Successful businesses, providing products or services, and the jobs they create are the foundation of our tax base in the CA. Employed people buy cars and homes and further support the tax base in America.
Unfortunately, CA is making great strides toward growing its image of not being business friendly. With CA’s extraordinary roadblocks from policies, processes, procedures, regulatory requirements, mounting bureaucracy, and special interest groups, it’s tough to convince private industry to invest their capital in a State that virtually guarantees the lowest return on their invested capital.
Everyone wants to live and work in our great CA climate, but every business has competition nationally and internationally and thus needs to remain competitive to make a profit and get a return on their invested dollars into their businesses. Putting an extra 40 pound rock on the backs of those in CA does not provide a level playing field for corporate America.
Many of the processes and taxes imposed and being proposed on the private sector could theoretically generate revenue for the State if the businesses and jobs would stay put in CA and still generate projected revenues with these higher costs of doing business.
Imposing more taxes on CA drilling would theoretically generate revenue for CA, but it may also make other states or offshore locations more attractive for the private sector to invest in drilling which would result in lesser tax revenue to CA and a loss of more jobs. Over the last several decades, half of the CA refineries have closed resulting in losses in jobs and taxable revenue as CA imports more and more of its energy needs from offshore. Outsourcing businesses and jobs to another country or to another state is driven by the return on the invested private capital and the associated risk and liability expenses.
Over the last few decades, we have seen huge impacts in the privately funded infrastructure, such as petrochemical. Private sector corporations are obligated to provide their shareholders with a return on the corporations invested dollars, i.e., an ROI. Obviously, the energy companies are not required to drill for oil in CA or the USA, nor are they required to process refined products such as gasoline, diesel, and chemicals for our daily use, but they do need to generate good ROI for their investments.
Here are some brief notes on what has transpired over the last several decades in the privately funded petrochemical infrastructure of California.
- CA has implemented the strongest environmental controls in the world, but has driven away over half of the refineries we had in CA.
- CA’s Global Warming initiative, AB 32, will not solve a Global problem, but will further perpetuate our choice to not develop our own resources. Our choice continues to let the world develop their resources with our money, for our use, and let them, with less stringent environmental controls than those in CA and the USA, control the carbon footprint of the world.
- More and more refining capacity, to meet the needs of CA is being developed in foreign countries, with significantly less stringent environmental controls, taxes, and regulatory restrictions.
- It is virtually impossible to drill for oil in the Gulf, West Coast, or Anwar, but we choose to send $600 billion of our wealth, every year, as well as the jobs and the technology, to foreign countries that don’t like the USA, rather than develop proven reserves in the USA and be independent of foreign sources for energy.
- The global population in 2005 was 6.4 billion, and is projected to grow to 8 billion by 2030.
- The global demand for crude oil in 2005 was 230 million barrels of crude a day, and is projected to grow to meet the demands of the population growth to 310 million barrels a day for crude oil, a 35 % increase.
- Alternative are making small progress, but not in the quantities needed, nor fast enough, thus projections are that oil, gas, and coal will fulfill 80% of the worlds demand for energy in 2030.
- Energy demands for transportation were 98% dependant on oil in 2005, and projected to still be 94% dependant by 2030, only a 4% decrease.
Alternatives such as ethanol, provided 9 billions gallons of corn based ethanol, but used 20% of America’s corn crop to produce that product.
- In addition to this annual transfer of our wealth, we are delegating the control of the world’s carbon footprint, to countries with minimal environmental controls.
- In addition to the taxes, regulatory restrictions, on private capital to realize a competitive return on their invested dollars (ROI), infrastructure projects that could benefits 100’s of million citizens can easily be stopped by a handful of NIMBY’s (not in my backyard).
- Refineries in China are already making CA gasoline and those in the developing stages, including Saudi Arabia are planning on producing CA gasoline.
- India set to Become Major Fuel Exporter after Refinery Expansions
- The refining capacity in India is expected to rise to 4.84 million bpd by 2012 from current levels of 2.6 million barrels per day (bpd).
- Currently, India has a domestic consumption of about 2.2 million bpd. Thus, they are a major exporter today of refined products, with more coming!
- The prognoses/trend over the next several decades is that private industries in CA may eventually close all the refineries, resulting in CA needing to import 100% of its petrochemical energy needs from foreign countries.
We have choices for our economy and jobs. “OUR CHOICE” to-date, referring to all the 350 million in the USA, not just the, 35 million in CA, the politicians, environmentalists, special interest groups, etc, but ALL of us that have bought into the concept of sending $600 billion worth of our capital and jobs every year to foreign countries that don’t like the USA and don’t’ care about the carbon footprint of the world.
Thus, here is a simple opinion survey, the results of which may provide direction for our legislatures for future policies to be implemented so we can accomplish the people’s choice.
Opinion of the choices available to Americans:
A. Continue to send $600 billion a year (at current crude oil prices) of our wealth each year, along with the jobs and the technology, to foreign countries that don’t like the USA, for the privilege of importing foreign crude oil as well as refined products from their refineries and burning them to meet our thirst for energy, as well as continue to delegate control of the World’s carbon footprint to counties with less stringent environmental controls than those in the USA.
B. Develop proven USA oil and gas reserves in the Gulf, West Coast, and Anwar and keep the wealth, jobs and technology in the USA while we further prepare for the transition to alternatives, as well as maximizing control of the World’s carbon footprint with the strictest environmental controls here in the USA, and eliminate dependency on supplies from countries that don’t like the USA.
This commentary was written by Ronald Stein, VP of Business Development at Principal Technical Services, Inc.