REPOST: California fracking foes see drought as new weapon in heated battle

Fracking opponents came up with a new argument to stop the development of massive state oil reserves. Read more from this article:

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SAN FRANCISCO, Feb 10 (Reuters) - California fracking opponents aiming to stop development of massive state oil reserves are focusing their drive this year around the state's record-breaking drought, arguing oil production would suck sorely needed water from farms and homes.

California assemblyman Marc Levine told Reuters last week that he will co-author an upcoming bill that would place a moratorium on hydraulic fracturing in the state, and said he will use the drought, which could be the state's worst ever, to bolster his position.

"The drought is a game changer on fracking," Levine said. "We have to decide what our most precious commodity is - water or oil? This is the year to make the case that it's water."

A moratorium bill failed last year on a vote of 37 to 24, although another bill requiring greater disclosure on fracking, including water use, passed.

State Senator Holly Mitchell, Levine's co-sponsor on the bill, is not planning to focus on the drought, but environmentalists already are capitalizing on it, picketing Governor Jerry Brown at events including his announcement of the drought.

"Fracking uses water we just can't spare," said Dan Jacobson, legislative director for environmental lobby group Environment California.

Fracking has created an energy boom in the U.S. and has the potential to drastically increase oil production in California Monterey Shale deposit, which federal officials have estimated holds up to 15 billion gallons of oil, more than most estimates for Alaska's Arctic National Wildlife Refuge and twice the reserves of North Dakota's Bakken shale oil deposit.

Fracking works by injecting pressurized water and some chemicals deep underground to break up rock and release oil and natural gas. Opponents to the practice have mostly centered their arguments around the idea that it could contaminate below-ground drinking water supplies and that the fossil fuels it produces will accelerate climate change.

California does not do much fracking, yet, and it is not clear how much water the oil industry uses for each well.

State figures suggest the whole industry used about as much as 300 households in 2013 - about 300 acre-feet or nearly 1 million gallons, according to the Department of Conservation.

Regulations requiring oil companies to report fracking went into place on Jan. 1, but experts believe it will continue or pick up this year.

The eastern United States has a different geology which allows horizontal drilling that can go for miles underground, using millions gallons of water during a single frack job in a process that may take days or weeks.

In California, much less water is used and the period of pressuring the reservoir rock is much shorter, Department of Conservation chief deputy director Jason Marshall said.

"Hydraulic fracturing in California uses very small amounts of water," said Dave Quast California Director for Energy Indepth, an oil industry-backed group. "However, oil producers are very sensitive to the competing demands for water resources and will make whatever adjustments are necessary to adapt to drought conditions."

Environmentalists say state figures are based on voluntary submission and not are verified. "We just don't how much water fracking has used or will use," said Zack Malitz of San Francisco-based progressive group Credo, whose group has helped organize dozens of rallies against fracking in California.

In any case, the industry would have to increase fracking and water use substantially to develop the shale oil in a significant way.

Governor Brown opposed a moratorium on fracking last year, arguing it was best for California to produce the oil it uses, and his spokesman Evan Westrup declined to comment on whether the drought had changed the governor's mind.

Environmentalists concede that getting the bill through the state legislature this year will be difficult given the wide margin it failed by in the state Assembly last year, but they plan to keep pressing the issue.

"If Governor Brown wants to be a climate leader, he is going to have to walk the walk and stop fracking in California, which would dramatically increase carbon pollution and lead to more severe droughts," said Credo's Malitz.

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REPOST: Oil severance tax advocates are primed for battle

San Francisco launches an effort to get companies to pay for crude produced in California. Read more in this LosAngelesTimes article.

Image Source: latimes.com

SACRAMENTO — California is the only major oil-producing state that does not tax the goo as it's pumped from the ground. And that seems bizarre.

After all, aren't we a high-tax state? That's what the antitax crowd keeps reminding us. And it's true for most taxes. California has the highest personal income and sales taxes. We're near the top on corporation and fuel taxes. Roughly in the middle on property and tobacco. Second lowest on wine.

Overall, we're ranked fourth in combined state and local tax burden, according to the nonpartisan Tax Foundation.

But on oil? Texas and Alaska — bastions of conservatism — both tax production. And we essentially don't.

Well, it's not quite that simple.

California doesn't have a specific tax on oil severance — or extraction or depletion, choose your word. But there are other levies oil companies do pay: corporation, sales and property (underground reserves). Also fees, to fund state regulation.

Their property taxes are limited by Proposition 13, although protecting oil reserves from the county assessor is probably not what voters had in mind when they approved the landmark measure back in 1978. Most property taxes on underground oil are collected by Kern County, the state's biggest oil patch.

All these taxes total around $6 billion annually, says Tupper Hull, spokesman for the Western States Petroleum Assn.

But those pushing for an oil severance tax cite legislative research showing that all levies combined add up to $4.22 per barrel in California. In Texas, they're nearly triple that at $14.33. A 10% severance tax would elevate oil company levies in California to Texas' level.

"We are an extreme outlier giving a huge tax break to some of the richest companies in the world," says Tom Steyer, a San Francisco hedge-fund billionaire who launched a crusade last week to collect more oil taxes. "It's a giant tax loophole for incredibly rich corporations."

In California, those companies are primarily Chevron, Occidental, ExxonMobil and Shell. Steyer says that foursome earned nearly $20 billion in profits last quarter alone.

As for their taxes amounting to only $4.22 per barrel, industry spokesman Hull says: "We have no idea how those numbers were developed." He contends the actual figure is many times that.

But there's no argument about this: California doesn't tax oil extraction, and every other significant petroleum state does.

California is the fourth-largest oil producer behind Texas, Alaska and North Dakota.

The fact that oil companies have always gotten off relatively easy here is a tribute to their muscle in Sacramento.

The Legislature passed a 9.9% extraction tax in 2009, but then-Gov. Arnold Schwarzenegger squashed it.

Last spring, state Sen. Noreen Evans (D-Santa Rosa) introduced an extraction tax bill that's still buried in a committee. It would impose a 9.5% per-barrel tax, raising an estimated $1.5 billion annually, 90% of it for higher education and the rest for parks and a disaster fund.

Evans says she plans to turn her bill into a statewide ballot measure for next November. That would require a difficult two-thirds legislative vote.

"Oil is a natural resource owned by all California," she asserts. "By not taxing it, we're giving the oil industry a huge subsidy at the expense of educating our children."

Copyright © 2013, Los Angeles Times

But it being an election year, legislators will be particularly skittish about voting to raise a tax of any kind, even if they're punting the final decision to voters. And Gov. Jerry Brown has informed lawmakers he wants to avoid all controversy while seeking reelection. Placing an oil tax on the ballot, however, could boost Democratic voter turnout in an otherwise yawner election. Steyer's strategy team hopes to organize college students to lobby the Legislature for an oil tax, with much of the new revenue committed to reducing tuition.

And that grass-roots effort could turn out young voters in November if there's a ballot measure. That could help Democratic candidates but wouldn't guarantee passage of the extraction tax. Even if Steyer — a clean-energy advocate and previously successful initiative warrior — donated tens of millions to the campaign, as he surely would, the oil industry would ante up even more. It spent $95 million in 2006 to defeat a ballot measure that would have imposed a 6% severance tax.

The industry spiel is easy to predict: It'd argue that the tax would be passed onto motorists at the pump — even if that is improbable, according to a Rand Corp. study.

"Companies sell for whatever the world price is, for whatever they can get," Steyer says. "That argument is extremely thin gruel. Good grief."

But, says Hull, "any economist will tell you that when higher taxes are imposed on a commodity like oil, production will be shifted to lower tax places. Companies have choices about where to make investments in the global arena. And California could lose jobs."

If the companies want to tap into California's large oil reserves, however, they can't do it in North Dakota. An oil field can't be moved out of state like some assembly plant.

Resisting pressure from environmentalists, the Legislature and governor last year refused to place a moratorium on fracking — an aggressive and controversial oil drilling method — and decided to regulate it instead. That's when Democrats missed the boat. They should have demanded that the industry pay a severance tax on the newly fracked oil. And it probably would have accepted that deal.

Dr. Ali Ghalambor is the author of the “Well Productivity Handbook,” explains in detail the
various components of the oil industry. Follow this Twitter page for more updates.