1-22-09 by dugan
Can California’s poor little oil companies–Exxon, Shell, Chevron
and Occidental Petroleum among them, afford in these bad times to pay
something back to California for oil they extract and sell in the
state? Oh, get real. Of course they can, as Richard Holober of the
California Consumer Federation so easily shows in this article.
It’s just as true that because of the way the price of oil is set,
customers at the pump won’t be dinged for the minimal cost of the tax.
California
is in desperate financial straits, from schools to health care, and is
also the only oil-producing state that doesn’t charge a per-barrel
severance tax on oil. Oil companies, unlike most of the state’s
economic engines, are awash in cash; ExxonMobil alone is sitting on about $40 billion and
Chevron, as of its last profit report, had $10.6 billion on hand. The
oil companies have each bought back tens of billions of dollars worth
of their own stock in the last few years, another form of piggy bank.
So
the 9.9% severance tax proposed by Gov. Schwarzenegger would return
about $800 million a year to the state for the extraction of a
nonrenewable resource, with almost no impact on the oil majors.
That’s
not what you’ll hear from poor little Chevron and Exxon, who are
spending their lobbying gazillions to defeat the idea, but it’s true.
From the article:
"Exxon Mobil, Shell, Chevron and Occidental Petroleum extract over 70%
of the oil pumped from California’s ground. In 2007, these four giants
reported combined record profits to the tune of $95 billion. That’s
$260 million every day, seven days a week – with 2008 profits expected
to be even higher."Severance fee revenues would fluctuate
along with the price of oil. At $40 a barrel, and production of 200
million barrels a year, the Governor’s proposal would bring in about
$800 million dollars a year."We believe that’s a fair price
for these wealthy corporations to pay to help reduce the budget pain
sure to be inflicted on our schools, public safety, and health
services. …"According
to an analysis by the California Tax Reform Association, California oil
companies currently pay the lowest amount of overall taxes on oil in
the country by a substantial margin. Reasons for this include: the lack
of an oil severance tax; the comparatively small cost paid in sales tax
on equipment; corporate taxes are apportioned, with an effective
corporate rate on oil companies of about 3%; and property taxes paid by
oil companies are kept low under Proposition 13."In 2006 Big
Oil spent $95 million to defeat Proposition 87, which would have levied
a variable severance fee of up to 6% based on the price of crude oil.
That measure also would have prohibited oil companies from passing
along the cost of the fee to the consumer. The Legislative Analyst’s
Office found that the state could easily enforce this provision, but
might not have to. The LAO report stated that oil prices are largely
determined globally, giving refiners options to purchase from other
sources, which in turn inhibits Exxon and Chevron’s impulses to raise
prices locally.
The
governor, who opposed Proposition 87 (as he long opposed any kind of
corporate tax) has changed his tune. Now it’s up to him and the
politically gridlocked state Legislature to resist the threats and
blandishments of the oil companies. They could start by giving up the
oil companies’ political contributions as a start toward "helping" them
pay the tax.
And here’s a link from the Consumer Federation article to help urge your legislators to make the decision California needs.