Oil Severance Fee Would Ease California Budget Pain

By Richard Holober
Executive Director
Consumer Federation of California

Exxon Mobil, Shell, Chevron and Occidental Petroleum combined reported record profits of $36 billion for the third quarter of 2008. That’s $400 million in profits every day, seven days a week. Those four oil giants extract over 70% of the oil pumped from California’s ground. And they pay no state fees for that privilege.

California is the nation’s third biggest oil producer - and it’s the only state that fails to charge oil companies a fee for extracting a non-renewable natural resource from our land. California collects just enough to cover the costs of the office that processes the oil wells’ paperwork. In fact, California collects more in hunting and fishing licenses than it does from oil drilling fees.

We applaud Governor Schwarzenegger’s endorsement of an oil severance fee as an element in his tax and budget proposal before the legislature. This is a reversal for a Governor who opposed Proposition 87 in 2006. That measure would have established a severance fee to pay for alternative energy research and development. A $95 million ad campaign funded mostly by Exxon Mobil, Shell, Chevron and Occidental Petroleum defeated the initiative.

The Governor’s proposed 9.9% severance fee would have reduced their profits to a measly $35.8 billion for the last quarter. Think of it this way: the proposed fee would have deprived them of about one-half of one day’s profits earned for the quarter.

That’s a fair price to pay to reduce the budget pain sure to be inflicted on our schools, public safety, and health services.

Expect big oil to squeal like stuck pigs at the very thought of California joining Sarah Palin’s Alaska, George Bush’s Texas and Dick Cheney’s Wyoming in levying a severance fee.

We’ll hear the usual cries that gasoline prices will go up and jobs will be lost. We heard those same cries in 2006 when Prop 87 was on the ballot. That same year Exxon Mobil’s CEO walked away from his job with a $400 million payday. That one paycheck alone would have covered Exxon and Shell Oil’s combined California severance fee for the year.

The budget crisis provides a window of opportunity to win an overdue measure of tax fairness. Let’s get behind the Governor and the Democrats in Sacramento and push hard for the oil severance fee.

Learn more and take action at: www.consumercal.org

The Consumer Federation of California is a non-profit advocacy organization. Since 1960, the Consumer Federation of California has been a powerful voice for consumer rights. CFC campaigns for state and federal laws that place consumer protection ahead of corporate profit. Each year, CFC testifies before the California legislature on dozens of bills that affect millions of our state's consumers. CFC also appears before state agencies in support of consumer regulations.

Comments

Posted by: Jay Gould at November 20, 2008 09:21 AM

Posted by: adolfo at November 26, 2008 06:48 PM

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