Monday, May 12, 2008

Supes to consider oil tax


County leaders will consider placing a tax on local oil production at the Board of Supervisors meeting tomorrow that could net millions in future revenues.
If the discussion goes forward as planned, the board will look into assessing a dollar value for each barrel of crude oil pumped on unincorporated land in Santa Barbara County, including state tidelands.

Such an approach is comparable to oil taxes collected in five California cities — Long Beach, Huntington Beach, Seal Beach, Signal Hill and Beverly Hills, according to a staff report by Doug Anthony, deputy director of the county’s energy division.
“No other oil-producing local jurisdiction within California appears to assess a tax other than permit and inspection fees, such as we do,” he wrote.
Rates for the five jurisdictions currently levying taxes on oil production in the state range from 36 to 59 cents per barrel and date back as far as 1960. Some also charge an annual base tax per oil well.
Santa Barbara County produced approximately 3.2 million barrels of oil in 2006, according to the California Department of Conservation. With a static tax of $1.20 per barrel, a sample figure offered by Anthony in his report, the county would stand to gain $3.84 million.
With a tax of 36 cents per barrel, the lower threshold of existing oil taxes, the county would still bring in $1.15 million based on 2006 figures.
Anthony also noted the Tranquillon Ridge Project, a proposal to drill into a previously untapped section of state tidelands off the coast of Lompoc that contains an estimated 170 million to 200 million barrels of oil, could boost that figure dramatically.
Assuming the project is approved and yields 100 million barrels of oil during the next decade, Anthony cited a gain of $184.5 million with an inflation-adjusted tax of $1.20 per barrel.
The Tranquillon Ridge Project, recently approved by the county’s Planning Commission on a 4-0 vote with one abstention, gained the backing of the local environmental community after the applicant, Plains Exploration and Production, agreed to a slate of requirements, including a rigid end-date for oil production from Platform Irene.
The project still requires approval from the State Lands Commission, the Coastal Commission and the Minerals Management Service.
Anthony also recommended that the Board of Supervisors, if it plans to move forward with the discussion of an oil tax, look into several factors, including inflation, frequency of payment and fluctuation of oil prices.
Officials could select a price index, such as Producers Price Index for domestically produced oil and gas or the Consumer Price Index, to set an inflation provision that would increase the tax annually.
The board would have to consider how often the tax will be collected and could also mandate random audits of oil producers. Another issue to consider is the fluctuating price of oil, Anthony said.
“Eventually, the price of oil may decrease substantially once we no longer depend on oil as a primary source of fuel for motor vehicles,” he wrote. “Although that time appears distant, some existing ordinances already include a threshold price at which their taxes are temporarily suspended.”
The Board of Supervisors would also have to select an election date for the placement of an oil tax measure. To qualify for the November 2008 ballot, the county would have to meet a series of deadlines, including approving the exact wording of the measure by July 5 and submitting a ballot order by August 22.
Advantages to placing the measure on the November ballot include preempting a similar state or nationwide effort, bringing in a larger voter turnout due to the presidential race, starting to collect the tax sooner, and covering as much production of the finite resource as possible, Anthony wrote.
Disadvantages, however, include competing with Measure D renewal (listed on the ballot as Measure A) and running the risk of the tax being viewed as exacerbating already skyrocketing fuel prices.
If county leaders decide to move forward with the drafting of an oil tax measure for the November ballot, staff will return with a draft ordinance by early July at the latest.

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