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Methinks he doth protest too much: Further thoughts on an oil tax

Op-ed

Obviously, Thomas Elias, the Index-Tribune’s syndicated Sacramento columnist, isn’t used to having his bias against the oil industry picked apart so publicly. Kudos to Catherine Reheis-Boyd for trying to set the record straight in the Feb. 14 Index-Tribune. As for Mr. Elias’ sputtering, selective rejoinder in the same issue, at risk of adding fuel to the fire (sorry, I couldn’t help it) may I offer a thought or two?

  It is frustrating to see such gross mischaracterization of California’s tax policies regarding oil production. Companies involved in oil production in the Golden State – be they the likes of Chevron and Shell or the few, remaining small independent producers in the Central Valley – pay taxes directly on the oil itself via property taxes, and indirectly through hidden levies and fees imposed by various state agencies.

  In California, the value of oil underground is included in property assessments and reflected in property tax payments. This is a very direct tax on oil, and one that other states do not impose. It is also the reason why anything that diminishes the value of oil underground – such as Mr. Elias’ proposed separation tax – forces an ensuing reduction in property tax revenues to local governments and schools.

  As for his contention that, “California gets no benefit to speak of from oil produced here,” and his diss of the economic impacts of oil industry employment, all I can say is that Mr. Elias is really “shovel ready” in more than one sense! Ms. Reheis-Boyd cites 18,000 direct jobs in oil production, and I believe that the rule of thumb is that these types of jobs correlate into an added 2.5 indirect jobs (service and supply contractors, etc.) for each direct job and, unlike Mr. Elias, I don’t think that 50,000-plus jobs is something to sneer about, during a recession or any other time.

  Would oil producers leave the state if a separation tax is imposed here? Not bloody likely, but they would limit their future investments here, and California’s already declining production curve would accelerate.

  Why is that important? Because Mr. Elias mischaracterizes that California imports little foreign oil. According to the California Energy Commission, we only produce about 40 percent of our own needs. Alaska accounts for about 20 percent, but the remaining 40 percent comes from unstable countries in the Middle East and elsewhere. And Alaska production is declining fast – not that that concerns Mr. Elias – and our state’s refiners are increasingly reliant on overseas crude.

  Mr. Elias asserts that, “Oil companies still price gasoline based on their worldwide costs.” I guess if you repeat a lie often enough somebody will believe it. According to the Government Accounting Office, and the U.S. Energy Information Administration, four elements drive the price we pay for gasoline: the price of crude oil; taxes; refining costs and profits; and marketing costs and profits. At this writing, crude is still priced over $100-per-barrel.

  Taxes, by the by, contribute significantly to California gasoline prices: with a pump cost of 66 cents per gallon – it’s posted right there on pumps at Sonoma’s few remaining stations – our state’s gasoline taxes are the highest in the nation, and 18 cents per gallon higher than the national average. Refining and marketing costs/profits are anybody’s guess.

  In sum, from my perspective, adding a severance tax to California oil producers’ existing burden would likely cost Californians’ jobs, increase our dependence on foreign oil, and add another burden to our recovery from recession. And it would likely add to Valley residents’ costs at the pump.

  That is why voters and the wise legislators in Sacramento (believe it or not there still are a few there) have repeatedly rejected proposals for an oil severance tax.

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  George M. Marcy is a New Jersey native and a Sonoma resident since 1983, who has held a number of public policy assignments with Chevron from 1978 through his retirement from the company in 2004. Previously active in the Valley soccer community as a player, coach and referee, he and his wife –  an executive with an area winery – have also been supporters of the SVHS Boosters, Boys & Girls Club, Sonoma Valley 4H, Stand By Me Mentoring Alliance and NorCal Golden Retriever Rescue.