An oil tax is being proposed in a bill from California senators.
The bill explains that there will be a tax of 9.9 percent for the gross cost for every barrel of oil extracted from California soil or coasts. If put into effect, the tax will be enforced beginning Jan. 1, 2014.
Introduced on Feb. 12 the bill by State Senators Noreen Evans and Mark Leno, it will create the Oil Severance Fund which will be established in the State Treasury to evenly allocate 93 percent of its revenue to the University of California, California State University, and California Community Colleges.
The remaining 7 percent will go to the Department of Parks and Recreation for the maintenance and improvement of state parks.
“California is the largest –and only—oil producing state in the nation that does not tax its vast oil resources,” Evans said in a press release. “Those are unrealized revenues we can, and should, use to endow our core services of government by fulfilling our commitment to higher education and similarly, preserve our natural resources in State Parks by funding them.”
If this bill is passed, it means 31 percent of the money collected will directly benefit Skyline and over 100 community college campuses in the state. According to a report by the Board of Equalization, the bill is to generate approximately $2 billion in a years’ time. If the revenue were distributed evenly between all of the California community colleges, it could mean well over $5 million in funding for Skyline by the end of 2014.
“I’ve worked on this issue for a long time and honestly higher education, community colleges in particular, have been devastated over the last four or five years,” said Jonathan Lightman, executive director of the Faculty Association of California Community Colleges. “We as a public have a choice, which is to say we can sit on our hands and do nothing or we can identify available revenue streams to rebuild our institutions of higher education.”
A common concern of consumers is the price they have to pay for gas and news of a proposed tax on oil will cause uncertainty. Many will want to know how the royalties collected by the state will affect the price at the pump.
“[Oil] is traded on the world market, the majority of the extraction that we have in California is exported anyway,” said Theala Schaff, communications director for State Senator Noreen Evens. “There was a bill that was looked at back in 2010 and the assembly revenue and taxation committee did an analysis on that.”
Schaff continued to read from the analysis, “In a 2006 report of Prop 87 which would have proposed a similar type of tax, market research could insure that oil severance tax should not be passed on to consumers because oil refineries have made many options for purchasing crude oil on the global market.
California oil producers will still have to maintain competitive prices to retain their share of the market. Otherwise oil refiners facing higher priced oil from California producers could at some point find it cost effective to purchase additional oil from non-California suppliers who would not be subject to the severance tax.”
The bill is in works of amendment and discussion currently and will be acted upon in the state senate on or after March 15.
