Nava Says No More ‘Free Ride’

More Gray/Armandariz carrying water for big money interests with little regard for our surrounding conditions . On the one hand they argue for the Venoco project in Carp citing the need for revenue , then oppose this measure which would bring California much needed income .
A similar tax rate on oil production in Louisiana doesn't seem to have lost them any business, but according to Armandariz/Gray it will here ? Gray has presided over the too fast for planning expansion of the North County and now residents are feeling the pinch of her poor judgement . Consider her history of poor decisions before you listen to anything she says .

Why does California have the lowest taxes on oil production among the States?
Do we have less natural beauty to protect?
Do we deserve a smaller cut of the oil produced in our own State than Texas does?
Why do those on the Right complain that an oil tax would drive up gas costs BUT SAY NOTHING when oil companies are pocketing billions in profits...off of OUR resource?
How does Oil Industry profit taking effect gas prices?
It seems reasonable that the taxpayers in California have as much right to the profits from their own oil resources as executives at Enron, Exxon or Venoco.

How many times can Pedro regurgitate the same press releases and press conferences on this issue?

He will be lucky to break 5% in the AG race.

Free ride?? LOL Pedro is grossly misinformed.

I say tax the bastards. Has anyone noticed the obscene profits of Exxon and other big oil companies. I am amazed that anyone has the cojones to come on these message boards and manifest sympathy for them. I'd challenge "ilovesb09" to tell us in what way Mr.Nava is "grossly misinformed".

Did Nava mention his support for "no end dates" for current oil drilling along our coast?

His tax plan should be much more profitable if he can keep the oil rigs up and running indefinitely.

You can't have it both ways Pedro. Nice try, but playing both sides eventually leaves you standing by yourself. Enjoy your State pension.

Obscene profits? Such an old 60's lefty phrase. And anyway, not nearly as obscene as the pensions of our county and city unionized employees (do you know what YOUR individual share of the pension obligation is? several hundred thousand dollars - now THAT is obscene). Not nearly as obscene as what the state gets in taxes from gasoline sales (which is, BTW, WAY more than the profit that the oil companies get off those sales - do your research). What is obscene anyway? If Exxon makes 3 cents on a dollar of sales is that obscene? If Von's makes 3 cents on a dollar of grocery sales is that obscene?

But Nava is right to push for the tax; just totally wrong in blocking further drilling.

Here's information that some might find useful. Texas has a severance tax (and other taxes on oil too) so they receive about $14 a barrel. California (with no severance tax) gets $4 a barrel. I don't see anyone saying the taxes paid to the Lone Star state have resulted in a loss of jobs-or that the oil companies have abandoned their wells there. Just a little something to think about.
Adoption of my 10% severance tax would generate about $1.5 billion a year (15 times what the PXP deal would bring) without ever having to drill in California Sanctuary Act waters. We could preserve our coast and receive a lot of money from existing drilling.

Joe Armendariz is utterly corrupt.

And the real John Locke is spinning in his grave over the nonstop stream of sophistry for years from "JohnLocke".

Not that I am in love with oil corporations, but I am also not in love with the insanely high gas prices here in Calif. We are consistently the highest priced state as a whole of any.

More info at www.gasbuddy.com

I drive a little gas sipper, thank heavens, and I have no idea how people who drive these massive urban assault vehicles can afford to feed them. However, the ridiculous prices here are really a pain, especially for people who have to commute to work each day.

So, does Nava (who seems to be a master of the Nanny law in general anyway) really believe that this tax is going to hurt the oil companies? If so, I want some of what he has been smoking, because what WILL happen is the cost will get passed on to US...and pretty soon driving will be a rich man's privilege.

Maybe that's the goal; force everyone to hike and bike, and if you live too far out of town, are old, or not a jock, too bad.

Darwinism, California style....dressed up as "concern for the environment".

Pfft!

I don't see that such a tax would affect consumers much. A vast majority of the oil we use in the US comes from abroad, as well as from other domestic producers (Texas, Alaska, Gulf coast), not California.
And who pays for the clean-up when those oil companies screw up? Taxpayers of course. Let them put their share into the till, instead of into their executives & shareholders' pockets.

Whether California does or does not have a severance tax is surely not the key issue here. Surely it's more relevant to ask what the total state tax take per barrel is. A lot of comparisons are made to Texas, but Texas doesn't have a state income tax. California does, and it's among the nation's highest. So could Mr. Nava tell us where California ranks in total state tax take per barrel, and also where it would rank after the severance tax law passes?

A number of people, including Mr. Nava himself, like this argument that state "A" has a severance tax and oil companies are still operating there, so therefore nothing will happen if the tax is enacted here. This argument is simplistic and misleading on three fronts.

1) When a state sets up its tax and legal framework for any industry, an equilibrium business environment is created. Companies make investment decisions accordingly. Every oil company will have some good projects all the way down to some that are on the margin. When you suddenly change those rules, some of those projects on the margin will become unprofitable. There is no free lunch, even though Mr. Nava seems to believe there is. Such a tax MUST have an impact at the margin on California's oil production. Some previously profitable wells will become non-commercial.

2) In 2008, California produced 227 million barrels from 55,000 wells, for an average of 11 barrels per day per well. There are roughly 500 oil companies operating in California, the top 30 of which account for 207 million of these barrels. So, about 470 small California oil companies produced 20 million barrels, for an average of around 115 barrels per day per company. That's a lot of small companies taking in revenues (not profit) of $3 million or so per year that are going to be affected. That's entire companies, not individuals. The majority of California oil companies take home less per year than Manny Ramirez. Large companies like Chevron will swallow this, but a lot of small businesses are going to be penalized.

3) Many factors affect local oil industry employment: prices, new exploration ideas, success rates, costs, taxes, environmental restrictions, permitting process, lease availability, and perceptions of future supply and demand, for example. In citing other states, Mr. Nava disregards the complexity and tells voters that the only variable is severance tax. This is not a scientifically accurate use of statistics. If California adopts the severance tax, and then oil prices plunge to $20, will it be fair if I tell Mr. Nava that the drastic drop in California oil development is due to severance tax alone? Of course it won't.

If Mr. Nava can demonstrate that the proposed tax would put California at parity with other states in terms of TOTAL tax take per barrel, and if he can demonstrate that it will not result in too many job losses in small businesses, then I would support such a tax. Unfortunately, what we hear is simplistic commentary.

When it comes to oil, everyone thinks they're an expert, and they're more than willing to blurt out whatever comes to their minds as if it were fact:

"A vast majority of the oil we use in the US comes from abroad"
Well, if you consider 67% to be vast majority, OK.

"as well as from other domestic producers (Texas, Alaska, Gulf coast), not California"
California ranks third in US oil production and produces about 11% of its oil. California has 20 of the top 100 US oil fields by reserves, and 4 of the top 10.

"And who pays for the clean-up when those oil companies screw up? Taxpayers of course."
Absolutely not. The companies are liable. When a spill occurs, they are liable for cleanup costs; they lose production revenue (they'd generally rather sell the oil than spill it, does that make sense?); they are subject to massive lawsuits; they may lose license to operate (Santa Barbara Channel?). The incentives not to pollute are tremendous. This may explain why there have been no major spills since 1969. More oil seeps out the seafloor naturally every week than has been spilled since 1969. About 7200 wells have been drilled offshore.

Holly,

Just want to bust another myth here...

Oil companies can't simply pass costs on to consumers. If you believe this, then explain the following:

1) The nation's largest refiner, Valero, lost $1.5 billion in 4Q2009 alone, and over $1 billion in 2008. The refining industry as a whole lost money last quarter. You can see this at the EIA's website.
http://tonto.eia.doe.gov/oog/info/twi...

2) For much of the fourth quarter of 2008, and into January of 2009, crude oil was selling for MORE than gasoline. Refiners were paying more for their product than they could sell it for.

3) Gasoline prices fell from a high of $4.16 in July 2008 to $1.71 in December 2008. Oil prices fell by 75% over the same period. If companies who sell oil and gasoline for a living can just name their price, how could this happen?

The economic and energy illiteracy in our country is appalling. Consider Noletaman's "Has anyone noticed the obscene profits of Exxon and other big oil companies."

In 2008, Exxon made a 9.5% profit margin.

Microsoft made 29%. eBay 21%. Apple 15%. Coca-Cola and McDonald's 18%. Google 19%. Are these profits also obscene? Are these companies ripping us off too? No one would say that. Yet everyone says Exxon is at 9.5%. Explain that to me.

Here are the top 10 performing industries in 2008, in profit margin, from Fortune Magazine:
1 Network and Other Communications Equipment 20.4%
2 Internet Services and Retailing 19.4%
3 Pharmaceuticals 19.3%
4 Medical Products and Equipment 16.3%
5 Railroads 12.6%
6 Financial Data Services 11.7%
7 Mining, Crude-Oil production 11.5%
8 Securities 10.7%
9 Oil and Gas Equipment, Services 10.2%
10 Scientific, Photographic, and Control Equipment 9.9%

Are networks and communications equipment companies also obscene at 20.4%? How about railroads at 12.6%? No one would say that. Yet everyone says the oil industry is at 11.5%. Explain that to me too.

Oil companies should absolutely pay for what they are extracting. Even Louisiana taxes their oil companies for crissakes. And even if the oil companies passed the tax down to comsumers, I wouldn't mind paying extra money at the pump if it meant my state could function.

Unless the demand function in inelastic, no seller of a product can "pass on the costs to consumers" in a world market. The price of oil and fuel is the price of oil and fuel. The Market sets the price.

"This may explain why there have been no major spills since 1969." -- swimmer

WHAT? You never heard of the Exxon Valdez? It happened 20 years after Platform A blew out.

SezMe,

I was talking about the Santa Barbara Channel - that's why the reference to 1969.

There have been a number of major spills around the world since 1969 besides the Valdez. The risk of spills due to tankers is far higher than the the risk due to drilling. In the 1970's there were on average 25.4 tanker spills per year around the world. Since 2000, the average has been 3.3 spills per year.

Major drilling-related spills are much rarer. The only major spill comparable to the Valdez that I can think of offhand after Santa Barbara was the Ixtoc 1 spill in Mexico in 1979.

Offshore California has produced 2,439,168,000 barrels of oil from about 7,200 wells. Since 1969, oil companies have spilled about 850 barrels or so, roughly equivalent to a week's natural seepage. That's a failure rate of 0.00003%. It would be interesting to compare that rate with other industries.

Correction, the oil industry has produced 3,658,169,000 barrels from offshore California. That cuts the failure rate to 0.00002%.

Well, never mind the spill from Platform Irene about 10 years ago (the same PXP platform wearing the offshore oil drilling tiara today) that took about 10 years to clean up. We wouldn't want to bring those facts into this conversation would we?

The 1997 spill from Platform Irene was caused by a ruptured pipeline, resulting in about 163 barrels spilled. In fact, I did bring this into the conversation , because it's included in the comment I posted already: "More oil seeps out the seafloor naturally every week than has been spilled since 1969." That is, about 850 barrels spilled since 1969, which you would have known immediately if you were aware what natural seepage rates are offshore. Which I assume you are.

The Irene spill was roughly equivalent to one day's natural seepage, or about .0002% of the oil produced in 1997 in offshore California. That's 1 barrel for every 467,000 produced. What failure rate do you demand? Should we penalize airlines for crashes too?

I think it's pretty clear that the Nava campaign is based more on an emotional dislike of an industry he doesn't understand, rather than any thoughtful and objective analysis.

For example, a previous post implies that since Texas pays $14 in tax per barrel, and California pays $4 (we'll take the figures as written), then it would be only fair if California producers should now pay an extra $10 per barrel. But since $10 is currently 12.5% of the spot oil price, and severance tax counts as a cost of goods, then the implication is that, at current prices, producers earning less than a 12.5% return on sales will have no profit. How much state income tax loss will that mean? How many job losses will that mean, and what will be the demand on state resurces to service these people. Presumably Mr. Nava doesn't care, because he can in the process poke the oil industry in the eye with a stick.

It's especially instructive that pedronava ignored the material comments in my post, and instead chose to attack a numerical detail, which he would have realized I had already incorporated, if he knew his numbers,