Nava: Big Oil not paying its 'fair share'

Chris Rizo Oct. 26, 2009, 7:58pm

Pedro Nava (D)

SACRAMENTO, Calif. (Legal Newsline)- Assemblyman Pedro Nava, the Southern California lawmaker vying to become the state's next chief legal officer, said Monday that Big Oil companies are getting off easy.

The Santa Barbara Democrat introduced legislation Monday that would levy a 10 percent tax on the gross value of the nearly 216 million barrels of oil that producers take from the Golden State's lands and sea beds.

The Oil Industry Fair Share Act is estimated to bring into state coffers $1.5 billion annually, based on a $70 a barrel price. By comparison, Alaska's oil severance tax is 25 percent; Louisiana charges producers a 12.5 percent levy.

Speaking to reporters, Nava said California, the third largest domestic petroleum source, is the only major oil producing state that does not collect a severance tax.

"We should not be so special," Nava said. "At a time when California families are feeling the bruising economic pinch, oil companies continue to be some of the most profitable companies in the world."

Noting that the state's fiscal crisis has forced deep cuts to schools, community clinics and social service agencies, Nava said it is time that Big Oil companies, including Chevron Corp., Occidental Petroleum Corp. and Exxon Mobil Corp. "pay their fair share" through an extraction tax.

"It is time to stop doing cuts to the budgets; Californians are suffering," Nava said, flanked by representatives from environmental and labor groups. "To address this problem, I am proposing a 10 percent tax -- I said it, the three-letter word -- on the gross value of each barrel of oil produced in California."

The levy -- to be permanently woven into the state tax code -- would exempt so-called stripper wells, which are incapable of producing more than 10 barrels a day, if the price of oil dips below $50.

The plan would also prohibit oil companies from passing on the the tax to consumers in the form of higher prices for such things as gasoline and diesel.

To pass, Nava's bill requires a two-thirds vote in both houses, meaning that some Republican support would be needed. Passage could be difficult since most Republican legislators have pledged not to support tax or fee increases to solve the state's budget woes.

Nava, who is running for state attorney general, 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, which is aimed at addressing the state's fiscal crisis.

"It is time for the state to start looking at new revenue options," Nava said. "Seniors, children, local governments and all Californians have paid enough. It is time for the oil companies to pay their fair share."

During budget talks this summer, Republican Gov. Arnold Schwarzenegger sought to expand oil drilling from an existing platform off Santa Barbara's coast to help plug the state's $26 billion revenue shortfall.

The plan, vehemently opposed by Nava, would have generated a one-time $100 million advance royalty payment and an estimated $1.8 billion in royalties by 2022.

"My proposal will raise more than 15 times that amount without a single new well or any additional risk to California's environment," Nava said.

Since California only produces less than 0.7 percent of the world's oil, Nava added that the severance tax would not affect gasoline prices at the pump or eliminate jobs.

However, that runs counter to a study released in January by Law and Economics Consulting Group, based in Emeryville, Calif.

The LECG report estimated that the oil producers' tax could lead to 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.

From Legal Newsline: Reach staff reporter Chris Rizo at

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