Supes line up behind crude oil tax proposal

BY COLBY FRAZIER
DAILY SOUND STAFF WRITER

A crude oil tax that could end up on November’s general election ballot and line Santa Barbara County coffers with nearly $200 million over the next decade received mostly praise yesterday from the Board of Supervisors.
Under the proposed tax, $1.20 would come out of every barrel of oil sucked from the ground in the unincorporated areas of the county, which could generate more than $10 million each year.

This level of revenue generation fell on open ears yesterday, as the board is expected to slash more than $26 million from the 2008-2009 budget. The board has repeatedly called on staff to come up with creative ideas to generate funds, and some feel this may very well be an answer.
Third District Supervisor Brooks Firestone, who over the past couple of months has regularly and bluntly reminded the board of the fiscal crisis whenever spending is mentioned, admitted that he is not fond of taxes, but likes this one.
“I’d like to speak as one who hates taxes,” he said. “Our revenue will not cover our basic services. We are going to be forced to look at ways of raising revenue because there are things we just can’t cut.”
In the same breath, Firestone raised what may end up being the most pivotal issue of the tax if and when it does end up on a ballot. He questioned whether or not the tax would create an incentive to expand exploration for oil throughout the county.
While Firestone said such an incentive could “work out to our mutual benefit,” other board members and environmental groups said it’s just the scenario they hope not to see.
“I’m concerned about the incentivizations that could occur from any tax,” said First District Supervisor Salud Carbajal. “I don’t see myself approving any future offshore oil development in my tenure.”
But Carbajal, who is the chair of the board, acknowledged that just because he is against expansion of oil facilities doesn’t mean other board members will be. If and when more oil proposals came forward, Carbajal said the county should be in the position of reaping the economical benefits, whether he likes it or not.
The board did not authorize staff to begin drafting a ballot measure yesterday, but instead directed them to meet with various shareholders, including the oil industry, and bring the item back in two weeks.
Representatives from the oil industry criticized the tax and insisted they want to sit at the table with staff before anything permanent is drawn up.
Bob Pool, a representative from Western States Petroleum Association, said county staff met with oil officials once briefly to discuss the tax — a gesture he said is counter to how the democratic process should work.
“There are numerous unanswered questions that need to be resolved before a tax could be placed on the ballot,” he said.
Fifth District Supervisor Joe Centeno, who was the most leery of the tax, said a fleet of questions needs to be answered before he could support a ballot measure. At the top of that list, he said, is how such a ballot measure would compete with Measure A, a transportation sales tax that will be on the November ballot and could renew Measure D.
“I would hope that we would not rush into this thing,” he said. “It’s important that we all buy into this thing and it needs to be structured right to get it done.”
As proposed, the tax would predominately impact onshore oil producers. The offshore oil platforms are in federal waters and therefore cannot be taxed by the county. The exception could be the Tranquillon Ridge project, which was approved by the Santa Barbara County Planning Commission last month. If drilling does occur there, hundreds of millions of barrels of oil from an under water area off the coast of Vandenberg Air Force Base could be taxed.
The Tranquillon Ridge drilling operations would occur from Platform Irene, which is located in federal waters, but the oil is located in state jurisdiction.
The board’s staff report used the Tranquillon Ridge project as a guideline for the revenue generating potential of the tax. It assumes 100 million barrels of oil could be extracted over the next 10 years and could yield about $184 million without taking into account onshore facilities. The report says the county produced 3.1 million barrels of oil in 2006.
Assistant County CEO John Baker said there’s no question that such a tax is legal.
Baker said the tax would also rise accordingly each year based on inflation and the price of oil, which has skyrocketed over the past five years and is currently at about $126 per barrel.
Joe Armendariz, executive director of the Santa Barbara County Taxpayers Association, said taxing oil is the wrong way to go about balancing the county’s budget.
“You put this tax on the ballot in November and we’ll oppose it,” he said. “This is absolutely, fundamentally the wrong thing to do for the taxpayers of this county.”
Armendariz said he felt the tax would put Measure A at risk and it would raise the cost of oil — a statement vehemently refuted by Firestone.
“[To think] our inconsequential tax in a tiny part of the world would raise the cost of gasoline; I just don’t think we can let that statement stand. I just don’t think it’s true,” he said.
Carbajal said he’s doubtful a ballot measure could come together by November, but there’s always next year.
“I’m excited about the possibilities,” he said. “I can tell you that in the community there’s a lot of support for this. [But] something tells me there’s not going to be enough time to really kick it around the way we should.”
The board will receive an updated report about the tax on May 27.