Paul Wellman

Should barrels of crude oil, like those pumped daily from this derrick near Orcutt, become subject to a Santa Barbara County severance tax in the years to come? It could mean millions of dollars in annual revenue for the county.

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Looking to inject the County’s cash-strapped coffers with millions in oil-derived dollars, the Santa Barbara County supervisors voted unanimously this week to explore the possibility of a per-barrel tax on oil harvested from beneath county land. Though still very much in the development stages, the tax, which would require public approval in a county-wide general election, was met with cautiously open arms by supervisors while also creating unusual bedfellows among its variously motivated opposition — including several oil industry operators, the Environmental Defense Center (EDC), the Community Environmental Council (CEC), and the Santa Barbara County Taxpayers Association. Summing up the realities of the proposal, which pits an obvious “no-duh” fiscal appeal against the possibility of creating an incentive for future oil production, Supervisor Janet Wolf said Tuesday afternoon, shortly before the vote, “It is about time we are approaching this. … But it needs to be fair and it needs to be thought-out if it’s going to work.”

According to county staff data, on-shore and off-shore oil production currently amounts to about 3.2 million barrels per year — a number that they admitted is slightly inflated as it includes natural gas production. That number could grow as large as approximately 13.2 million barrels if and when the PXP Tranquillon Ridge project offshore of Vandenberg becomes a reality. In staff’s estimation, based on a theoretical per barrel tax of $1.20, the revenue stream associated with the tariff is probably more like a raging river of cash, albeit a finite one, to the tune of well over $12 million a year and perhaps as much as $184 million within a decade of its inception with inflation rates considered. With a certifiable bloodletting currently being carried out with the county’s budget, a less than stellar statewide economic forecast, and the hopes of a new county jail fast moving toward actualization, the appeal of the per-barrel severance tax was not lost on any of the supervisors. As Supervisor Brooks Firestone, a self-admitted hater of taxes and longtime supporter of oil, put it, “There are very real reasons to consider this tax.” As such, the supes left the door open this week for putting the tax question to voters perhaps as early as this November.

“There are numerous answers to questions that need to be resolved before an informed decision can be made on this subject.” - Bob Poole

That being said, this week’s discussion, born out of a revenue brainstorming session by the supervisors in 2007, was anything but music to the ears of area oil operators. After only briefly hearing about the matter during an unrelated meeting with county officials in mid-April, oil operators big and small turned out in force on Tuesday to demand a seat at the table in any future discussions on the matter. With a debate concerning major variables such as the fluctuating price of oil, the difference between production prices and annual barrel output, and the perceived possibility of taxing the same mineral twice as a result of the county’s complex property tax protocol for oil and gas leases, oil producers emphasize the need for a dialogue among stakeholders, similar to that which preceded the recently updated county petroleum ordinances. As Western States Petroleum Association spokesperson Bob Poole put it, “There are numerous answers to questions that need to be resolved before an informed decision can be made on this subject.” Furthermore, more than a few oil industry insiders cautioned the county against pinning financial hopes on the oil industry while also warning that the tax could be felt both at the gas pumps and in the bank accounts of property owners who lease land to oil operators. However, in the opinion of the county’s director of planning and development, John Baker, “The impact [the tax] would have on fuel prices at the pump is nothing at all.”

Though motivated by entirely differently reasons, the EDC’s chief counsel, Lynda Krop, also warned the supervisors against moving too fast on the tax proposal. Calling it both a “complex and controversial issue,” Krop worried aloud that, as presently proposed, the tariff — currently similar to ones being applied in six California cities including Beverly Hills, Signal Hill, and Seal Beach — could work to give added incentive to greenlighting oil production in Santa Barbara County. “If this applies to new oil proposals” explained Krop, “we would oppose it.” Similarly, the CEC’s Michael Chiacos questioned what impact such a dollar-driven incentive would have on the county’s efforts to reduce fossil fuel dependence in the years to come.

The matter is expected to be back before the Board of Supervisors on May 27.

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