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Graph showing falling oil prices in the marketINDUSTRY PAYING LESS THAN $5 MILLION IN LOCAL TAXES

The decline of gas prices at the pump over the past year, from well over $4 a gallon to less than $3, has been a reflection of declining oil prices, including the value of the oil produced in Monterey County.

That means that the oil company advertising in opposition to Measure Z on the November ballot contains figures that are seriously out of date. In commercials opposing the anti-fracking measures, the industry says it pays $9 million in local property taxes annually based on the oil value. One of the most recent mailers from the oil industry says, “If Measure Z is passed it could end up costing Monterey County $9 million in funding per year, which is currently used to support vital public services like schools, police and fire districts.”

The industry’s local tax bill for this year, however, actually will be “somewhere south of $5 million,” according to Monterey County Assessor Steve Vagnini.

An analysis by Vagnini’s office in July reported that “the assessed value of crude oil in Monterey County has gone from $980 million to approximately $511 million in the last three years as a result of the decline in the price per BBL (barrel).” Since then, the value has continued to decline to below $500 million, said Vagnini, who added that he still has serious concerns about the Measure Z’s potential financial impact on local government, especially if litigation results.

Vagnini’s office presented the reduced amount to the Board of Supervisors earlier this year to be taken into account for next year’s budgeting.

“Oil prices dropped on Monday, weighed by oversupply concerns, with U.S. crude dropping below $50 as trade volumes spiked ahead of the Oct. 20 expiry date for American futures contracts.” CNBC

Roughly, the annual property tax paid by the oil producers works out to about 1 percent of the value of its product. If oil prices continue to decline, it is possible that the oil industry will spend as much on anti-Measure Z advertising as it does in local taxes this year. As of last week, Chevron and others had put about $3.7 million into the campaign against the ballot measure. The industry-financed opposition effort argues that passage of Measure Z would create significant layoffs and increase the nation’s reliance on foreign oil, but the leading argument and focus of the TV advertising is that it would cause the loss of $9 million in local taxes.

Jim Eggleston, a spokesman for Protect Monterey County, the sponsor of Measure Z, says the actual reduced tax figure  “exposes how phony their argument is.”

“Measure Z doesn’t shut down anything,” Eggleston said. “It was written specifically to answer the takings question. It’s really about water.”

Measure Z would ban fracking in Monterey County and require the oil industry to adopt technology that would stop the practice of injecting tainted wastewater back into the groundwater supply.

Even at $5 million, the oil fields of San Ardo and elsewhere in southern Monterey County are major contributors to local government operations, including schools. Vagnini mentioned that the  proposed Hartnell College bond on the upcoming ballot will become more expensive for Salinas Valley homeowners if Measure Z causes an oil industry slowdown or shutdown.

The process of assessing oil fields is complicated, involving various formulas that account for factors such as the thickness of the oil – Monterey County’s is particularly thick — but the written analysis by Vagnini’s office does a good job of simplifying things:

“Crude oil prices fluctuate on a daily basis with many variables that affect daily prices. The oil prices may fluctuate from domestic or foreign market reasons. OPEC often can set (price fix) foreign oil prices by either flooding the market or reducing production, which in-turn affects all other crude oil prices, stock markets, futures market for both foreign and domestic oil.

“In the third and fourth quarter of 2015 through the first quarter of 2016, we saw some of the lowest crude prices in three decades. Iran and Iraq attempted to force OPEC into relinquishing control over oil prices by flooding the markets with their crude oil. OPEC in response did not curve their production of crude which created a surplus and brought oil prices down to the $20 to $30 per barrel (BBL) range which affected domestic crude oil prices.

“For lien date 2016 the Brent benchmark price was $41.00 per BBL. All oil in Monterey County is benchmarked at a Midway-Sunset (MWSS) 13 specific gravity which is the basis of most of the oil in the central California region. For lien date 2016, MWSS 13 was adjusted to $35 per BBL as a baseline, then each reporting field was adjusted either higher or lower based on their specific gravity of crude oil. Once a base price for the crude oil is determined we forecast the next 5 years and then hold the last number constant for the remaining economic life of the field up to 30 years.

“It is important to note that the current $35 BBL of oil only represents the current market value and does not represent the value of oil in Monterey County. In 2013 the MWSS benchmark was $95.50 BBL, in 2014 the MWSS benchmark was $101.00 BBL and 2015 MWSS benchmark was $54.00 BBL. The Assessed Value of crude oil in Monterey County has gone from $980 million to approximately $511 million in the last three years as a result of the decline in the price per BBL.”

The analysis predicts a slow and steady increase into 2017 but Vagnini’s figures this week indicate that the uptick has not yet started.

The analysis continues, “The price of oil prices also impacts decisions made by oil companies on future exploration. When the benchmark crude oil prices are low, oil companies tend to conserve resources and postpone the construction of new wells, new facilities and new projects. Conversely, when benchmark prices start going up, oil companies take more risks, invest more capital in projects, discover new reserves which all generate new taxable assets.”

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Aged Oil Pump on Colorado Prairie with Mountain Hills in the Background. Oil Industry Theme.So I was thinking about oil and fracking and other issues of the day, and I had an idea.

You’ve probably seen the TV commercials and the mailers paid for by the oil industry. They say that if Monterey County voters approve Measure Z, the anti-fracking initiative on the Nov. 8 ballot, it will shut down the local oil industry. (The ballot measure language says just the opposite, but we’ll let this issue slide for the moment.)

The commercials and mailers also tell us that the loss of the oil industry would cost various local government agencies $8 million or $9 million in property taxes each year. (They started out with $8 million but the number has grown in the last week or so.)

The commercials are pretty slick. They show a fire engine disappearing as it rolls down a country road and a firehouse vanishing. Nobody would want that to happen.

But that’s when I started thinking about those tax dollars. Let’s call it $9 million. On the one hand, that’s kind of a lot. But then again, is it really?

It amounts to just about 1 percent of the property tax income in Monterey County. And even if Measure Z did put the oil industry out of business, it wouldn’t happen all at once. The property values would decline over time but that would stop long before hitting zero.

The amount of property taxes paid by the oil companies in Monterey County works out to less than the property taxes paid by owners of the houses along the fairways of the Pebble Beach links. And the owners of those houses aren’t doing much to increase the carbon footprint. They aren’t using government-financed roads to send tanker trucks filled with crude to refineries out of the area. They aren’t pumping oily wastewater into the aquifers of Pebble Beach.

So here’s the idea.

If all those fancy commercials, the expensive scare tactics, the big lie technique, manage to beat back Measure Z, the community should stick together and require the industry to start paying for the privilege of getting rich from the resources of Monterey County.

At last count the oil companies had spent $3.7 million to fight Measure Z. They’re able to do that because they might as well be pumping money out of those wells instead of gas and oil. Last year, they pumped 7.8 million barrels of crude from the San Ardo fields, and smaller amounts elsewhere. At the current per barrel price, that oil was worth about $400 million.

That’s a lot.

If for some reason Measure Z fails, we need to find a way to make sure that the oil companies take responsibility for the environmental cleanup that their work surely will require. The bottom line issue addressed by Measure Z is the wastewater that the oil companies now inject into the ground as part of their processes. They say they aren’t hurting anything, but others who have studied the issue closely say it is only a matter of time before the current practices create a contamination crisis in the aquifers that serve the county’s much larger and much more important ag industry.

If Measure Z fails – and, perhaps, even if it passes – we should be requiring the oil companies to set aside a percentage of their take to create whatever technology is needed to ensure that the crisis never comes and to create a fund to clean up the water should it ever occur.

Just a couple of years back California legislators played around with a 9 percent production fee but those big-spending oil companies used campaign contributions to dissolve the legislative resolve. I’m thinking 9 percent sounds about right for Monterey County’s oil production tax, but let’s call it 10 percent just to make the math easier.

By the way. Yes on Z.

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JEANNE TURNER: Why Measure Z is good for Monterey County

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Aged Oil Pump on Colorado Prairie with Mountain Hills in the Background. Oil Industry Theme.Since our governor accepts large contributions from Big Oil, he is not going to support a ban on fracking in California, as Gov. Andrew Cuomo did for New York. So the group known as Protect Monterey County helped write the Measure Z initiative, on Monterey County’s Nov. 8 ballot, which is meant to accomplish that goal.

Despite the unanimous recommendation of the Monterey County Planning Commission, the Board of Supervisors, by a 3-2 margin, voted not to place a moratorium on fracking in the county. That left us no alternative but to create the initiative. All statements made in the initiative had to be supported by documented research before the attorneys would include them in the initiative’s language. The main reason our coalition put Measure Z on the ballot is because of the horrific water contamination taking place.

The oil production in San Ardo is done by steam injection or flooding. The steam is put down one well to loosen the viscous oil in the tar sands, and then both the oil and water are brought up through what is called a production well. What is produced along with the liquified oil is wastewater — water that went down there to liquify it the oil. It is contaminated by the chemicals in the oil and by arsenic and lead naturally occurring in the soil.

One-third of this 13.8 million gallons of water used daily is cleaned by reverse osmosis, but two-thirds of it is put into wastewater injection wells that go down into “protected” aquifers. For decades, oil companies have operated in the county with little oversight or environmental review despite the industry’s advertised claims of stringent regulation.

For example, local oil operators have been disposing of their wastewater using injection wells for many years, in violation of the U.S. Safe Drinking Water Act. In fall 2015, the Central Coast Regional Water Quality Control Board notified six oil companies — Chevron and Aera the two largest — that 35 out of their 44 wells are illegally injecting wastewater into protected aquifers near the Salinas River. Letters were sent giving owners of these wells until February 2017 to cease use of these wells, or get exemptions from the Department of Gas and Geothermal Resources (DOGGR) — a regulatory agency that generally caves in and grants exemptions so the practice of water contamination continues. That’s why we have to stop this, and our only remaining alternative is to use the initiative process.

John Steinbeck wrote of the Salinas River being an “upside down river,” not because it flows north but because there is far more water hidden as groundwater than can be seen in the river itself. It is all the same water, fed by the underground aquifers.

It is not a matter of if but when the Salinas River groundwater will become irreversibly contaminated. As the river flows north from San Ardo it impacts agriculture and tourism, Monterey County’s top two industries, ultimately flowing out into the Monterey Bay National Marine Sanctuary where there are myriad species of sea life.

Despite all the hype in the No on Z television ads, the oil extraction companies pay only 1 percent or less of the property tax collected in Monterey County. There are fewer than 200 workers in the oil fields, most of whom are brought in from outside the area by contractors. The crude oil is put on trains that go down to L.A., where it goes out on the open market. It does not make Monterey County energy independent.

What you are hearing and seeing are scare tactics from an industry that has enjoyed the freedom to do pretty much as it wished, thanks to the Halliburton Act. Can the rest of us put dirty water into clean aquifers? No, the water we use goes through sewage treatment. Every other industry is required to clean its wastewater.

The industry will have to clean up all its contaminated water (not just the 30 percent that they clean now). Even with water cleanup, profits will remain in the billions.

Does our initiative shut down oil operations in San Ardo? No. They are allowed to continue using the over 1,500 wells in existence. No jobs will be lost because the oil companies are not serious about shutting down if Measure Z passes. The 1 percent of the county’s property tax that they pay will still be there. In fact, cleaning all their contaminated water (not just 30 percent of it, as they do now) would provide new jobs. So passing Measure Z will actually result in a net increase in jobs.

Those interested in the Yes on Z campaign can contact me or go to protectmontereycounty.org/. We now have two headquarters — one at 1340 Munras Ave., Suite 308, Monterey, and the other at 521 S. Main St., Salinas. Both are open 3 to 7:30 p.m. weekdays and 9 to 11 a.m. and 3 to 7:30 p.m. on weekends; 831-272-2084.

Jeanne Turner lives in Monterey. This piece originally appeared in the Monterey Herald.

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Aged Oil Pump on Colorado Prairie with Mountain Hills in the Background. Oil Industry Theme.The oil industry campaign against Measure Z is providing work for political consultants, lawyers, video production companies and caterers up and down California. As of Sept. 24, it had raised $3.3 million and spent a large measure of it on every form of advertising, including $8,000 on Facebook.

Measure Z, of course, is the November ballot measure that would ban fracking in the Monterey County oil fields and require the oil companies to stop injecting wastewater into the ground. The No on Z campaign is financed entirely by the oil industry — $1,812,480 from Chevron, $1,464,000 from the Shell and ExxonMobil–owned Aera Energy of Bakersfield, and $25,000 from oil property owner Mary Orradre.

Though the ballot measure would allow oil operations to continue, the industry advertising maintains it would end oil production in the county.

Unknown-1The listing of expenses from the No on Z campaign filing takes up dozens of pages and includes the purchase of numerous endorsements from slate mailer operations. A large share of the money went to advertising locally, with TV station KSBW receiving the biggest buy. The campaign relies on a Sacramento law firm for legal advice and numerous consultants for political advice but also used the L&G law firm in Salinas and local land-use consultant Maureen Wruck.

In contrast, Protect Monterey County’s Measure Z campaign reported collecting $143,402 from more than 100 contributors, including singer Joan Baez. That amounts to 4 percent of the total raised by the opposition .

The largest contribution on the anti-fracking side, $32,000, came from the Center for Biological Diversity, whose director, Kassie Segal, added $2,135.

Other major contributors included Paicines Ranch owner Sallie Calhoun, $10,250; Robert Frischmuth, $7,500; retired architect Robert Gunn, $5,390; Nancy Burnett, $5,000; environmental activist Gillian Taylor, $3,000; and retired dentist Dan Turner, $2,000. Also among the contributors were former Monterey City Councilwoman Nancy Selfridge, former Pacific Grove Mayor Dan Cort and Marina Coast water board member Jan Shriner.

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Hand holding out a stack of money tied to the end of a stick for bribery

WITH UPDATE BELOW

 

Yes, I know. We’re all tired of politics. But I couldn’t pass this up because it’s about how things work behind the slick campaign brochures.

Alert readers may recall that back in April, the Monterey County Deputy Sheriffs Association contributed $5,000 to Monterey County Supervisor Dave Potter and another $5,000 to supervisorial candidate Dennis Donohue. Nothing wrong with that. The association is the union that represents sheriff’s deputies and it’s only natural for it to cozy up to county supervisors who have the last word on wages and benefits. You may also remember that the head of the association, Dan Mitchell, filed a couple of specious election complaints against Potter’s opponent, Mary Adams, and Donohue’s opponent Jane Parker. The association even contributed $3,000 to one of Donohue’s campaign managers, Pivotal Campaign Services.

But that’s not the interesting part. The interesting part is that campaign disclosure forms show that the week before the Deputy Sheriffs Association started making those contributions, it received a $20,000 contribution from Chevron, the big oil company.

In other words, the money that found its way into the Potter and Donohue campaign treasuries apparently didn’t come from hard-working sheriff’s deputies. It came from one of the world’s largest oil companies, which has drilled a few holes in Monterey County and has visions of drilling a few more. (Association officer Scott Davis also appears to have benefited from the Chevron money with $1,000 contributed to his upcoming campaign for a Salinas City Council seat.)

During the just-ended supervisorial campaigns, the various candidates were watching closely to see if they could connect the opposition to oil-industry money, especially fracking money. That’s partly because an anti-fracking initiative will be on the November ballot in Monterey County and few politicians are willing to admit that they are fracking friendly. Potter, who lost his seat to Adams, returned a $2,000 contribution from an important fracking fellow a couple days after the Partisan wrote about it but held on to a contribution from a fracking lawyer in Wyoming.

There weren’t any obvious signs of oil money in the campaign reports filed by Donohue, who fell short in his attempt to unseat incumbent Jane Parker. Turns out it was there, it just wasn’t obvious.

UPDATED INFO HERE: After this story was posted this morning, an alert Partisan reader pointed out another back channel Chevron used to route a little help to the fellows. On April 11, right around the time it was writing a check to the deputy sheriffs group, Chevron sent a $30,000 check to the Monterey County Business PAC, which is made up of hospitality and ag interests. Four days later, the PAC contributed $20,000 to the Donohue campaign. Three days after that, the PAC sent $30,000 to District 1 Supervisor Fernando Armenta and a week later it gave $25,000 to the Potter campaign.

What this boils down to is that a little bit of legalized money laundering apparently enabled Potter and Donohue to pick up some extra campaign cash and to make it look like it represented union and law enforcement support when it really represented oil company support. Though that’s how things work in politics these days, with contributors hiding behind PACs and Super PACS, this was as slippery as an oil slick, never mind how the Chevron website goes on and on about good government and transparency.

Mitchell didn’t respond to a request for comment Friday. If he gets back to us, we’ll share what he has to say.

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