How SB 4 Will End Up Taxing the Oil and Gas Industry and Even California's Consumers: Looming Fee Hikes Will Cover State Water Resources Control Board's Budget Needs, New Staff Positions


Most of the media has been consumed with talk of a proposed severance tax on oil and gas production, but meanwhile in Sacramento another tax on oil and gas production is being poised to take effect -- funding requests to implement SB 4.  The State Water Resources Control Board (“SWRCB”) is asking for more than $15,000,000 over the next two years in order to cover the costs associated with developing groundwater monitoring criteria, as they are obligated under SB 4.  According to a January 8, 2014 budget change proposal from the SWRCB, that money will come from raising fees on oil and gas operators.

Currently, the Division of Oil, Gas & Geothermal Resources receives oil and gas assessments and operation fees from oil and gas operators.  The SWRCB is requesting that some portion of this funding be shifted from DOGGR to the SWRCB in order to cover the expenses required to develop the groundwater monitoring criteria.  The SWRCB reports that the funding will go to covering contracts and creating new staff positions (up to 14 during the 2015-2016 budget year).  Not surprisingly, these positions add to the new state employees required at DOGGR for SB 4 implementation.   

The SWRCB’s budget change proposal notes that operators are likely to oppose this budget shift and the increased fees.  The proposal even notes that increasing the operator’s fees may be passed on to the consumer. No wonder the Governor has so flatly rejected the idea of a severance tax. 

As the SWRCB is promulgating the groundwater monitoring criteria, DOGGR’s Emergency Regulations cover the creation of groundwater monitoring plans (see Section 1784.3).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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