California Field Report – April, 2014

By Olman Valverde and Mike Flores, of Luna & Glushon


California oil companies and business advocates have organized a campaign to defeat proposed legislation that would place a tax on oil extraction in California. The bill, SB 1017, is authored by state Sen. Noreen Evans, a Democrat from Santa Rosa. It would generate about $2 billion dollars a year for higher education, state parks and health and human services.

This bill would impose an oil and gas severance tax upon any operator, as defined, for the privilege of severing oil or gas from the earth or water in this state for sale, transport, consumption, storage, profit, or use, as provided, at specified rates, calculated as provided. The tax would be administered by the State Board of Equalization and would be collected pursuant to the procedures set forth in the Fee Collection Procedures Law. The bill would require the board to deposit all tax revenues, penalties, and interest collected pursuant to these provisions into the California Higher Education Fund (whose establishment is part of the bill).

California Chamber of Commerce President and CEO Allan Zaremberg released the following statement on SB 1017: “We just raised California taxes by $7 billion a year for seven years. We now have a projected $5 billion surplus. To create a new tax on oil only extracted in California will drive up the price of California oil which constitutes about 40% of the California gasoline market. California’s robust oil industry will be at a competitive disadvantage. This new tax will kill jobs and hurt local tax revenues. In addition, the bill would create an unaccountable, unnecessary, and expensive bureaucracy. The proposal appears to conflict with Governor Brown’s earlier comments in response to a question about taxing oil extracted in California.”

Additionally, Western States Petroleum Association’s (WSPA) statement on SB 1017 read in part: “… Increasing taxes on oil production in California will place the state at a competitive disadvantage with other states and countries that impose lower taxes and costs on production.

That will mean more dependence on foreign oil at a time when the rest of the nation is experiencing a renaissance in domestic production and increased energy security.”


A bill by Senators Holly J. Mitchell (D-Culver City) and Mark Leno (D-San Francisco), which would impose a moratorium on the practice in California, has passed out of the Senate’s Natural Resources and Water Committee.

SB 1132 would halt hydraulic fracturing until state-sponsored research determines whether it can be done safely and the conditions for its regulated use. The bill would place a similar temporary ban on other well stimulation practices increasingly used in urban neighborhoods, such as acidization.

On a party line vote, the panel sent the bill to the Senate Environmental Quality Committee for further consideration. SB 1132 is the only bill pending in the Legislature which seeks to regulate HF and other methods of oil extraction beyond traditional drilling.


Hydraulic fracturing has been used since the 1940’s. According to Energy in Depth, a research, education and public outreach campaign launched by the Independent Petroleum Association of America (IPAA), this well stimulation technique has never been conclusively associated with groundwater contamination — a fact regulators and scientists from the Obama administration, the Brown administration and the National Academy of Sciences have repeatedly reiterated.

Hydraulic fracturing in California uses an average of 160,000 gallons of water per well. That’s about one-fifth of an Olympic-sized swimming pool. In fact, in 2013 the California Department of Conservation reported hydraulic fracturing used slightly more than 300 acre feet of water in a year. For context, California’s golf courses use 140,000 acre feet and agriculture used 34 million acre feet. Not to mention that oil development actually produces water, which is sometimes treated and sold to agriculture.

According to Tim Kustic, former DOGGR Supervisor, “there is no evidence of harm from fracking in groundwater in California at this point in time.” Dr. Mark Zoback of Stanford University agrees, stating “fracturing fluids have not contaminated any water supply and with that much distance to an aquifer, it is very unlikely they could.”