California is Missing Out on Transforming the State

fracking oil gasHardline energy policies against fossil fuel exploration and production (E&P) originating from Sacramento are causing California citizens and taxpayers to miss the boom coming from United States (US) shale production taking place in Texas, North Dakota, Pennsylvania, Oklahoma and Colorado that has forced OPEC to raise crude supply forecasts for 2018. California could use this economic growth from shale E&P since our GDP growth rate has slipped to 35th in the nation.

Moreover, Los Angeles now ranks as having the worst traffic congestion in the world, California is possibly in another drought according to the New York Times, and The Stanford Pension Institute says, “that CalPERS has a $1.4 trillion unfunded liability.” These could be some of the reasons why more people are migrating out of California – even beautiful San Francisco isn’t immune to net migration – and regulations are also making it tougher to grow the economy, hire workers and bring tax relief to the middle class.

But there is hope for California that energy E&P could pave the way to relieve many of these problems along with upgrading our outdated infrastructure, older schools, and overreliance on wealthy taxpayers to fund a majority of the state budget.

According to the International Energy Agency (IEA), the United States (US) will surpass Saudi Arabia and Russia with record oil production topping over 10 million barrels a day (mbp) while approaching 11mbp faster than analysts expected. This type of energy production hasn’t been seen since the Nixon administration. Daniel Yergin, economic historian and author of The Prize: The Epic Quest for Oil, Money and Powerstates:

“This is a 180-degree turn for the United States and the impacts are being felt around the world. This not only contributes to U.S. energy security but also contributes to world energy security by bringing new supplies to the world.”

Shockingly, the US Census Bureau in early February reported that the US exported roughly 700,000 barrels of light domestic crude in December 2017 to the United Arab Emirates (UAE). The EIA iterated the significance by pointing out the UAE is the fourth-largest OPEC producer and first time importer of US oil. The US net oil imports now hover near 3 mbp, whereas in 2006 the US imported over 12 mbp.

The EIA reports that by 2022 the US “will become a net petroleum exporter from rising crude exports and overseas sales of refined petroleum products such as gasoline. This new reality has the Energy Information Administration (EIA) Annual Energy Outlook 2018 confident that America will be the world’s leader in oil and natural gas E&P by the end of this year.

For California, the untapped, unexplored Monterrey Shale and Pacific Ocean could hold trillions in new revenues and economic activity. The question is will voters and elected officials understand the significance of wise, regulated energy exploration in one of the largest shale plays and ocean reserves in the world? If Texas, North Dakota and Pennsylvania can figure out reasonable E&P then California’s technological giants based in Silicon Valley and universities like Cal-Tech can certainly come up with best practices to ensure environmental safety while growing California’s economy.

Many critics like the Post Carbon Institute’s new report, “Shale Reality Check,” question the sustainability, long-term production prospects and viability of US shale. But are critics like the Post Carbon Institute missing an opportunity to diminish the force of the modern petro-state led by OPEC that in the past has crippled California’s economy and caused our Marines based in Camp Pendleton to be deployed overseas to fight in their never-ending, expensive wars?

For decades American, western and Asian diplomats have tiptoed around Middle Easter nations – particularly, Saudi Arabia – since they needed vital oil and natural gas for continued economic growth. But the US no longer needs as much Middle Eastern oil. This will make it tougher for OPEC to agree on production guidelines that raise prices at the pump while limiting Russia’s foreign policy that relies on the weaponization of state-run oil giants to fund their geopolitical adventures.

In late 2014 it seemed America’s oil independence was a pipedream and the Saudi’s would force America into renewable energy when they targeted shale drillers for elimination by flooding world markets with new supply. Throughout this Saudi-led war on US shale, bankruptcies overtook the Texas Permian Basin and Bakken Formation in North Dakota; production also fell in the US from 9.6 mbp to 8.5 mbp. Shale companies though never declared defeat; instead, they slashed costs, employed automation and adopted cutting edge technology (robotics, sensors, smart phones) to keep drilling. There is no reason why California can’t be the leader in these technologies, E&P and oilfield services.

West Texas intermediate crude is now in the 60s and the US is supplying China and India while causing the Saudis to now try and invest in US shale properties. Taking aim at Russia – a California priority after the 2016 elections – is taking place since the US is now a major exporter of natural gas and can “undercut Russian energy dominance over Eastern Europe.” The US is now able to withstand political turmoil in Venezuela, Libya and Nigeria – all major OPEC suppliers – when historically supply disruptions would have risked global growth. California now doesn’t have to concern itself as much with unstable countries and regions as we have for decades.

Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University and former Obama administration energy official speaks about this new geopolitical reality:

“For the last 40 years, since the Arab oil embargo, we’ve had a mindset of energy scarcity, but as a result of the shale revolution, the U.S. has emerged as an energy superpower.”

This new reality also means China, Japan and Southeast Asia have become more dependent on the US and potentially California than on the Middle East. The US and California can now argue the global order they have ensured should become a shared burden financially and militarily.

These are good problems for California to have, and when energy independence was only a dream in the 70s over the Arab oil embargo now fossil fuel superiority can bring California benefits for everyone in our state and the US. Energy accomplishments that bring economic freedom should be celebrated; and the geopolitical advantages that America and now California enjoy from shale drillers reshaping global energy markets could bring us decades of prosperity if only we will take advantage of them.

 is an independent public policy consultant focusing on the geopolitical implications of energy based in Los Angeles, California.

This article was originally published by Fox and Hounds Daily

Could oil firms be forced to pay for climate change in California?

Porter Ranch gas leakThe Bay Area city of Richmond recently made an unlikely move that got the attention of its largest employer and taxpayer, Chevron.

It followed other municipalities and counties across California that have filed lawsuits against oil companies, alleging that the energy giants knowingly contributed to climate change and should begin paying for it. Literally.

Employing the legal strategy that brought states major payouts from tobacco companies decades ago, the plaintiffs are demanding that oil interests begin writing checks to protect Californians against rising seas, crippling drought and harmful air.

The legal viability of the lawsuits is unclear; the cases are in early stages. But if any succeed, the implications are profound: The state is already spending hundreds of millions of dollars to shore up coastlines, protect infrastructure and retrofit roads and bridges in response to rising seas. And if companies are persuaded to drill and refine less oil, California has a much better chance of reducing greenhouse-gas emissions on the schedule it has set.

Besides Richmond, plaintiffs include the cities of Imperial Beach, Oakland, Santa Cruz and San Francisco and the counties of Marin, San Mateo and Santa Cruz. The Los Angeles City Council is considering its own suit.

 The state has not joined in, something environmental groups say is a failure of leadership.

“Accountability is critical,” said Kassie Siegel, director of the Climate Law Institute at the Center for Biological Diversity. “The state of California can and should file a case seeking money damages and also an injunction against ongoing activities.”

The California Department of Justice has sued the Trump administration two dozen times over policies that include several related to the environment. Asked whether the state would join the cities and counties or consider filing its own suit against the oil companies, the Justice Department declined to comment about potential future action.

The city-county suits began six months ago when Imperial Beach, in southern San Diego County, sued a handful of oil companies. Richmond, surrounded on three sides by water and imperiled by rising seas, joined the fight Jan. 22. Its city council voted unanimously to sue 29 oil producers, even if it meant taking on Chevron, whose tax payments—$45 million in 2016—account for 25 percent of the city’s general fund.

“They are a pretty important corporate citizen,” said Richmond Mayor Tom Butt.

However, “we are a waterfront city—Richmond has 32 miles of shoreline on the Bay. Part of our city is vulnerable to sea-level rise: our transportation systems, neighborhoods and commercial areas and thousands of acres of waterfront park.”

Among those vulnerable venues is Chevron’s refinery, which sits at the edge of San Francisco Bay. Completed in 1902, this refinery, the state’s largest, was immediately dubbed “the colossus.” The facility today employs more than 3,400 people.

Leah Casey, the spokeswoman for Chevron’s Richmond refinery, said in a statement that lawsuits like the local ones “will do nothing to address the serious issue of climate change. Reducing greenhouse-gas emissions is a global issue that requires global engagement.”

Butt said the city sued “out of frustration, because I know that these fossil fuel companies are aware of the long-term costs and damage of the widespread consumption of fossil fuel.” He said Richmond was already planning for the sea’s rise but had not yet calculated mitigation costs.

The suits are filed in state court under California’s public-nuisance law, which allows legal actions against activities that are “injurious to health.”

New York City filed a similar claim against five of the world’s largest oil companies in federal court, asking that the cost of mitigating damage done by the companies as a result of their contribution to climate change be charged to them.

The legal challenges also assert that the oil industry has known for decades that burning fossil fuels accelerates climate change. The Richmond complaint states, “The industry has known for decades that business-as-usual combustion of their products could be ‘severe’ or even ‘catastrophic.’

“Companies were so certain of the threat that some even took steps to protect their own assets from rising seas and more extreme storms,” the complaint goes on, “and they developed new technologies to profit from drilling in a soon-to-be-ice-free Arctic. Yet instead of taking steps to reduce the threat to others, the industry actually increased production while spending billions on public relations, lobbying, and campaign contributions to hide the truth.”

The slow unraveling of the decades-long industry cover-up of the medical harm from cigarettes turned the tide in the tobacco cases, according to Ann Carlson, an environmental law professor at the Emmett Institute on Climate Change and the Environment at the University of California, Los Angeles, School of Law.

Carlson, who is advising some of the plaintiffs’ lawyers, said that courts will take into account the oil-industry-funded campaign to discredit climate science.

“That matters in California,” she said. “If you can show evidence that a defendant engaged in a campaign to obfuscate, it’s more than just a nice detail. Evidence helps.”

With much at stake, oil companies are pushing back hard. ExxonMobil has responded with a demand to depose lawyers representing the California cities and counties.

The company says it is a victim of a conspiracy and cities and counties are being disingenuous: When they issue municipal bonds, they portray risk from climate change as unpredictable, not the fault of oil firms, as the lawsuits claim.

The companies have also filed motions to move the cases to federal courts, where they believe there are precedents more favorable to them.

The number of the legal claims intended to monetize the consequences of a warming planet is growing. Carlson said greater scientific certainty about attributing climate change impacts to specific industries and companies has created a legal opening.

“The courts were uncomfortable that they couldn’t trace the harm,” she said.

California is the epicenter of so-called climate-attribution science, said Peter Frumhoff, director of science and policy for the Union of Concerned Scientists.

“There’s really a quite robust ability to characterize the extent to which climate change impacts have worsened,” he said.

Further, by collating data taken from oil companies’ annual accounting and national and international energy agencies’ reports, “one can then connect the dots and assign a cost. That tees up the question, ‘Who is responsible and who should pay?’ ” Frumhoff said.

“This is where the science is taking us, with increasing specificity and confidence.”

This article was originally published by CalMatters.org

Could Trump’s Offshore Drilling Plan for California Become Reality?

Offshore frackingThe Trump administration’s recent announcement week that it would seek to lease out 47 large areas in U.S. waters off America’s coasts to oil and gas exploration companies from 2019 to 2024 – including two areas off Northern California, two off Central California and two off Southern California – might have been expected to trigger elation among the Golden State’s energy-exploration firms and panic among its environmentalists.

Instead, Catherine Reheis-Boyd, president of the Western States Petroleum Association, put out a perfunctory statement emphasizing that any such drilling would be subject to “stringent” and “overlapping” state rules as well as federal rules. And Golden State environmentalists and elected leaders pointed to all the different tools with which California could thwart the Trump administration initiative.

The most obvious is that the State Lands Commission controls and has long-established authority over the first three milesoff California’s coast. No energy exploration company will pursue an offshore drilling project without certainty that it can get the oil or natural gas it pumps to refineries and related infrastructure onshore. Assemblyman Al Muratsuchi, D-Torrance, and Sen. Hannah Beth Jackson, D-Santa Barbara, announced that they are preparing legislation to forbid the Lands Commission from approving new pipelines or infrastructure related to new offshore drilling. If the state of California blocks the construction of pipelines offshore and needed facilities onshore, offshore drilling isn’t economically feasible.

Former Coastal Commission lawyer sees plan as ‘grandstanding’

The huge obstacles led Ralph Faust, former general counsel for the California Coastal Commission, to tell the Los Angeles Times that the Trump administration’s plan “just seems like grandstanding.”

The Coastal Commission also has tools that give it a potential veto over what is happening in the federally controlled waters beyond three miles from shore – if it finds federally sanctioned actions are incompatible with the state’s offshore management plan. The federal courts have at times sided with states and at times with Washington when such claims are made.

While California is the third-largest oil-producing state in the United States – after Texas and North Dakota – its untapped potential has frustrated energy exploration companies for decades. No new offshore drilling, such as the facility off the Santa Barbara coast that is pictured on this post, has been approved in more than 30 years.

On land, some geologists think there are vast amounts of oil in the Monterey shale – a massive underground area along the Central California coast and inland – that could be recovered with fracking. Similar finds have yielded billions of dollars for oil exploration firms and substantial new tax revenues in North Dakota, Texas, Ohio and Pennsylvania.

But while Gov. Jerry Brown initially seemed intrigued by the possibility of drilling in the Monterey shale after taking office in 2011, his interest disappeared after the U.S. Energy Information Administration’s 2014 decision to sharply reduceestimates of recoverable oil under the Golden State.

Florida’s request for exception quickly granted; California gripes ignored

Instead of grandstanding, as the former Coastal Commission counsel suggested, it’s also possible that the Trump administration and Interior Secretary Ryan Zinke are trolling Gov. Jerry Brown and other Democratic leaders in the deep-blue Golden State.

On Tuesday, Zinke announced he was dropping plans to lease drilling sites off Florida at the request of the state’s governor, Rick Scott, a Republican.

Zinke has offered no comment on the far more vociferous objections to his offshore drilling plan from California’s top elected officials.

This article was originally published by CalWatchdog.com

Conventional Fuels Still of Vital Importance to California

Gas-Pump-blue-generic+flippedThe American Society of Civil Engineers recognized oil as an element of “infrastructure” in California in its 2016 Infrastructure Report Card. That report card clearly documents the fact that there are no easy answers to our complex energy and transportation challenges for the future.

Fossil fuel permeates every aspect of our daily lives. It has driven an exponential increase in human numbers and civilizations from the horse-and-buggy days. It enables us to easily get to work, school and medical facilities as well as the freedom to travel for family and recreational purposes. It supports the quality of life Californians take for granted. We need more – not less – fossil fuels to develop economies and basic infrastructures for the people of developing and third world countries.

This has been lost on the part of many lawmakers and regulators who have come under intense pressure from the powerful anti-oil lobby to eliminate fossil fuel production and use at the local and state level in California, primarily to reduce greenhouse gas emissions associated with climate change. Wind and solar are only able to provide intermittent electricity to the grid, but cannot provide the oil or the oil by-products that are the basis of every component of modern civilizations’ industries and infrastructures. This is an overly simplistic approach to addressing the complex international challenge of forestalling global warming.

The fact is, oil is the only energy source that is technically able to power about 95 percent of our state’s 32 million vehicles with transportation fuel demands of 40 million gallons per day. It’s just common sense to produce as much of that crude oil and manufacture the transportation fuels as much as possible in California for its 38 million citizens who live on an “energy island” for several reasons: First, our state has the nation’s strictest environmental laws, generating far lower greenhouse gas emissions than those associated with producing and transporting oil from countries with weaker rules. Second, it would provide California consumers with the energy security necessary to protect us from disruptive and costly supply interruptions. Third, it would be good for our economy, providing jobs and revenues right here in California instead of in other states and countries.

Despite this reality, regulators continue to recklessly forge ahead with schemes to force an immediate move away from reliable fossil fuels in favor of alternatives and renewables. With both in-state crude oil production and shipments from Alaska on the decline, shipments from foreign countries, already at 52 percent of California’s needs, will be increasing. An alternative to reduce dependency on foreign crude is approval of crude transport by rail from the Midwest or Canada to meet the demands on the California energy island.

One scenario under consideration by the Air Resources Board would mandate that the number of electric, plug-in hybrid and fuel-cell vehicles increase from the current 300,000 to 5 million and 40 percent of new car sales by 2030, regardless of cost or feasibility.

There are local efforts underway as well. For example, here in the Valley area, two of three planned phases to expand access to the San Fernando Road bike path have been completed, and the third is underway. But is it intellectually honest to think that Valley commuters will be able to use a roughly three-mile bike path to get to jobs throughout the more than 4,000 square miles of Los Angeles County alone?

A recent traffic study concluded that six of the most congested stretches of highway in the United States are in the Los Angeles area. The101 Freeway in the Valley earned the dubious distinction as the worst highway in the country, where during rush hour it can take 91 minutes to travel 26 miles at an average speed of 17 miles an hour.

So how do we reconcile the desire to fight global warming with the real-life transportation needs of Valley motorists and our counterparts throughout the state? First, some perspective may be helpful: according to the California Energy Commission, our state contributes a miniscule 1 percent of total worldwide greenhouse gas emissions. It’s been a decade since the passage of the flagship climate change policy AB 32, yet, the state has not been transparent with the results of its emission crusade, and remains on a go-it-alone path to micromanage the California emissions that generates billions of dollars for the government at the expense of businesses and the financially challenged. So no matter how much inconvenience and cost we impose on drivers, we are likely to see a return that is purely symbolic, not substantive.

And no matter how many electric cars we put on the road, they will still be stuck in the same maddening traffic jams that increasingly enrage users of more conventional vehicles.

Let’s hope that future generations will be up to the challenge facing humanity to mitigate climate change responsibly and cost-effectively. Meanwhile, as the society of civil engineers report card suggests, California might do well to focus more attention and resources on improving transportation infrastructure to make commuting easier and cleaner for the folks in the Valley and elsewhere.

ounder of PTS Staffing Solutions, a technical staffing agency headquartered in Irvine

Fossil Fuels Witchhunt is a Quest for Cash

natural gas1The oil and gas industry was born in Pennsylvania on Aug. 27, 1859, when Edwin L. Drake drilled the world’s first commercial oil well. A critic said Drake should leave the oil underground because it was needed to fuel the fires of hell, and to pump it out would protect the wicked from their eternal punishment.

That’s how long some people have believed oil companies are in league with the devil.

Today’s anti-petroleum alarmists warn of the hellish climate that someday will result from civilization’s reliance on fossil fuels. Fortunately they’ve hit on a solution: cash payments. 

The strategy was hatched in 2012 at a two-day meeting in La Jolla organized by the Union of Concerned Scientists and the Climate Accountability Institute. It brought together 23 experts on law, science and public opinion for a workshop titled, “Establishing Accountability for Climate Change Damages.”

The idea was to compare “public attitudes and legal strategies related to tobacco control” to those related to climate change, according to a report of the meeting.

The group found a few problems with the comparison to tobacco. For one thing, they couldn’t identify a specific harm from climate change that had damaged anybody.

“What is the ‘cancer’ of climate change that we need to focus on?” asked one attendee.

And there was a bigger problem. “The fact is, we do need some form of energy,” one participant said. Another lamented, “The activities that contribute to climate change are highly beneficial to us.”

Oh, that.

Originally published in the Los Angeles Daily News. For the remainder of the column please go here.

Can CA Survive Without Oil? Two Perspectives

Gas-Pump-blue-generic+flippedA week ago, Zocalo Public Square published an article, Imagining California Without Oil Refineries, by one of its editors, Lisa Margonelli, suggesting that Californians are embracing new technology that will lead to an oil free future. She wrote that not being gasoline consumers has become part of many Californians’ identities. Meanwhile, the California Resources Corporation (CRC), a publicly traded oil and natural gas exploration and production company, produced a website also asking Californians to imagine the state without oil. The two imaginings could not have been more apart.

The Zocalo piece spoke of the history of the environmental movement in the Golden State and the fact that younger generations are limiting consumerism and supporting a new way of living that reduces — and some day would eliminate — the need for oil. The CRC imagined a day without oil and offered a list of products that would disappear. Never mind the energy that is used to power products, petroleum is raw material used in refrigerators, dishes, smartphones, coffee makers, kayaks and more.

But it was the area of economic effects that made me take notice.

Margonelli wrote that, “Technologies as diverse as Facebook, compost bins, and electric vehicles have made many Californians see themselves as participants in building an oil-free future, without much fear of the potential downsides.”

And: “Rather than being afraid, a surprising number saw an economic upside in getting oil out: In polls, 43 percent of Californians said that cutting gasoline use would create jobs, while only 13 percent said it would kill them.”

(I might note that the PPIC poll respondents don’t always have the best information. Continually when asked, they describe prisons as getting the most money from the state budget and education near the bottom when the opposite is true.)

But accepting for the moment that there would be a rush of new jobs with technology and alternative energy what might be lost if we shut down the oil business?

The CRC made the following assertions:

The industry directly employs 184,100 Californians from diverse backgrounds and all levels of the socio-economic spectrum, which translates into $23.3 billion per year in wages and salaries for oil and natural gas jobs. It offers jobs to workers of all education levels, including truck drivers, geophysicists, chemists and machinists.

The oil and natural gas sector reflects California’s diversity. Over a quarter of the statewide industry workforce is Latino … In California, the average annual oil and natural gas industry salary of $118,032 is double the $56,590 average for other private industry jobs, according to a 2015 report by the Los Angeles Economic Development Corporation (LAEDC).

In total labor income alone, the oil industry injected $40 billion annually into the state’s economy, according to the LAEDC report. These salaries filter into the local economy through the vendors who work with the oil companies and the local businesses frequented by workers… The oil industry supported 456,000 jobs in the state, or 2.1 percent of California’s employment, and generated more than $204 billion in direct economic activity.

In addition, U.S. oil and natural gas companies pay considerably more in taxes than the average manufacturing company. According to Standard & Poor’s research, in 2013 the oil and natural gas industry paid an average effective tax rate of 40.2 percent versus 22.3 percent for other S&P 500 industries such as healthcare, retail, utilities, media and pharma.

In California, nearly $22 billion in state and local taxes collected in 2013 can be attributed to the oil industry, as well as $14.8 billion in sales and excise taxes, according to the LAEDC report, all of which help fund essential services and infrastructure that Californians rely on every day.

The issue of taxes paid by oil and gas companies plays against the future imagined in the Zocalo piece. Will the new alternative energy industries produce the same kind of revenue for the state?

The end-oil commentary concluded that a young woman was driving an electric vehicle – a Leaf—“with state and federal incentives.” (The family) “even installed solar panels that feed the Leaf, making them participants in generously funded state programs…”

You wonder if we cut out the traditional energy industries with all those jobs and the billions paid by the oil and gas industry in taxes if there will be revenue available to offer generous state funded incentives to buy solar panels and electric vehicles or pay for other budget items.

Originally published by Fox and Hounds Daily

VIDEO interview: Gov. Scott Walker on Iran, Russia and Keystone XL

Wisconsin Gov. Scott Walker addresses criticisms of his limited foreign policy experience — discusses U.S. policy regarding Iran, Middle East and Russia in an exclusive interview with Orange County Register Opinion editor Brian Calle.

Hermosa Beach Torpedoes Oil Opportunity

Drill, baby, drill?

In Hermosa Beach on Tuesday, voters instead replied: No, baby, no.

On the wave of a big turnout, 79 percent of city voters rejected Measure O for “oil.”  According to Ballotpedia, the measure would have authorized 34 new wells through “an oil drilling and production project agreement between the city and E&B Natural Resources Management Corporation, providing for an exemption to the city’s ban on oil and gas drilling.”

Though the politics of drilling turned the city vote into fodder for a familiar national controversy, the outcome hinged on a decades-old saga affecting the beach community. At the same time, clear ideological lines were blurred by the complicated scheme of subsidies promised to Hermosa Beach and its public schools.

A historic vote

Especially in recent years, the word “historic” has been used to describe outcomes or events that count toward some bigger sense of progress or social change. Although anti-drilling advocates made clear they viewed the Hermosa Beach vote that way, voters cast their ballots against the backdrop of a more traditional kind of history.

For years, long-running peculiarities defined their municipality’s hesitant approach to oil. As the LA Weekly recounted, Hermosa Beach has puzzled through the costs and benefits of drilling for generations.

A 1932 vote wiped out any oil and gas exploitation within city limits. Residents only loosened the ban in 1984, green lighting two initiatives that allowed drilling at two locations. One such permit went to Macpherson Oil.

By 1992, the City Council had signed off on a so-called slant drilling plan; Macpherson would access offshore oil by angling its bits and pipes from an onshore facility.

Three years after the slant drilling plan was approved, voters pulled the rug out from under Macpherson by reimposing their 1932-era ban on all drilling. Three years after that, in 1998, the City Council reversed itself completely and opted to scuttle Macpherson’s whole setup.

Perhaps predictably, Macpherson took the city to court. Perhaps even more predictably, the case never made it to trial.

settlement blessed Macpherson’s sale of its Hermosa Beach stake to another firm, E&B Natural Resources, which secured, as part of the deal, an allowance to seek voter approval for its own take on the Macpherson plan.

Late last year, the Hermosa Beach City Council finally gave its approval to the wording of E&B’s ballot initiative — vowing to stay neutral and merely provide voters information in the run-up to this week’s referendum.

Shock waves

At once, friends and foes of offshore American drilling interpreted the long-gestating Hermosa Beach vote as a bellwether. Advocates on both sides sprung into action accordingly.

Up and down the L.A. coast, anti-drilling activists used the vote to warn that, if Hermosa Beach approved E&B’s plan, drilling would proliferate. The Santa Monica City Council could offer only token opposition, but did.

Manhattan Beach, the nearby Del Rey Neighborhood Council and the Surfrider Foundation followed suit. Heal the Bay, the National Resources Defense Council and others brought Robert F. Kennedy Jr. into town to decry the measure.

In an effort to woo voters, meanwhile, E&B worked to ensure that it helped subsidize popular local priorities. As the New York Times observed, the quirks of the agreement that teed up the vote put E&B in the strange position of punishing Hermosa Beach if residents voted against it. Opting against drilling triggered a payout of $17.5 million in damages to E&B, “the equivalent of about half the annual general fund budget in this city of almost 20,000 people.”

Currying favor, E&B touted the $600 million-odd windfall in royalties it said Hermosa Beach would enjoy if the deal went through.

Oil markets

But the exigencies of the oil markets, and the shifting sands of its increasingly complicated agreements, made the potential payout more uncertain. A cost-benefit analysis commissioned from Kosmont Companies by the City Council assumed oil would hover around $95 a barrel. But the plunging oil prices of recent months forced Kosmont to revise its analysis in a supplemental report designed to better sync estimates with market prices and future projections.

Reported EasyReaderNews.com:

“The school district would receive $1.8 million at $95 per barrel and $1.4 million at $40/per under the terms of the lease agreement, Kosmont said. The education foundation would receive $16.5 million at $95 per barrel and $7.1 million at $40 per barrel under the terms of the development agreement, Kosmont said.

“Should voters not lift the oil ban, Kosmont said, the city would need to repay E&B the $17.5 million loan. The city has $6 million set aside to meet this obligation. The balance, Kosmont said, would cost $825,000 to finance over 30 years. The city’s current annual budget is $34 million.”

Amid the flurry of numbers, Hermosa Beach residents found themselves increasingly divided, even bickering over the vote. The anxiety of drilling may now be over, but the costly payout now adds to the burden of taxpayers.

Originally published by CalWatchdog.com

Whether Politicians Like It or Not Gasoline Is California’s Life Blood

The Field Poll reports that for the first time in seven years more California voters believe the state is moving in the right direction (50 percent) than feel it is on the wrong track (41 percent). Those living in coastal California are much more likely to have a positive outlook on our state’s future than inland residents. And Democrats are more optimistic than Republicans, so it may be safe to assume that Democrats living in Malibu, Silicon Valley and the Bay Area are much happier than Republicans living in Central Valley and other areas with high unemployment.

Like politicians everywhere, California’s governing class will attempt to claim credit for this reversal of what had been nearly unanimous pessimism.  Moreover, they will also claim that this is vindication of progressive policies that have given California one of the most harsh tax and regulatory environments in the nation.

However they explain the voters’ optimism, they are unlikely to bring up the one thing for which they can claim no credit whatsoever; the lower gas prices that existed during the period the poll was conducted, January 26-February 16, just before the cost of a gallon of gas began to vault upward again.  With prices in late January down almost 2 bucks per gallon since the high in 2014, many Californians have had reason to smile. It is also interesting to note that the last time more voters than not were positive about their state, gas prices were also down.

Even if there is not an exact correlation, when drivers who fill up their cars two or three times a month see that they are saving money, they are definitely in a better mood.What is ironic is that while the Sacramento political class may want to take credit for voter optimism, they have been working overtime to keep the cost of gasoline high. Between the high gas tax and the additional “carbon tax” imposed on manufacturers that is putting upward pressure on prices, the politicians have proven they are no friend of the millions of average folks who must depend on their cars for transportation.  According to State Board of Equalization Member George Runner, even with the price dip, Californians in January were paying as much as 47 cents more per gallon than drivers in other states.

Acknowledging that gas taxes are providing sufficient revenue, the State Board of Equalization last week reduced the state gas tax by 6 cents a gallon beginning this July. The reduction is based on a formula enacted by the Legislature in 2010, a formula that is so complicated that most news reporters don’t understand it.  Runner rightfully objects to this confusing system that hides the actual cost of the gas tax by hiding the second carbon tax that is only reflected in the overall price.  Currently, Californians pay about 64 cents per gallon in taxes and fees — the second-highest rate in the nation — but we become number one when the hidden tax of about 15 cents is added in.

If the Sacramento politicians really want to see voters smile, they should lay off trying to increase costs for the millions of Californians who depend on their cars to go to work, take their children to school and to do the weekly shopping.  Because one thing is certain – the optimism that Californians are feeling now will disappear in a heartbeat if gas prices return to what they were less than a year ago.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Economic Contrast: Texas vs. CA

In the last decade, Texas emerged as America’s new land of opportunity — if you will, America’s America. Since the start of the recession, the Lone Star State has been responsible for the majority of employment growth in the country. Between November  2007 and November 2014, the United States gained  a net 2.1 million jobs, with 1.2 million alone in Texas.

Yet with the recent steep drop in oil prices, the Texas economy faces extreme headwinds that could even spark something of a downturn. A repeat of the 1980s oil bust isn’t likely, says Comerica Bank economist Robert Dye, but he expects much slower growth, particularly for formerly red-hot Houston, an easing of home prices and, likely, a slowdown of in-migration.

Some blue state commentators might view Texas’ prospective decline as good news. Some, like Paul Krugman, have spent years arguing that the state’s success has little to do with its much-touted business-friendly climate of light regulation and low taxes, but rather, simply mass in-migration by people seeking cheaper housingSchadenfreude is palpable in the writings of progressive journalists like the Los Angeles Times’ Michael Hiltzik, who recently crowed that falling energy prices may finally “snuff out” the detested “Texas miracle.”

Such attitudes are short-sighted. It is unlikely that the American economy can sustain a healthy rate of growth without the kind of production-based strength that has powered Texas, as well as Ohio, North Dakota and Louisiana. De-industrializing states like California or New York may enjoy asset bubbles that benefit the wealthy and generate “knowledge workers” jobs for the well-educated (nationwide, professional and business services employment rose by 196,000 from October 2007 through October 2014), but they cannot do much to provide opportunities for the majority of the population.

By their nature, industries like manufacturing, energy, and housing have been primary creators of opportunities for the middle and working classes. Up until now, energy  has been a consistent job-gainer since the recession, adding  199,000 positions from October 2007 through October 2014, says Dan Hamilton, an economist at California Lutheran University. Manufacturing has not recovered all the jobs lost in the recession, but last year it added 170,000 new positions through October. Construction, another sector that was hard-hit in the recession, grew by 213,000 jobs last year through October. The recovery of these industries has been critical to reducing unemployment and bringing the first glimmer of hope to many, particularly in the long suffering Great Lakes.

Reducing the price of gas will not change the structure of the long-stagnant economies of the coastal states; job growth rates in these places have been meager for decades. Lower oil prices may help many families pay their bills in the short run. But there’s also pain in low prices for a country that was rapidly becoming an energy superpower, largely due to the efforts of Texans.

Already the decline in the energy economy, which supports almost 1.3 million manufacturing jobs, is hurting manufacturers of steel, construction materials and drilling equipment, such as Caterpillar. Separately, the strengthening of the dollar promises harder times ahead for exporters  in the industrial sector, and greater price competition from abroad, amid weakening overseas demand. Factory activity is slowing, though key indicators like the ISM PMI are still signaling that output is expanding.

Right now in Texas, of course, the pain is mounting in the energy sector. Growth seems certain to slow in places such as Houston, which Comerica’s Dye says is “ground zero in the down-draft.” Also vulnerable will be San Antonio, the major beneficiary of the nearby Eagle Ford shale. The impacts may be worst in West Texas oil patch towns like Midland, where energy is essentially the economy.

Yet there remain reasons for optimism. Cheaper energy prices will be a boon for the petrochemical and refining industries, which are thick on the ground around Houston and other parts of the Gulf Coast. The Houston area is not seeing anything like the madcap office and housing construction that occurred during the oil boom of the 1980s. Between 1982 and 1986 the metro area added 71 million square feet of office space; including what is now being built, the area has added just 28 million square feet since 2010. Compared to the 1980s, the residential market is also relatively tight, with relatively little speculative building.

The local and state economies have also become far more diversified. Houston is now the nation’s largest export hub. The city also is home to the Texas Medical Center, often described as the world’s largest. Dallas has become a major corporate hub and Austin is developing into a serious rival to Northern California’s tech sector.

Texas needs to increase this diversification given that oil prices could remain low for quite a while, and even drop further after their recent recovery.

This is not to deny that the state is facing hard times. Energy accounts for 411,372 jobs in Texas, about 3.2% of the statewide total, according to figures from Austin economist Brian Kelsey quoted in the Austin American-Statesman. If oil and gas industry earnings in Texas fall 20%, Kelsey estimates the state could lose half of those jobs and $13.5 billion in total earnings.

Low prices also could also devastate the state budget, which is heavily reliant on energy industry revenues. A reduction in state spending could have damaging consequences in a place that has tended to prefer low taxes to investing in critical infrastructure, and is already struggling to accommodate break-neck growth. The only good news here is that slower population growth might mitigate some of the turndown in spending, if it indeed occurs.

But in my mind, the biggest asset of Texas is Texans. Having spent a great deal a time there, the contrasts with my adopted home state of California are remarkable. No businessperson I spoke to in Houston or Dallas is even remotely contemplating a move elsewhere; Houstonians often brag about how they survived the ‘80s bust, wearing those hard times as a badge of honor.

To be sure, Texans can be obnoxiously arrogant about their state, and have a peculiar talent for a kind of braggadocio that drives other Americans a bit crazy. But they are also our greatest regional asset, the one big state where America remains America, if only more so.

This piece first appeared at Forbes.

Cross-posted at New Geography and Fox and Hounds Daily