3-13-08 by dugan
California lawmakers were full of sound and fury last night over oil prices, oil profits, and oil taxes, but the end of the script was written before the first red-faced speaker grabbed the mike.
The Legislature’s gripping show of passion was aimed at a bill that would have imposed a 6% extraction tax on oil drilled in the state, with proceeds to alleviate budget cuts in education.
The Legislature’s Republicans have sworn to never approve a tax, so no tax proposal, even one called an extraction fee, can get the two-thirds vote required for money bills. Assembly Speaker Fabian Nuñez knew this when he sped the bill to a vote in in a special session on the remaining $8 billion of the state budget deficit.
A hastily called late-afternoon session to vote on the measure thus turned into verbal pie-throwing. Opponents lobbed over-the-top rhetoric like "This is a disgusting attempt to hurt working families [through higher gasoline prices]… and pacify a special interest [the teachers]." (Anthony Adams, Hesperia). Nothing there about whether oil companies that are raking in record profits could afford the kind of severance tax that every other oil-producing state imposes.
Proponents declared that "education contributes more to California than Chevron… I am not going to balance the budget on the backs of children." (Andre Swanson, Oakland).
An extraction tax is a sensible idea, and it is not likely to increase gasoline prices above the mad levels we’re now seeing. The bill explicitly forbade using the tax to raise retail prices, a tough demand to enforce. But it would have pried open a window on gasoline pricing, giving the state tax board power to investigate costs and pricing practices to decide if gouging is occurring, at any level.
The legislators could have debated the wisdom of dedicating a single-industry tax to the education budget, rather than development of renewable energy. But that issue never came up. The drama was all about creating quotes to pacify supporters and play to voters.
The prize for hardest-to-follow (more fruit cobbler than pie) went to Assemblywoman Bonnie Garcia, who tried to link a severance tax to homeowner foreclosures and the price of milk.
The most logical statement came from John Laird of Santa Cruz, who noted (long after most of his colleagues had left the room) that if the Legislature and voters hadn’t cut $7 million in taxes and passed bills and initiatives that cost the state billions more in unfunded costs, California wouldn’t be in such a fix.
Assemblyman Lloyd Levine of Los Angeles had the best grasp of oil profiteering: "When the price … on the world market increases, producers sell the oil in California at the world price, but their cost of production hasn’t changed.
You can’t take the oil out of state because the oil is in the ground. It is fair to ask those making huge profits [on this oil production] to pay their share." He could have been quoting OilWatchdog.
Opponents of the oil tax used the occasion to point out all the shortcomings of the state’s education system. They defended oil company profits as "normal." Supporters shot back that not passing the oil tax would amount to an "Every Child Left Behind" policy. And so on.
The vote was, as expected, well short of the two-thirds requirement. There wasn’t a serious discussion of oil profits or the state’s excruciating record gasoline prices, heading swiftly to $4.00 a gallon.
Oil profits are now off the table, as dead as they were in 2006 when $100 million in oil money killed a voter initiative to impose a similar extraction tax, using the proceeds to develop a renewable energy industry in California.
As usual, Big Oil got its way in California’s Legislature, just less quietly than usual.