Capital News & Notes
For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – Muddied Waters & A Fool’s Errand…Sort Of
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
Stay current daily! For our focused updates via Twitter: @jrgualco / @robertjgore / @gualcogroup
- Governor’s Race Polls Show Mixed Results
- How 3 Little Words Can Decide An Election
- GOP’s Anticipated Primary Attack Ad Calls Out Newsom, Villaraigosa
POPULATION & HOUSING
- CA Annual Statistics: Population Up, Housing Down
- Legislature Kills “Revolutionary” Housing Bill
WATER & POWER
- Key Water District Postpones Delta Tunnels Vote
- Californians Keep Their Feet on the Gas, But Oppose Oil Drilling
- Utilities, Oil Battle Over Electric Vehicle Policy at Legislative Group
FOR THE WEEK ENDING MAY 4, 2018
READ ALL ABOUT IT!!
Governor’s Race Polls Show Mixed, Confusing Results
Two recent polls have muddied the waters of the top election races in California, but political analysts say they may be outliers.
A SurveyUSA poll last week showed former Los Angeles Mayor Antonio Villaraigosa closing the distance behind fellow Democrat Lt. Gavin Newsom. Meanwhile, a Berkeley IGS poll indicated Villaraigosa falling behind not just Republican businessman John Cox, as he has in some past surveys, but also Republican Assemblyman Travis Allen.
In the U.S. Senate race, the Berkeley poll also showed Democratic U.S. Senator Dianne Feinstein’s lead softening in comparison to past support. More shockingly, it also showed the sudden rise of a virtually unknown Republican challenger, James Bradley, from out of a field of 11. In the poll, Bradley had closed within range of former state Senate leader Kevin de León, who is challenging Feinstein from her left.
But Geoffrey Skelley of the University of Virginia Center for Politics says it’s important to take any individual poll with a heavy grain of salt, particularly in a primary election featuring many candidates and a high level of undecided voters.
“It’s sort of a fool’s errand sometimes, because you don’t have a lot of data or the data is all over the map,” Skelley said. “You sort of have to look at the overall averages among recent polls.”
That longer view shows a few constants, according to Skelley.
“We could say only two things fairly confidently,” Skelley said. “Dianne Feinstein will get a shot at winning re-election in November in the Senate. And Gavin Newsom, there’s really no reason to think he won’t make it to November.”
Under California’s primary system, the top two June finishers — regardless of political party — advance to the November general election.
After Newsom, polls have generally shown Villaraigosa and Republican John Cox vying for the second slot in the November general election, and, in the Senate race, de León solidly behind Feinstein.
How 3 Little Words Can Decide An Election
When Californians step into their voting booths on Election Day—finally shut off from the daily deluge of campaign ads—every candidate will still have at least one last word. And a maximum of three.
Right on the ballot, just below his or her name, California law affords each person running for office a designation. Like an ultra-pithy, last-minute advertisement, this short biographical description gives candidates an opportunity to tell voters just a little bit more.
For those who don’t know that Gavin Newsom is the lieutenant governor, for example, they’ll find out on the ballot, along with the fact that he’s a “businessman.”
Likewise, voters in one Assembly district may learn that their assemblyman, Heath Flora, also moonlights as a farmer and a firefighter, according to his designation.
And voters across the state will find a “retired steam engineer” running for treasurer, a “puppeteer/musician” for governor and an ocean of small-business owners, doctors and teachers.
People say first impressions are everything, but in California politics, sometimes the last impression matters most.
“A lot of thought and debate goes into this every two years,” said Dave Gilliard, a Republican political consultant. Thought, debate, public-opinion research and, when all else fails, litigation.
Voters may be guided by a rational assessment of each candidate’s stances on a constellation of public-policy issues. But sometimes trivial details can be decisive. Party designation, name recognition and even the order of names on the ballot have all been shown to influence electoral outcomes.
So in what has become a venerable California tradition, the spring before every election is lawsuit season. Candidates sue to block ballot designations that may bend the rules and might give their rivals a competitive edge.
This year, the California Secretary of State’s office has been party to at least eight lawsuits related to ballot designations, and the recipient of an untold number of written complaints.
In a crowded inland Orange County congressional district where 17 candidates are competing to replace Republican Rep. Ed Royce, who is retiring, front-runner Gil Cisneros (“Education/Veterans Advocate”) brought a suit forcing a fellow Democrat, Sam Jammal, to change his designation from “civil rights attorney” to “clean energy businessman.”
State law requires candidates to list their current job, or one they held within the last year. Jammal had practiced voting-rights law until the late 2000s, but most recently he worked as an attorney for SolarCity, a solar-energy company.
In another Orange County district, this one along the coast, the state forced Republican Assemblyman Rocky Chávez to switch his designation from “Retired Marine Colonel” to “Assemblymember” after a Marine veteran in the district filed a complaint. Chavez, who is described on his campaign website as “one tough Marine,” retired from the corps in 2001. He is running to succeed Rep. Darrell Issa, who is not running again.
And in a district stretching east and south of Sacramento, into the Sierra Nevada, a judge stripped Democratic candidate Jessica Morse of her chosen designation, “National Security Strategist,” after Regina Bateson, another Democrat in the race, sued. When the judge also deemed Morse’s two alternative choices inadmissible, the candidate opted to be on the ballot without any designation at all.
“Some people will say this is nitpicking,” said Bateson, an M.I.T. political science professor who will be listed as a “Military Security Analyst.” “The issue here is that I think the rule of law matters. Everyone running for office in California is expected to abide by the same set of laws.”
Are these three words on the ballot really worth all the fuss?
In high-profile races, where most people enter the voting booth with an opinion about the various candidates, the answer is probably not. But virtually every other contest aside from the presidential race is a “low-information election,” says Jessica Levinson, a professor at Loyola Law School in Los Angeles.
So far, that even includes this year’s governor’s race. According to a recent surveyby the Public Policy Institute of California, only a little over half of likely voters—the subset of the population presumed to be most engaged—are paying either “very” or “fairly” close attention to the gubernatorial contest.
“A critical mass of people do not encounter their candidates until they get their ballot,” said Levinson. “So what they’re looking at is just what’s on the ballot and that is: Which party do you prefer, how do you describe yourself and what’s your name?”
And particularly in crowded primaries, or in nonpartisan races where voters can’t simply vote on a party line, an unknown “Nurse” will probably beat out the anonymous “Marketing Consultant” everytime, said Brian Hildreth, an election lawyer at the Sacramento firm Bell, McAndrews & Hiltachk who has helped candidates challenge their rivals’ ballot designations.
“When you get down to county supervisor, when you get down to auditor, or even to member of the Assembly or member of the state Senate, …they might look to someone who is a ‘teacher’ or an ‘educator’ or a ‘taxpayer advocate,’ ” he said.
Unlike political ads and other forms of influence, ballot designations must refer to either a candidate’s current or recent elected position or some other “profession,” “vocation” or “occupation.”
What distinguishes an acceptable “vocation” from a prohibited “avocation”? It’s not always easy to say for sure, but state regulations are crystal clear on these points: “parent,” “priest” and “teacher” are sufficiently time-consuming to be proper designations. “Wife,” “husband” and “philosopher” are not.
Whatever the job description, it can take only three words, though incumbent positions are exempt. Hence Xavier Becerra’s long-winded “Appointed Attorney General of the State of California.” California place names are considered one word.
And unfortunately for candidates whose most impressive credentials lie behind them, “ex-“ and “former” are banned modifiers. That’s bad news for gubernatorial candidates Antonio Villaraigosa, the ex-mayor of Los Angeles, and Delaine Eastin, a former Superintendent of Public Instruction.
Or make that Villaraigosa, the “Public Policy Advisor,” and Eastin, the “Educator/Youth Advocate.”
For Villaraigosa, that label may have cost him in the polls. Between February and late March, Villaraigosa dipped dramatically in public-opinion surveys, as most pollsters began describing him by his approved ballot designation rather than as the former Los Angeles mayor.
Given that so few people are paying attention to the race and that Villaraigosa hasn’t been mayor since 2013, the switch in job description is probably part of the explanation, said Dean Bonner, an associate survey director at PPIC.
”It’s an environment where I could see the title playing some role,” he said. “Did it contribute to it? My feeling is that it contributed some.”
There’s a subtle art to crafting the right designation: appealing to voters’ sympathies and papering over unpopular occupations. It’s all about knowing your audience, said Gilliard.
“Republicans tend to favor business and law enforcement, Democrats tend to favor educators,” he said. Nurses and doctors also tend to do well overall, especially among liberals.
While most elected lawmakers seem to believe there’s a benefit in touting one’s credentials as an incumbent, not every politician does. Assemblyman Jim Patterson (“Businessman/Broadcast Executive’) and state Sen. Andy Vidak (“Farmer/Small Businessman”) both eschew any mention of their elected status. The two incumbents are Republicans from the Central Valley, the region where approval of the California Legislature is lowest, according to a recent poll.
Republican U.S. Rep. David Valadao (“Farmer/Small Businessman”) is the only California member of Congress whose elected status won’t be on the ballot. His district overlaps with both Vidak’s and Patterson’s.
Meanwhile, there’s a bipartisan distrust of lawyers, said Gilliard, which may explain why candidates from the legal profession often tack on softening qualifiers. “Workers’ rights attorney,” “consumer protection attorney,” or “attorney/mother” are all on California ballots this year. And for lawyers who own their own firms, he said, consultants will sometimes suggest omitting the J.D. entirely and casting themselves as yet another “small business owner.”
GOP’s Anticipated Primary Attack Ad Calls Out Newsom, Villaraigosa
The political attack that many expected in California’s gubernatorial campaign against Lt. Gov. Gavin Newsom and former Los Angeles Mayor Antonio Villaraigosa — calling them out for sexual affairs they had while in office — landed Monday.
Who’s throwing the punch? An independent expenditure committee supporting Republican businessman John Cox, called Restore Our Values.
The 30-second spot begins with images of a rogues’ gallery of men recently exposed for sexual misconduct — movie producer Harvey Weinstein, former talk show host Charlie Rose, former Fox News chief Roger Ailes, former “Today” host Matt Lauer, casino magnate Steve Wynn and former Sen. Al Franken, D-Minn.
The ad’s narrator states, “Powerful men are finally being held to account and punished for inappropriate sexual conduct with women over whom they exercised power.
“Gavin Newsom had such a sexual relationship with a woman on his mayoral staff. Antonio Villaraigosa did the same with a reporter assigned to cover him. Newsom and Villaraigosa think the rules shouldn’t apply to them. They don’t want punishment — they want a promotion.” The kicker: “Californians deserve better: John Cox for governor.”
The backstory: Cox is aiming at Villaraigosa because the two are virtually tied in the latest nonpartisan Public Policy Institute of California poll, for second place behind Newsom. Only two candidates from the June 5 primary will advance to the general election.
However, it is questionable whether Restore Our Values has enough cash to ensure that the attack resonates. It has only $64,935 cash on hand and has raised only $106,005. That’s not much when it costs roughly $2 million to keep an ad on the air for a week in a major California market.
Plus it will be interesting to see if this attack resonates in the #MeToo era, given that voters seemed to have forgiven both men. Newsom was re-elected mayor of San Francisco nine months after news of his 2005 affair with his scheduler, who was the wife of his campaign manager, broke in February 2007. Voters subsequently elected him lieutenant governor twice. Villaraigosa was re-elected easily in 2009, two years after news of his affair broke.
There’s a bit of backstage GOP intrigue behind the pro-Cox group.
Its primary funder is Marin County businessman Ken Casey, who contributed $100,000 to the pro-Cox independent expenditure campaign through his company, Professional Investors Security Fund or PISF. Casey wasn’t always a pro-Cox. On April 5, PISF contributed $300,000 to Cox’s top GOP opponent, Assemblyman Travis Allen, R-Huntington Beach, for a campaign to oppose California’s gas tax.
Instead, according to Restore Our Values co-chairwoman Leigh Teece, Allen used the contribution to promote his own campaign as well as the anti-gas tax. That’s one reason why Casey is now a pro-Cox donor.
“We are concerned because Travis betrayed a donor and a friend,” Teece told The Chronicle Monday. Instead of spending the money on gathering signatures to get the anti-gas tax on the ballot, “Travis took that money and spent it on himself. Our group is about integrity. If he’s taking it from a donor and a friend, what’s he going to do as a governor?”
“That is an outright lie,” Allen told The Chronicle Monday. “If money dictated the outcome of races in California, then Meg Whitman would be governor of California. All of this is just another attempt by the crony pals of John Cox to cover his own inadequacies and record of failure.”
CA Annual Statistics: Population Up, Housing Down
In the midst of a housing crisis, California lost 13,200 homes last year — many destroyed in wildfires — but came out ahead with the net addition of 85,000 housing units, according to a demographics report released by the state Tuesday.
The state also saw a net addition of 309,000 residents, including newborns and migration from other states or countries — with the highest numbers of new Californians settling in Los Angeles, San Diego and San Francisco.
The report, by the California Department of Finance, says the state population now stands at 39.8 million and the housing stock at 14.2 million units.
Of the 482 cities in California, 421 increased their population, 57 saw reductions, and four remained the same last year. Flame-ravaged Santa Rosa grew by two-tenths of a percent, but that was only because an unincorporated area called Roseland, with 4,500 residents, was annexed last year. Santa Rosa lost 3,081 housing units in the Tubbs Fire.
The report shows that the long-term trend of steady population growth has apparently slowed, at least compared with the 333,000 average yearly growth seen since 2010, when the state’s population was 37.2 million.
Bill Schooling, the chief of demographic research for the state Department of Finance, said California has added more than 2.5 million residents since the 2010 census.
“You read a lot of negative things, but California still attracts people,” said Schooling, referring to the wildfires and high housing costs in the state.
In housing, San Francisco added 4,464 units while 10,000 more people moved in, bringing the city’s population to 884,000. The city by the bay had the state’s third highest total population gain, behind only Los Angeles and San Diego. San Jose, which added 8,500 people, was fifth.
Of the 10 most populated cities, Sacramento had the highest population growth rate — the percentage of new residents compared with the overall population — with 1.43 percent, and the fastest-growing counties were in Central California.
Merced, which added 4,900 people, or 1.8 percent, had the highest growth rate, followed by Placer and and San Joaquin counties.
Mark Hendrickson, the director of community and economic development for Merced County, attributed the fast growth to stepped-up housing construction, lower housing prices and the fact that the area is known as the gateway to Yosemite.
The rapid growth of UC Merced and Google’s driverless car spinoff known as Waymo, which operates on 91 acres leased from the county, are big incentives for people looking to move into the area, he said.
“The San Joaquin Valley as a whole is really primed to be California’s next frontier,” Hendrickson said.
The report documented a 2.6 percent drop in housing in Sonoma County, a 1.1 percent reduction in Napa County and a 1 percent drop in Mendocino County from the fires.
“We were having a housing shortage that mirrored the rest of California before the fires,” said Margaret Van Vliet, the executive director of the Sonoma County Community Development Commission. “In total, we lost about 5,300 units of housing, so for sure we were the most fire-impacted county in the state.”
Between 2010 and 2016, an average of 5,500 housing units were demolished statewide.
California Revenue and Taxation Code section 2227 requires the Department of Finance to transmit an estimate of the percentage change in population to local governments. Each local jurisdiction must use their percentage change in population factor for January 1, 2018, in conjunction with a change in the cost of living, or price factor, to calculate their appropriations limit for fiscal year 2018-19.
Legislature Kills “Revolutionary” Housing Bill
The death of far-reaching—even revolutionary—legislation to facilitate housing development crystallized a conflict that’s been simmering in California for decades: Who controls land use?
Based on “police powers” in the state constitution, cities and counties have, for many decades, regulated how land may be used. They do this most obviously by zoning it for specific purposes, such as residential, commercial, industrial or agricultural, with countless subcategories, but also by controlling specific projects within those zones.
In theory, such regulation avoids incompatible uses. But there are enormous social and economic consequences as well, and it’s a purely political process with a veneer of civic benefit but often with corrupt undertones.
Zoning and other land use tools also affect the “character” of a community, as opponents of specific projects often contend. But they also may reinforce its tendencies toward racial and economic segregation by ensuring that only those with higher incomes can afford to live there.
Local governments also have financial stakes in land-use decrees—by, for instance, maximizing land available for retail developments that generate sales taxes.
Historically, state government has taken a more or less hands-off attitude toward land use, even though its activities, such as building highways and water systems, have obviously affected how land is developed, or not. Indeed, one could argue with ample authority that the perennial wrangling over water has been a proxy war over land use.
Over the last several decades, however, the state has become more directly involved by requiring localities to have general plans to guide their development, by setting housing quotas (although not really enforcing them until this year), by requiring more housing near transit lines to reduce greenhouse gases and by the creating powerful regional regulators such as the Coastal Commission and the Tahoe Regional Planning Agency.
Today, however, the state’s ongoing, and ever-worsening, housing crisis has placed the land-use question on the front burner of political consciousness.
California, state officials say, needs to be building 180,000 new units of housing a year to keep up with population growth, replace housing that’s lost to fire and old age and make a dent in the backlog. However, the state is scarcely meeting 60 percent of that goal and is particularly deficient in low- and moderate-income housing.
The biggest impediment to building more housing is resistance within local governments that control land use. City councils and other elected bodies reflect their voters’ disdain for having more neighbors that would bring more traffic and other consequences of population growth, a syndrome especially virulent when it comes to high-density “affordable” projects.
It has a name: “not in my backyard,” or NIMBY.
State Sen. Scott Wiener, a San Francisco Democrat, proposed to override local land use control with legislation to allow construction of up to five-story apartment buildings near major public transit stops, including areas zoned for single-family homes.
Local governments, labor unions and even some housing advocates lined up against Senate Bill 827, some contending it went too far and others saying it didn’t go far enough. Ultimately, it received just four votes in its first committee hearing, far short of what it needed to advance.
SB 827 may be dead, at least for the time being, but the underlying land-use question is very much alive.
It’s highly unlikely that California can deal with its housing crisis unless it somehow overrides local authority over land use to blunt NIMBYism. But could it be done without also shifting the high-stakes, often smarmy political gaming over specific projects to Sacramento as well?
If not, the cure could be just as bad as the disease.
Key Water District Postpones Delta Tunnels Vote
After a five-hour packed public hearing, the board of Silicon Valley’s largest water provider late Wednesday night put off a closely watched vote until next week on whether to provide up to $650 million to support Gov. Jerry Brown’s $17 billion plan to build two giant tunnels under the Sacramento-San Joaquin River Delta to make it easier to move water south.
Although it appeared there might be four votes on the seven-member Santa Clara Valley Water District board in favor of the project, which the Brown administration calls WaterFix, board members were divided and continued the issue until Tuesday at 9:30 a.m.
At least three said that given the risk of cost overruns to ratepayers on a project of such a large size, they needed more time to read and understand hundreds of pages of staff reports and draft contracts, some of which were presented to them only 24 hours earlier by district staff members urging them to approve the plans.
“What’s the rush?” said Dick Santos, chairman of the water district board. “In my opinion, we need to sit down as a group and really discuss these things. This is too fast.”
In October, the board voted 7-0 not to help fund Brown’s plan, which calls for building two massive tunnels, each four stories high and 35 miles long under the Delta. Supporters, who include business groups and Los Angeles-area water agencies, say the project would allow cities and farms a more reliable water supply by reducing reliance on giant pumps near Tracy that in recent years have been ordered shut down by court rulings at times to protect endangered salmon, smelt and other fish.
One of the state’s top water officials, Karla Nemeth, a former Metropolitan Water District employee whom Brown appointed several months ago to run the state Department of Water Resources and oversee the project, drove to San Jose for the meeting.
“As I’m sure you all know, the vote before you today is part of a transformational moment in California water policy,” Nemeth said. “The choices and outcomes are as meaningful and as consequential tonight as those made by water managers who built the State Water Project decades ago.
The Santa Clara Valley Water District, which provides water to 2 million people, is considered a key player in the tunnels debate because its support would allow Brown and other supporters to frame the issue as a statewide one, rather than a north-south battle. A similar plan in 1982, when Brown was also governor, called the Peripheral Canal, was defeated by voters in a statewide ballot measure after the issue broke down as a battle between north and south over water.
In recent months, the CEO of the Santa Clara Valley Water District, Norma Camacho, and other top staff have met with Brown administration officials to discuss the tunnels project. At the same time, the district applied for $485 million from the state in bond funding to help it construct a new dam near Pacheco Pass. In February, the California Water Commission, whose nine members are appointed by the governor, recommended no funding for the Pacheco Dam. But two weeks ago, the agency’s staff recommended the project receive full funding as part of an appeals process, and days afterward, the district staff placed a re-vote on the tunnels before the board.
Lisa Lien-Mager, a spokeswoman for the state Natural Resources Agency, said there was no quid pro quo deal.
“Those processes are completely separate, and suggesting otherwise is really misleading,” she said. “The Water Commission staff has been completely transparent about its review of the Pacheco project.”
The district’s chairman, Santos, on Wednesday night suggested that his agency wait to take a final vote on whether to help fund the tunnels until after July, when the state water commission board has made its final decision on the dam project. He said that would be valuable because then the district would know if the $1 billion dam project will move forward, which would help give the agency a better overall budget picture as it approaches the the decision over whether to spend $650 million on the tunnels.
But board members who said they now support the tunnels, including Tony Estremera and Gary Kremen, said they oppose that kind of delay.
“If we’re talking about waiting until July, that ain’t going to happen,” said Estremera.
Referring to Metropolitan Water District, he said: “They are going to do what they want to do. They are going to do the project. Do we want to participate or not?”
Critics, including most of the state’s environmental groups and Northern California congressional representatives, have compared the project’s risk of cost overruns to Brown’s high-speed rail project, and worry that if built, it would make it easier for Southern California interests and Central Valley farmers to take more water from the north, despite promises to take only the current amount from the Delta.
On Wednesday, several board members who voted not to support the two-tunnel plan in October said they have changed their minds after the powerful Metropolitan Water District of Southern California, which has 20 million customers, voted to contribute $11 billion to the project last month. They said that they wanted Santa Clara Valley Water District to participate in a joint powers agreement with that Los Angeles-based agency to help build the project so it would have a seat at the table.
“It’s important that we stay engaged. I do not trust Southern California and agribusiness to be looking out for the interest of Northern California,” said board member Barbara Keegan.
But other board members said they were not convinced.
Board member Linda LeZotte said she had concerns about the project’s environmental impacts on fish, wildlife and water quality in the Delta and San Francisco Bay. Other board members said they are worried about construction problems that could mean property tax increases or higher water rates in the event of cost overruns.
“The cost I don’t believe for a minute,” said LeZotte. “I have concerns about the environment, and I don’t see the need for two tunnels. On the other hand, Met has put us in a position where we need to be at the table. I’m highly conflicted.”
The project already has been hit with multiple lawsuits and still needs approval from the State Water Resources Control Board. Brown has only eight months left in his term to try and pull it across the finish line, although none of his potential successors have indicated strong support for the two-tunnel plan.
Throughout the evening Wednesday, more than 40 members of the public spoke, most in opposition. Union members in orange T-shirts said the project would bring construction jobs. Environmental groups said it was a boondoggle.
Californians Keep Their Feet on the Gas, But Oppose Oil Drilling
Draped in flower-covered panels, the iconic derrick that towers over Beverly Hills High School has pumped crude for decades. Now, it waits to be dismantled, its demise mirroring the fate of oil drilling in California.
As the Golden State tilts toward a low-carbon future, Los Angeles’ legacy drillers are being crowded out, leaving behind more recoverable crude than in all of Alaska.
Yet this shift away from drilling hasn’t quelled California’s appetite for oil: While the state pumps less, it’s importing more. Last year, the state’s refineries processed the second-highest annual volume of crude since 2008 — with 57 percent of it coming from overseas. The trend runs counter to the story of the shale revolution, which has fueled record-high production and curbed U.S. reliance on foreign oil.
“California has one of the highest concentrations of oil in place in the world,” said Margita Thompson, vice president of communications for California Resources Corp., one of the state’s largest oil producers. “Yet the state is an energy island.”
With no major pipelines connecting California to its neighbors, the state remains largely untouched by the shale boom. While refiners in the Midwest and Gulf Coast are awash in cheap, American crude, those in California are paying as much as $6 more per barrel for oil shipped from Saudi Arabia, Ecuador and Colombia. That’s taken a toll on California pump prices, which were 61 cents higher per gallon last year than the national average.
“California consumers are paying higher prices for gasoline in part because the cost of crude oil to California refineries is higher than much of the rest of the country,” David Hackett, president of energy consultancy Stillwater Associates in Irvine, California, said by phone. “There are currently no pipeline connections, because in the past, the connections weren’t needed.”
For decades California’s homegrown oil industry satisfied the state’s demand. But now output from the largest oil fields is falling. Twenty years ago, the Midway-Sunset field in the San Joaquin Valley was the largest in the state, pumping more than 160,000 barrels a day. Last September, it produced less than 60,000 barrels a day. The number of wells drilled sank to 759 in 2016 from more than 3,000 four years earlier
Efforts to revive the state’s oil industry have fallen flat amid local opposition and environmental regulations. Most recently, state politicians rejected a Trump administration plan to open offshore waters to new production, with California Lieutenant Governor Gavin Newsom vowing that “not a single drop” of oil would reach shore.
Further down the supply chain, California is preparing for a fight with the U.S. Environmental Protection Agency over emissions standards. The federal government wants to unravel them — California wants to keep going. The state’s Air Resources Board will vote to strengthen its Low Carbon Fuel Standard Friday.
Meanwhile, existing offshore production remains curtailed by the 2015 closure of a Santa Barbara-area pipeline that spilled thousands of barrels of oil along California’s coast, a flashpoint that only inflamed opposition to oil production.
In densely populated areas like Los Angeles, it’s getting harder for companies to operate even decades-old wells. Recently, noise and odor complaints by neighbors of a well pad near the University of Southern California prompted the city to require Sentinel Peak Resources LLC to build a 45-foot wall enclosure around their site.
In February, the L.A. County Department of Public Health recommended expanding the setback between oil wells and urban areas beyond the current 300 feet.
“There is quite a lot of pressure now from people in the L.A. basin, who would sort of like to move on, shut off production,” said Don Gautier, a former U.S. Geological Survey geologist.
Still, with oil prices nearing $70, drilling could turn around in the state, slowing the decline in production, Stillwater’s Hackett said. But that won’t save many of the wells being shuttered today.
Back at Beverly Hills High School, the old oil derrick’s fate was sealed with the 2017 bankruptcy of the lease holder, Venoco LLC. When the wells were shut just over a year ago, production had dropped by 90 percent since the early 1980s annual peak of 850,000 barrels.
The oil earned the district half a million dollars a year before the tap was turned off, La Tanya Kirk-Carter, chief administrative officer of the district, said by phone. Now, the district and city are stuck footing the $8 million bill for plugging the wells with cement and dismantling the site.
With a few additional wells shuttered, more foreign imports may be needed, creating a drain on the state, according to Kevin Klowden, executive director for the Center for Regional Economics at the Milken Institute in Santa Monica, California. “Ultimately, the money is going out of California.”
Utilities, Oil Battle Over Electric Vehicle Policy at Legislative Group
Utility companies clashed with oil industry interests over electric vehicle and fuel subsidies at a meeting of the American Legislative Exchange Council (ALEC), a conservative political group, last Friday.
Oil-backed groups led by the Institute for Energy Research (IER) proposed a resolution that opposed state efforts to subsidize non-gas vehicles and allow utilities to charge customers for — or “ratebase” — EV charging stations. It was tabled after a protracted floor battle and opposition from utility interests like Duke Energy and the Edison Electric Institute, a trade group.
The battle at ALEC, a secretive group that convenes private companies and conservative legislators, shows how utility interests are diverging from those of the oil and gas sector in an era of low-priced renewable energy and proliferating electric vehicles. Supporters of the resolution say they intend to bring it back up in November at ALEC’s annual meeting in New Orleans.
“What we need to do is figure a [way to] work around the corporate rent seekers,” said Myron Ebell, energy director at the Competitive Enterprise Institute, a conservative think tank that supported the resolution. “Groups like UPS and some of the utilities like Duke Energy and the Edison Electric Institute, we need to figure out a way to work around them.”
The Alternative Fuel Vehicle (AFV) resolution began as a proposal for consideration at ALEC’s Spring Policy Summit in the Western Michigan city of Grand Rapids last week.
ALEC, formed in 1973, serves as a private policymaking body for major companies and conservative lawmakers. Corporate members, who pay tens of thousands of dollars in annual dues, convene with lawmakers to craft model policies that legislators then bring back to their states to enact.
The group is influential — Brookings reported in 2013 that the rate of adoption for ALEC model legislation is “strikingly high” compared to other bills.
The AVF resolution originally targeted subsidies for non-gas vehicles, including “electric, natural gas, biofuel, propane clean diesel and, in some instances, supporting fueling infrastructure.” It was introduced in two separate committees, or “task forces,” by IER, an energy group funded by the oil magnate Koch brothers, as well as Ebell’s CEI and conservative group Americans for Prosperity.
ALEC meetings are private events not open to the press, so Utility Dive was not present for task force votes. But multiple sources inside each room provided information on how the resolution evolved and was eventually defeated.
Facing a close vote in the energy task force, a state legislator from Texas introduced an amendment on the floor that expanded the resolution’s scope to any energy subsidies. Another amendment from an Ohio lawmaker sought to broaden it further, including all energy mandates as well as subsidies.
“The resolution originally was really just for electric vehicles and related infrastructure on subsidies,” said Rep. Ron Simmons (R-Texas), who introduced one of the amendments. “I agreed with it, would have voted for it, but also we don’t really need subsidies in the energy world at all.”
Opponents of the resolution expected the Simmons amendment to be a poison pill, as it would include renewable fuel subsidies and oil industry tax breaks important to many ALEC legislators. But despite that and opposition from utilities, the amended resolution narrowly passed the energy task force.
“The resolution as it passed it would apply not only to all vehicle types but it would also apply to subsidies and mandates of all fuel types, so that would include, for example, the renewable fuel standard,” Ebell, who chaired President Trump’s EPA transition team, said. “EEI was lobbying against it and so was Duke Energy.”
Duke did not respond to requests for comment on ALEC, but EEI confirmed it worked against the resolution.
“The Edison Electric Institute strongly opposed this resolution, and we are extremely disappointed in these efforts to limit our ability to serve our customers,” said spokesperson Brian Reil. “As the operators of the energy grid, electric companies play an important role in developing charging infrastructure and expanding access to electric transportation for our customers and the communities we serve.”
Despite support in the energy committee, the resolution hit stronger opposition in the commerce task force, where participants say some legislators got cold feet about opposing all forms of fuel subsidies.
“Their main concern, which I shared, is that the resolution could have been more carefully worded,” said Rep. Bill Seitz (R-Ohio), who sits on the ALEC Board of Directors. “I don’t oppose, nor do I think most of the people in the room oppose, traditional forms of government incentives for not just alternative fuels, but also alternative forms of energy.”
Seitz said he would have preferred language that opposed only policies that “compel customers to subsidize” certain forms of energy. Ohio is trying to lure a multi-billion dollar ethane cracker plant to the state, he said, and “there is no way in hell we’re going to be able to land that project without appreciable assistance from the state.”
“If it’s something as simple as building them better roads or more likely job tax credits or other forms of assistance they provide I see nothing wrong with that,” Seitz said, “but where I fault the resolution is in failing to make clear that we are not opposing that.”
Seitz’s opposition to the AFV resolution may make its revival at the New Orleans meeting less likely, as the ALEC board has the final say over resolutions and model legislation passed out of task forces. An AFV resolution similar to the original proposal was passed in 2015, Ebell said, but was withdrawn by its legislative sponsor before reaching the board.
A key issue in the intervening months is likely to be how the ALEC members view rate-based investments from utilities in EV charging infrastructure. Utilities say the practice is no different than deploying other power infrastructure like poles and wires, but Seitz worries it will block independent companies from entering the space.
“They are in effect compelling ratepayers to subsidize one particular player in this field to the arguable exclusion or disadvantage of others who may wish to play in that space,” he said.
Along with EV charging, Ebell said the inclusion of ethanol subsidies in the amended resolution could spell trouble for the effort if it is brought up again in New Orleans.