SHOULD OIL SEVERANCE TAX KEY THE RUN FOR ATTORNEY GENERAL?

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, MAY 28, 2010, OR THEREAFTER

BY THOMAS D. ELIAS
“SHOULD OIL SEVERANCE TAX KEY THE RUN FOR ATTORNEY GENERAL?”

Every guesstimate of the coming year’s state budget deficit says it will come to about $16 billion, even if spending holds at the reduced levels reached by furloughing state employees, cutting hours at state parks and all the other slashes made after months of grinding negotiations last year.

That’s why the oil severance tax proposed by one of the Democrats now running for state attorney general has some traction. As envisioned by Assemblyman Pedro Nava of Santa Barbara – long a thorn in the side of oil companies – a tax of about 10 percent on the gross value of each barrel of oil pumped in California would bring in about $1.5 billion. If crude oil prices rise, so would tax revenue.

Nava proposes the oil tax as a means of saving some state programs. How many Cal State classes could $1.5 billion spare? How many more hours could it keep parks open? How many more patients could stay on the Healthy Families program? How many in-home caregivers could be kept at work?

But there’s another side to the oil severance tax. By pushing it aggressively and authoring the proposed Oil Industry Fair Share Act, Nava has set himself at least slightly apart from others seeking this year’s Democratic nomination for attorney general.

He’s a liberal, like all the rest: fellow Assembly members Albert Torrico of Fremont and Ted Lieu of Torrance, San Francisco District Attorney Kamala Harris, former Los Angeles City Attorney Rocky Delgadillo and ex-Facebook executive Chris Kelly.

On the Republican side, Orange County state Sen. Tom Harman faces Los Angeles County District Attorney Steve Cooley and former Chapman College Law School Dean John Eastman. There is no doubt where Harman and Eastman stand on any new tax: against.

Kelly, who has put $8 million of his own cash into the race, can spend more than any of the other Democrats. Harris has a close association with President Obama plus a lock on both the African-American vote and support in her home city. Delgadillo has ample name recognition in his huge home city and Torrico will run strongly in Oakland and San Francisco’s East Bay suburbs.

Nava lacks that kind of solid financial or geographic base. He needs something different. He won some note in his own area for fighting strongly against liquefied natural gas terminals and expanded oil drilling. But that got him scant attention elsewhere. So the oil severance tax could serve him well if he could get out his message about it.

Even then, it would only help him if the public got behind it. A similar levy was on the ballot in 2006 as Proposition 87 and failed badly. The revenue from that plan would have funded research and development of alternative energy sources – which lacked wide appeal in those flush times at the peak of California’s real estate boom.

The moment Nava so much as mentioned an oil severance tax, it drew fits from the petroleum industry. Such a tax, Joe Sparana, president of the Western States Petroleum Assn., told a reporter, “would result in steep declines of California oil and natural gas production, the loss of nearly 9,850 jobs…and higher costs for consumers.”

As they did during the 2006 campaign, severance tax backers disagree, arguing the cost of any levy would be spread worldwide, meaning it would have negligible effects on gasoline prices here. They also point out that California is the only one of America’s 22 oil producing states with no severance tax.

And they point out that while governor of Alaska, former Republican vice presidential nominee Sarah Palin raised her state’s oil severance tax by 10 percent – to 25 percent of the value of each drop of oil drilled. Since much of California’s gasoline is refined from Alaskan oil, says Nava, California drivers now are paying that severance tax, thus subsidizing the $1,305 each Alaskan gets yearly from oil tax revenues just for being an Alaskan.

Plus, they point out, the Alaskan tax hasn’t cut pumping there, nor has the levy hurt production in places like Texas and Oklahoma.

In fact, high oil levies are the main reason Texas has no income tax. Sparano argues California’s corporate income tax already hits oil companies at least as hard as severance taxes imposed elsewhere.

Given enough attention in hard times, a severance tax could have large-scale appeal, especially when several polls indicate voters would favor it if proceeds went to the state’s strapped general fund.

Why is all this important? Mostly because being attorney general has often been a stepping stone to the governor’s office. Earl Warren was attorney general. So were Pat Brown, George Deukmejian and unsuccessful 1978 Republican nominee Evelle Younger. Current Attorney General Jerry Brown wants to make the leap this year.

So there’s more here than just a possible tax on oil drilling. If the debate gets loud enough in the next few weeks, this just might have a major effect on California’s political future.

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Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net