Wednesday, May 8, 2013

California's Energy Policy, Economy and Employment Compared to Texas ... A Lesson for America

Individual states make choices about lots of things which enable America as a whole to draw comparisons about what works and what doesn't work. State income and other taxes, public sector pension funding, right-to-work laws, universal health care in Massachusetts, unemployment benefits and now Medicaid through ObamaCare are just a few examples of how individual states choose to do things differently.

But let's look at energy today and specifically at the individual states of California and Texas. It's a clear case of the "First, do no harm" principle of government being sorely needed throughout American government.

That's because, due to its current energy policy, there is very real harm being done right now to Californians and the rest of the nation as well. As a result, California today, both politically and economically, is an economic nightmare.

And it's a self inflicted nightmare at that. It's a perfect example of government gone wrong.

As a result of its unwillingness to exploit its energy resources, the state's economy is now in shambles. And when compared to Texas, it's an absolute manmade political disaster.

All that said, it's still very much correctable if only the government knows best gang and the elitists would adopt the "First, do no harm" principle of governance. But that's not likely anytime soon.

So despite the fact that California has both lots of oil and a lousy economy with an unemployment rate of 9.4%, the politicians sit on their hands.

They apparently don't want to recognize that a big part of the solution is right there in plain sight. Meanwhile, Texas is doing the right thing and Texans are reaping the benefits while California sits and does nothing except allow the situation to get worse each day. Californians and all of America suffer as a result of the harm they're doing to themselves.

A Tale of Two Oil States is subtitled 'While the shale boom lifts Texas, California sits on vast resources':

"Texas and California have been competing for years as U.S. growth models, and one of the less discussed comparisons is on energy. The Golden State has long been one of America's big three oil producing states, along with Texas and Alaska, but last year North Dakota surpassed it. This isn't a matter of geological luck but of good and bad policy choices.

Barely unnoticed outside energy circles, Texas has doubled its oil output since 2005. Even with the surge in output in North Dakota's Bakken region, Texas produces as much oil as the four next largest producing states combined. The Lone Star State now pumps nearly two million barrels a day, and Texas Railroad Commissioner Barry Smitherman (who is also oil commissioner) says "total production could double by 2016 and triple by the early 2020s." The entire U.S. now produces about seven million barrels a day. . . .


More than 400,000 Texans are employed by the oil and gas industry (almost 10 times more than in California) and Mr. Smitherman says the average salary is $100,000 a year. The industry generates about $80 billion a year in economic activity, which exceeds the annual output of all goods and services in 13 individual states.

Now look to California, where oil output is down 21% since 2001 . . . .

This is not because California is running out of oil. To the contrary, California has huge reservoirs offshore and even more in the Monterey shale, which stretches 200 miles south and southeast from San Francisco. The Department of Energy estimates that the Monterey shale contains about 15 billion barrels of oil, which is about double the estimated supply in the Bakken.

Occidental Petroleum, the big oil player in California, has recently purchased leases from the Interior Department to drill in the Monterey shale, but in April a federal judge blocked the breakthrough drilling process known as hydraulic fracturing, or "fracking," in the state. The judge ordered an environmental review of the drilling process that Texas, North Dakota and other states have safely regulated for years.

A large part of the explanation for the Texas boom and the California bust is the political culture. Despite their cars, California voters have elected politicians who consider fossil fuels to be "dirty energy."

The plaintiffs in the Monterey shale lawsuit were the local chapters of the Sierra Club and the Center for Biological Diversity. . . .

California has also passed cap-and-trade legislation that adds substantially to the costs of conventional energy production and refining. The politicians in Sacramento and their Silicon Valley financiers have made multibillion-dollar and mostly wrong bets on biofuels and other green energy. Texas has invested heavily in wind power but not at the expense of oil production.

Another contrast is that most Texas oil is on private lands, which owners are willing to lease at a price. In California much of the oil-rich areas are state or federally owned, and leasing doesn't happen because of political constraints. In California it can take weeks or even months to get approval for an oil rig. The average in Texas? Four days.

In short, Texas loves being an oil-producing state while California is embarrassed by it. And it's no accident that Texas has been leading the nation in job creation since the recession ended. The energy boom is creating thousands of jobs related to drilling but also in downstream industries such as transportation, high-technology, construction and manufacturing. The Texas jobless rate is 6.4% while California's is still the third highest at 9.4%.

Texans are realizing another benefit from oil production: money to fund government services. According to energy analyst Kathleen Hartnett White of the Texas Public Policy Foundation, "oil and gas production generated $12 billion in state taxes in 2012." This helps Texas avoid a state income tax. California's top marginal income-tax and capital-gains tax rate is 13.3%.

California has the natural resources and technical expertise to be the next Texas if it wants to be. What it needs is the political will. California Governor Jerry Brown at least says he wants to drill, but his dominant Democratic Party is so beholden to the already-rich greens that the state is paralyzed.

So the oil remains locked in the ground, as one million Californians look for work, as its schools and roads deteriorate, and as it keeps raising taxes to balance the budget. What a tragedy. Imagine how fast the U.S. economy would grow if California were more like Texas."

Summing Up

To repeat what was said in an earlier post, it's time for the Hippocratic Oath of "First, do no harm" to apply to government officials throughout America.

After getting the message out in Washington, we should proceed directly to California and elsewhere.

That's my take.

Thanks. Bob.

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