Local residents recently gathered near the Baldwin Hills oil field for a forum about how petroleum companies can help protect public services and the environment by paying taxes on crude extracted.
In the coming weeks, California legislators are expected to introduce such a tax, and supporters believe the proposed oil severance will generate $1.2 billion to fund public services and help close the oil drilling loophole.
“California is the only jurisdiction in the Unites States (of 22 oil-states) that doesn’t extract an oil tax,” commented Community Heath Council (CHC) Policy Director Gwendolyn Flynn. “This hearing is an attempt to raise awareness about this problem.”
The absence of a law taxing petroleum companies is the loophole CHC is trying to close.
The four major oil producers in California–Chevron, ExxonMobile, Shell, and Occidental–made more than $45 billion in profits in 2009 and $106 billion in 2008. According to CHC analysts’ research, an oil tax would not decrease production but would raise funds to prevent hundreds of thousands of families, from losing health care and educational benefits during the current U.S. recession.
Baldwin Hills resident Irma Munoz, one of the most vocal advocates at the forum, expressed concern about the economic and environmental effects of oil drilling in the Baldwin Hills community. “The people of this area are bothered by the billions of dollars oil companies are making without being taxed,” Munoz said. “It bothers us that (oil companies) are not held accountable for environmental degradation. The reservoir burst in Kenneth Hahn Park because of frontal oil drilling. This has caused property damage to homes in the immediate surrounding areas.”
The money from the proposed tax would specifically target communities around the state where oil drilling takes place.
Many community members, who live and work near the oil fields plan to ask legislators to hold major oil companies accountable and get the facts about the oil severance tax.
According to the Rebuild California State Budget Campaign 2010 fact sheet, oil economists have shown that California refineries buy oil on the world market. Therefore, increasing California’s severance tax would have no effect on gas prices in California. According to an April edition of the Wall Street Journal, the profit on oil pumped in California is $45 per barrel.
“California producers will not be shutting down their oil drilling operations, if we close the drilling tax loophole,” Flynn said.
The CHC policy director contrasted California’s oil drilling practices with those of other states: Alaska taxes oil drilling at 25 percent; Louisiana collects severance tax and royalties that amount to 22 percent.
“The federal government charges a royalty of 18.75 percent on oil drilled more than three miles from the California shore,” Flynn concluded, “but in California and its waters, the extraction tax rate is zero.”
According to a study by the University of California Berkeley, closing the oil extraction tax loophole would result in 400 lost jobs. In contrast, if no severance tax money was added to state coffers, and legislators had to rely on an all-cuts budget, this would result in 430,000 lost jobs.
CHC has the support of several elected officials including California State Assembly Speaker Emeritus Karen Bass and Senator Curren Price, who are expected to carry the legislation.