Extracting Sense From Energy Debate

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The editors like to see contributors to My Turn focus on local issues, but something has been bugging me about energy policy. If I can get that off my chest, maybe I can look for a local angle.

First off, if California has an energy policy, I seem to have missed it.

Now, no doubt you have seen the ruckus over that $4 billion Keystone pipeline from Canada to the Gulf States. While oil companies and GOP hopefuls have railed about lost jobs and lost energy independence if we don’t build it, my brain works in other ways.

Why, I’d like to know, do we want to ship all that crude oil from Canada and North Dakota to Texas or Louisiana to refine it and then ship the gas back north for consumption, especially if the pipeline poses a risk to the Ogallala Aquifer, as the Republican governor of Nebraska has claimed?

Why not use the money to build a refinery in Fargo and a shorter pipeline to carry the refined products to places like Chicago or New York? Wouldn’t that help create jobs and energy independence while cutting out the north-south-north round trip for all that oil?

I think I found the answer to this puzzler last week. Turns out the US became a net exporter of refined petroleum products in 2011 for the first time since 1949. We’re not talking crude here (though our imports of crude have fallen from about 60 percent of our needs to 49 percent). These are refined products such as gasoline.

We’re exporting to places such as Mexico, Spain, France, and Turkey. And that pipeline would bring a whole lot of crude to refineries on the Gulf Coast where tankers can load up on refined petroleum products for export to world markets.

So if you thought getting that pipeline built would bring new supplies and the price of gasoline down here in Southern California, you might want to take a closer look. Ditto to those who believe that the cry of “drill, baby, drill” is all the energy policy the country needs. Turns out oil is a “fungible” commodity that can flow out just as easily as it can flow in.

Now here comes the local angle. Republican governors in oil-rich states such as Texas, Louisiana, and Alaska do have state energy policies. They’re called taxes. They have “extraction” taxes on the crude oil pumped out of the ground there. They use the oil tax revenue to pay for things and keep other taxes lower.

California is the largest oil producing state without an extraction tax. Maybe we need a local energy policy after all – an extraction tax. That might not bring down the price of a gallon of gas, but it might help keep our other taxes down and remove the incentive non-oil companies have to relocate to Texas.

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