AG candidate Nava to propose oil severance tax

Chris Rizo Oct. 26, 2009, 12:01am

Pedro Nava (D)

SACRAMENTO, Calif. (Legal Newsline)-A Democratic candidate for California attorney general today will once again introduce legislation to enact a $1.5 billion a year tax on oil producers.

The plan by state Assemblyman Pedro Nava, D-Santa Barbara, calls for a tax of 10 percent of the gross value of the oil that producers take from the Golden State's lands and sea beds.

Nava said his proposed Oil Industry Fair Share Act could bankroll a variety of state programs, including those for schools, social services and public safety amid a historic fall in state revenues.

"California oil companies are getting a free ride," Nava said, noting that California is the only major oil producing state that does not collect an oil severance tax. "It is time for California to catch up with Alaska, Texas, Alabama, and Arkansas. We need to collect the people's share of this potential revenue source by forcing Big Oil to pay its fair share."

Nava proposed a similar bill earlier this year, during the state's regular legislative session. The current bill will be heard in the Legislature's Sixth Extraordinary Session.

Since California only produces less than 0.7 percent of the world's oil, Nava has said the proposed severance tax would not affect gasoline prices at the pump.

But the wider economic effects of an oil severance tax would be widespread, according to a study by Law and Economics Consulting Group, a respected global consulting firm based in Emeryville, Calif.

The report, released in January, estimated that the oil producers' tax could, among other things, cause steep declines in the state's oil and natural gas production and the loss of nearly 9,900 jobs.

"California's oil production is already among the most heavily taxed in the country. This new oil tax would make California's combined taxes on petroleum the highest in the nation by far," the LECG report said.

To pass, Nava's bill requires a two-thirds vote in both houses, meaning that some Republican support would be needed in the Democratic-led Assembly and state Senate. Passage could be difficult since most Republican legislators have taken a stand against raising taxes.

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