I debated whether to post another story about an oil company protest so soon after the one I did a few weeks ago on AB32, but the behavior of oil companies is a hot topic right now and rightfully so. There are many stories coming to light and this one is about more than just the environmental impact, it is about about a devastating financial impact as well. You don’t have to live in California these days to know that the state is in the throes of a $19.1 billion budgetary deficit that has already forced many spending cuts and threatens to implement many more. Jobs are at stake, and social programs and education will also undoubtedly feel the pain.
Now, you reduce deficits by either cutting spending or raising taxes, so what other oil producing states have done is to exact something called an oil severance tax, which is a royalty paid by the oil company for the right to extract the oil from the state’s land and water. The idea is that if you are going to deplete a valuable natural resource from the land, you need to pay for it. Seems fair, and even other oil producing countries have this tax which are usually much higher than the ones imposed in this country.
The problem is that the only oil producing state that does not have this severance tax is California. There have been several attempts to rectify this, most recently in 2006 with Proposition 87, which would have implemented a 6% tax on oil extraction. It had widespread support but faced a $95 million campaign funded by oil companies and went down to defeat 54.7% to 45.3%.
Lest you think this is a right versus left thing, consider that Gov. Sarah Palin and the Alaska GOP controlled legislature instituted a 25% tax on oil extraction and now have a multibillion-dollar budget surplus. The California 6% tax would have been modest in comparison, and would have raised about $1 billion in annual revenue, but at least it would have been a start. Critics argue that the tax would force prices up, chase oil companies from the state and eliminate jobs, but these are all the red herrings that are always thrown out when oil companies are threatened with a reduction of their massive profits and are debunked quite rightly by those outside the industry.
Last Thursday, over a thousand people, made up of union workers from SEIU Local 721, as well as students, childcare workers, school employees, and various community organizations marched from the Federal building in Westwood to the Occidental Petroleum offices a few blocks east on Wilshire and Westwood Blvd. The line of people stretched for blocks as the protesters gathered in front of the offices and emptied small fake bottles of oil at Occidental's doorsteps.
When I told people about the rally and march later, several of them asked if something like that actually makes a difference. I responded that the only thing I knew for sure was that if all those folks had stayed home, then absolutely nothing would have been accomplished. At the very least, demonstrations serve to rally the community and to energize those participating, who in turn have a chance to educate others about the situation, just as I am doing here. Not participating is exactly what the oil producers hope for. Maybe with talk once again of instituting an oil severance tax, the time will be right to actually make it happen.