Why California’s Finances Could Derail Their Energy Plans

Energy power linesAccording to State Senator John Moorlach, R-Costa Mesa, California has real financial problems that need to be immediately addressed. A self-described Truman Democrat, Joel Kotkin, in a recent syndicated article echoes the same sentiments. Some of the problems are California has the highest taxes overall in the nation, worst roads, underperforming schools, and the recent budget has at least a $1.6 billion shortfall.

Moreover, depending on how the numbers are analyzed California has either a $1.3 or a $2.8 trillion outstanding debt. This is before counting the maintenance work needed for infrastructure, particularly roads, bridges and water systems. Yet tax increases aren’t covering these obligations, and even the bullet train project, which held so much promise when it was passed are now billions over budget.

However, the financial strain also has California’s net financial position running a $169 billion deficit according to the Comprehensive Annual Financial Report, which puts California ranked last in the nation. Deferred maintenance on our state roads and highways is roughly $59 billion. Estimates of California’s unfunded pension liabilities – assuming a rate of return – above 5% has CalPERS at $114.5 billion, CalSTRS at $76.2 billion and UC Pension at $12.1 billion.

California in addition has the highest unfunded retiree medical liability in the nation, second highest gas taxes when cap and trade is added, highest corporate and individual income taxes, and lastly has the worst business competitive environment in the U.S. as well.

Our biggest issue of all could be that our nation’s unfunded pension liabilities have reached upwards of $5.6 trillion with California’s share at $956 billion. These above-mentioned sobering assessments of our state’s financial and societal health are reasons to question why California has become an outlier of progressive policies – particularly when it comes to energy – with renewable energy being at the forefront of our overall energy portfolio.

At one time California was the leader in sensible environmental, education, manufacturing and cultural polices, but those days have seemingly passed. As the country moved to the right during the recent election, California has entrenched itself as the stronghold of the left-leaning, progressive movement. Nowhere has this played itself out than in California’s embrace of global warming with AB 32 and SB 32. Both energy policies are known to restrict economic growth, and make all forms of energy more expensive. Whether you believe or not in global warming and climate change, California’s embrace of the fundamental tool for economic growth – affordable, scalable energy – has now become harder than ever to achieve with the voters, California legislature and Governor’s full embrace of these policies.

At this time California isn’t creating middle or upper middle class jobs, except in the northern California region. With San Francisco leading the way. Apple just announced they are creating 2,000 jobs in Arizona with firms such as Toyota, Tesla and Carl’s Jr., having followed suit the last few years. Recent labor announcements about California creating 21,600 private sector jobs in December turned out to be a false narrative.

According to payroll processing company Automatic Data Processing Inc. working with Moody’s Analytics Inc., put the figure at only 2,400 “goods producing types of jobs.” Meaning that nine out of ten jobs created were service sector, minimum wage paying levels jobs.

With this type of employment opportunities being created how are Californians expected to pay for an energy portfolio that strongly relies on renewable energy? This could be turned around with great paying careers that the oil and gas industry provides. As an example, according to Russell Gold’s book “The Boom,” page 62, the average oil-field worker made $91,400.

Renewable energy at this time doesn’t work on the type of basis that could power neighborhoods, cities, counties, or this state. Additionally, renewable’s technology hasn’t solved a number of key issues for energy security, reliability and scaling at a cost effective measure to reach all California markets.

These main problems are: 1) storage of excess energy, 2) intermittent weather issues when using wind and solar, 3) generous tax credits needed for profits (Tesla as an example), and 4) modernizing the grid needs to take place, because renewable energy causes surges that California’s grid isn’t able to handle from over 38 million Californians.

As California relishes its role fighting the new President, it is hard to imagine his administration doing anything to assist California lowering its energy costs. It’s not hard to imagine that if you live in Los Angeles, San Francisco or other expensive coastal enclaves that a $200,000 a year salary isn’t enough once taxes are paid. Therefore, why is California nudging the new President towards confrontation?

Gun control, immigration, and even snubbing him at his inauguration, members of the California Congressional delegation are playing a dangerous game. Joel Kotkin has many times called California’s energy policy an amalgamation of “green clergy, or a clerisy.” Trump also has control over federal dollars. California is expected to receive $105 billion this year, with $78 billion going to health and human services programs. Likewise Trump has nominated pro-fossil fuel advocates to the Departments of State, Energy, Interior and the EPA. It doesn’t seem wise for California to not want to work with the Trump administration on opening up parts of California to energy exploration to assist with politically disagreeable problems now in the mix.

California has billions of gallons of oil and trillions of cubic feet of natural gas sitting off our coastlines and in the Monterrey shale. Jobs aren’t being created that can sustain working families, infrastructure is lagging and our energy portfolio isn’t functioning correctly to contain costs.  Our high-energy costs are one of the biggest factors why companies and CEOs are leaving California.

Many astute energy observers believe California will need to cut 100,000 jobs and increase energy prices to meet our ambitious climate goals. These goals could be met with moving towards natural gas and nuclear-powered plants.

A desirable goal for the new year would be for voters to begin considering voting for moderate, business-friendly Democrats, and sensible environmental Republicans who believe in an all-of-the-above approach when it comes to energy policy.

This perfect amalgamation of animosity rapidly approaching California could be mitigated with sensible, low-cost energy policies that benefit all of California.

Todd Royal is a geopolitical risk and energy consultant based in Los Angeles.

What President Trump Will Mean for California’s Economy

donald-trump-3Since Trump’s election we’ve seen a national rebound in consumer, small business and large corporate confidence. The American business and worker class seem to be saying what Californians don’t want to hear: We want an economy not stifled by environmental and tax regulations. We want a president that understands, “It’s the economy, stupid!” California once had that type of mentality, but now with an economy that mostly produces temporary, low paying, service sector jobs where are the positives for the California economy?

The answer is everywhere. Progressive policies were a great idea over a hundred years ago when they were meant to curb female abuse at the hands of alcoholic husbands, child labor in Chicago meatpacking sweatshops epitomized in Upton Sinclair’s, The Jungle, and breaking down corporate monopolies. Former President Theodore Roosevelt led that charge for the working man and woman.

That day has passed, and now gentrified environmental billionaires such as Tom Steyer and his legislative lackeys tow the global warming line for coastal elites. Unfortunately, most of California – and even wealthy Los Angeles – suffer the policies of leaders such as Senate Pro Tem Kevin de Leon’s job killer bill like SB32 and the boosting of AB32 into further restrictions on economic growth.

There isn’t a green economy that comes close to what Trump is proposing to do for energy exploration on public and private lands. Factually, there isn’t such a thing as the California green economy. It doesn’t exist. Nor does it produce anything resembling large-scale economic progress the way oil and gas exploration produces millions of jobs, and billions of tax revenues.

This is what President Trump will pursue when it comes fossil fuel extraction as a nationwide policy. And this will include California, especially if Trump does away with the moratoriums on deep water drilling for oil and natural gas off the California coastlines.

California has billions of barrels of oil and trillions of cubic feet of natural gas. The tax revenue produced by this could turn California into an economy that could reach the second largest in the world. If California would turn their back on the fallacy of the green economy and embrace sensible exploration our public schools could be the envy of the U.S., our infrastructure needs taken care of without tax increases, and a true, thriving middle class. Not the progressive haves and have-nots currently seen in California.

This is what Trump has in mind for the U.S., and dare it seems California could be on his radar to expand American energy opportunities.

Trump’s cabinet picks have all indicated economic growth will be their number one priority, and re-establishing America’s preeminence in the world through a larger blue water navy. What this means for California is hard to understand, but one thing is certain, the tech sector will see growth supplying the U.S. Navy with state of the art software. But China’s recent belligerence could be a bellwether of things to come for California’s economy; if the Chinese begin to make their markets even tougher to enter, this doesn’t bode well for California exports.

Sanctuary cities in California could also see a hit with cheaper labor on the downturn if Trump keeps his campaign promises and begins deporting illegals that are criminals, and not allowing the DREAM Act to continue through executive action. The rush for asylum could see Trump’s Justice Department and I.C.E. taking on Gov. Brown and the California Legislature.

Does California have the stomach for federal funds being cut off? Trump doesn’t need California, more than California needs the president-elect, and the federal dollars he is soon to control. The politics of this issue could be a harbinger for the legal fights and strength of the federal government California will be dealing with in 2017. What happens when Trump appoints the next Supreme Court justice, and then could go after the special status of illegal aliens/undocumented immigrants. California will lose. It’s hard to imagine Brown and the Legislature along with the Congressional delegation negotiating sensibly with Trump and his administration.

Special status will be reserved for California’s fixation on global warming led by Gov. Brown and coastal elites in San Francisco and the west side of Los Angeles. When Trump and his cabinet increase energy, but not necessarily renewables, California laws – AB32 and SB32 – won’t have the ability to make much of a difference. Though they don’t really work as intended anyway.

And with economic growth taking precedence over Paris Climate Agreements and the Clean Power Plan the rest of the U.S. will need cheaper energy that oil, natural gas and coal provide. Further, California’s dream of electric vehicles, solar panels and windmills powering California will not grow and the bullet train will be dead on arrival for the incoming administration and Congress.

California will also not be able, or allowed, to stop shipments of coal that the Obama administration encouraged and certainly didn’t stop. Not to mention the legality of the issue. California again will run into a juggernaut of federal laws, regulations and a hostile federal government if coal shipments are not allowed through California ports to reach an energy hungry China, India and the rest of Asia. Those are American jobs, and votes for Trump’s re-election that he more than likely won’t allow California environmental policy to dictate how and where coal is shipped from our ports. Global warming won’t be high on Trump’s vision of American growth, and it was misguided policy by the Obama administration that hurt Americans of all economic stripes.

We’ve already seen how Trump has dictated new water policies to California that doesn’t involve climate change, or EPA policies curbing manufacturing, but instead showed how water enhancement can assist farmers and development in the Central Valley. Anything that grows the economy will be at the forefront of the Trump administration, and not the reduction of greenhouse gases. These were all economic harbingers shunned by California and the Obama administration’s Commerce, Interior and Energy Departments along with his EPA. That won’t be the case with President Trump.

Economic opportunity will rule the next four years, and because California supported President Obama’s use of executive orders, and his famous, “I’ve got a pen and I’ve got a phone,” form of governance, California can expect the same. The expansion of federal powers under Obama will be stretched to block California progressive laws that don’t coincide with Trump’s presidency.

A Republican House and Senate will thumb their nose at California’s economic and social gains seen under Obama that will be hard to stop if Trump decides he’s had enough of our voter’s malfeasance towards him. The problem with supporting Obama’s way he governed by executive fiat won’t be able to counter Trump is moving beyond the Constitution since that is what Obama has done for eight years with California supporters cheering his every step.

California was certain that Trump would lose and Clinton would expand every social whim most of America finds disdainful. Economic reality will be coming to California and our environmental laws, because Trump can ignore this state for his entire presidency. If you take away California’s bloated vote totals then he won the popular vote by over 1.6 million. We better understand a new dawn is arising, or our economy could be left behind in more ways than we can imagine.