HOW CAN FORSAKEN REVENUE BE GOOD FOR CALIFORNIA?

Bob Tippee

A state government in a fiscal crisis would never spend money in order rid itself of a revenue source—would it?

It might if the state it governs is California.

Gov. Gray Davis wants the federal government to buy back 36 undeveloped oil and gas leases on the Outer Continental Shelf off central California.

"What's good for Florida is good for California," he declared after the federal government bought back seven disputed leases off Florida for $115 million last May.

He might end up wishing he hadn't said that.

In a letter to Davis expressing willingness to negotiate, Interior Sec. Gail Norton pointed out that Florida, unlike California, had never shared in revenue generated by the repurchased leases.

"As we consider resolution of these leases in California," she wrote, "it is important to note that the federal government will expect the state of California, which has received substantial revenues from some of those leases, to be a contributor to such a settlement."

She helpfully added that California has received $2,017,703,578 from all OCS activities since 1968.

In fiscal 2001 alone, California received $32,416,425 in federal disbursements related to the OCS.

For a state with a general budget of $80 billion/year, that's not a lot of money.

For a state that will accumulate a deficit totaling an estimated $52 billion over the next 5 years, however, any revenue at all has to be welcome.

…Unless, of course, the state is California and the revenue comes from offshore oil and gas.

The $32 million/year the state receives from OCS activities is a fraction of what the figure could be. But California has stymied exploration and development of a federally owned resource, so oil and gas production remains far below potential. And so do royalties.

Oh, well. The state government just doesn't want the money.

And soon it might help the federal government buy back leases purchased in good faith during 1968-84 for a total of $1.1 billion.

How a deal like that can be good for a broke state like California is a mystery. It's certainly rotten for the rest of the country.

(Online Aug. 23, 2002; author's e-mail: bobt@ogjonline.com)

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