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Aged Oil Pump on Colorado Prairie with Mountain Hills in the Background. Oil Industry Theme.Update: The Monterey County Weekly has now included a mention of the following article in Monday’s online version of Squid Fry. This is good.

Update No. 2: KSBW on Tuesday interviewed Assessor Steve Vagnini and reported his finding that the oil industry’s tax bill this year would be about $5 million and would range in upcoming years between $2 million and $5 million, so the Partisan takes back the jab it sent in TV’s direction. 

SUBTRACT $3 MILLION FROM $8 MILLION AND WHAT DO YOU GET? NOTHING

It takes some effort to get me riled up these days. I used to be rather easily irritated but I’m older and calmer now. I get more sleep. But the local press corps has managed to push my buttons, simply by ignoring me.

It isn’t a big deal, except that it kind of is. In a Partisan post a week ago, I wrote about how the oil industry keeps advertising about how Measure Z, the anti-fracking measure on the November ballot, will shut down the oil industry and wipe out $8 million in annual property taxes to various Monterey County government agencies.

However, I dutifully reported, it turns out the low price of oil these days means that the industry’s property tax bill this year is actually less than $5 million, according to Monterey County Assessor Steve Vagnini, whose office is in charge of determining that amount. It will go up when oil prices go back up. Maybe next year. Maybe later.

Now Vagnini’s “south of $5 million” pronouncement is not some assertion, some exaggeration by the environmentalist types who created Measure Z. This is from the office that actually sets the figures. It’s based on real numbers, not anyone’s speculation.

The truth is that Measure Z will not rise or fall on the amount of property taxes potentially at stake. Backers of the measure will tell you that the tax issue is nothing but a scare tactic anyway because passage of the measure won’t put anyone out of business.

Even so, I was kind of proud of my little scoop. I lean in favor Measure Z largely because I don’t trust the oil industry. Its outdated claim about paying $8 million a year in property taxes helps illustrate why.

But, unfortunately for voters and other truth seekers, my little scoop has been ignored by the titans of the local press corps. Even though I emailed it to them the same day I posted it on this blog. Even though several other practitioners of the journalistic arts subscribe to the Partisan and some probably look at it from time to time. Out of pity if nothing else.

I didn’t expect my scooplet to make it onto anyone’s front page but I did kinda hope it would be deemed worthy of a mention in the next Squid Fry column in the Weekly. Some fairly thin material makes it there some weeks. But no.

I also figured the Herald would mention it the next time it wrote about the measure in a big way. But no. Sunday’s paper contained an otherwise well done Page 1 story about the pros and cons of Measure Z but it simply repeated the $8 million figure, attributed to an out of date report from the Auditor’s Office, without mentioning the fresh report from  the assessor. Same thing with the paper’s anti-Z editorial.

I held out less hope for the electronic media. I was pretty sure they would just skip along collecting all that money for the oil industry commercials repeating the fib about the $8 million tax bill and wouldn’t set the record straight unless and until there was money to be made.

Where I come from, things like this matter, but I guess I’m just old and in the way now. And, well, what’s $3 million anyway? Heck, the oil industry executives have spent considerably more than that just on those helpful commercials. And they’ll probably plow the tax savings right back into the community. Right?

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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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