unpopularity of oil companies offers Democrats perhaps their best opportunity to pressure Republicans on a revenue-raising measure. Schwarzenegger at one point suggested an oil tax, but dropped the idea in the face of opposition by GOP lawmakers.

John Doherty, a legislative aide to Torrico, told us the assemblyman did not have the votes to get his proposal out of the Assembly Revenue and Taxation Committee earlier this year; Torrico plans to use the rest of the current legislative session to build support for passing it in 2010, he addedm a wide-open election year in which many legislators will be seeking statewide offices.

A 9.9 percent severance tax would generate about $1.4 billion a year with oil at $70 a barrel, according to the lieutenant governor. A barrel of crude oil was priced at $71.97 on Wednesday.

In the interview with Calbuzz, Garamendi also addressed three related issues, saying he:

-Expects the governor, having “set the stage for a new re-run,” to try again to push through the controversial Tranquillon Ridge project defeated in the Assembly after passing the Senate by one vote, perhaps when the Legislature reconvenes later this month.

-Plans at next week’s meeting of the State Lands Commission to hold a risk-assessment hearing to weigh the relative merits of drilling in state waters from offshore and onshore facilities: “Intuitively, drilling from the land, you’re not likely to spill in the ocean (while) drilling from the sea you’re likely to spill in the ocean,” he said, “We want a data base to determine the facts.” The issue is timely because Venoco Oil Co. is proposing an onshore slant drilling project in state waters off Santa Barbara, not far from the Tranquillon Ridge project.

-Dismisses speculation that if he (Garamendi) wins his congressional race, Schwarzenegger will be able to hand-pick a successor as lieutenant governor who would swing the balance of power on the lands commission in favor of authorizing an offshore lease. The governor’s nominee would have to be confirmed by the Democrat-dominated Legislature, three of whose members are already running for the post, he noted.

“There’s a lot of foolishness about this,” he said of speculation in Sacramento about such a scenario.