By Brad Plumer
The New York Times, Jul. 7, 2022
Dozens of state and local budgets depend heavily on tax revenue from oil, gas and coal to fund schools, hospitals and more. Replacing that money is turning out to be a major challenge in the fight against climate change.
TAFT, Calif. — Every five years, this city of 7,000 hosts a rollicking, Old West-themed festival known as Oildorado. High schoolers decorate parade floats with derricks and pump jacks. Young women vie for the crown in a “Maids of Petroleum” beauty pageant. It’s a celebration of an industry that has sustained the local economy for the past century.
This is oil country, in a state that leads the country in environmental regulation. With wildfires and drought ravaging California, Gov. Gavin Newsom, a Democrat, wants to end oil drilling in the state by 2045. That has provoked angst and fierce resistance here in Kern County, where oil and gas tax revenues help to pay for everything from elementary schools to firefighters to mosquito control.
“Nowhere else in California is tied to oil and gas the way we are, and we can’t replace what that brings overnight,” said Ryan Alsop, chief administrative officer in Kern County, a region north of Los Angeles. “It’s not just tens of thousands of jobs. It’s also hundreds of millions of dollars in annual tax revenue that we rely on to fund our schools, parks, libraries, public safety, public health.
Across the United States, dozens of states and communities rely on fossil fuels to fund aspects of daily life. In Wyoming, more than half of state and local tax revenues comes from fossil fuels. In New Mexico, an oil boom has bankrolled free college for residents and expanded medical care for new mothers. Oil and gas money is so embedded in many local budgets, it’s difficult to imagine a future without it.
Disentangling communities from fossil-fuel income poses a major obstacle in the fight against climate change. One study found that if nations followed the urging of scientists and cut emissions from oil, gas and coal deeply enough to avert catastrophic warming, United States tax revenues from oil and gas production, currently about $34 billion per year, could fall by two-thirds by 2050.
While Kern County produces 70 percent of California’s oil, it is also the state’s largest supplier of wind and solar power. But renewable energy doesn’t generate as much tax revenue as fossil fuels, partly because California exempts solar panels from property taxes to spur construction. And jobs in the wind and solar industries generally don’t pay as much or last as long as those in the oil fields.
So Kern County is feuding with the governor. Local officials, who have unsuccessfully sued to block Governor Newsom’s restrictions on drilling, are backing a plan for up to 43,000 new wells and have threatened to halt solar projects in response to the state’s oil crackdown.
Whether Kern County can transition to cleaner energy could offer a model, or a cautionary tale, to the rest of the nation.
“California is about 10 years ahead of other places on climate policy, but I expect we’ll see similar issues pop up across the United States,” said Kyle Meng, an economist at the University of California, Santa Barbara. “When you look at how deeply oil and gas is woven into the fabric of many communities, providing money for schools and hospitals and roads, the shift to clean energy can get really complicated, really fast.”
‘Oil supports everything we have’
Nestled in the southwest corner of the San Joaquin Valley, Taft was built above the Midway-Sunset oil field, California’s largest, after a gusher in 1910 sent millions of gallons of crude raining from the sky.
Today, Taft is surrounded by roughly 10,000 wells, and oil defines the city.
Downtown features the Oilworker Monument, a towering bronze statue of a derrick and a roustabout wielding a wrench. The Black Gold Brewing Company sells oil-themed beers like Petroleum Highway Porter, along with Thai food, guns and ammunition. The West Kern Oil Museum walks visitors through thousands of modern products derived from petroleum, from fertilizer to nail polish.
“We take a lot of pride in what we do here, in our contribution to America’s energy security,” said Dave Noerr, a former oil field worker and mayor of Taft since 2016, as he drove his pickup truck through town one recent morning. “And our industry partners have been incredibly generous to our community in return.”
Property taxes from oil and gas fund Taft’s well-kept parks and recreation centers. The local college built a new classroom and hired staff to teach anatomy with funding from Chevron. Millions of dollars in donations from oil companies support the Taft Oil Technology Academy, a popular high school program where students learn petroleum geology, fly drones and research topics like carbon dioxide recycling.
But Taft’s boom years may be over, and the future is uncertain. Even as Russia’s invasion of Ukraine has sent oil prices soaring, crude production from California’s fields keeps declining. Much of that drop is structural: The state’s output peaked in 1985 after decades of exploitation, and the remaining heavy oil requires sophisticated techniques like steam injection to extract.
At the same time, local officials and oil companies say production has been further depressed because state regulators have made it increasingly difficult to obtain drilling permits. As California has suffered through record-breaking heat waves, droughts and wildfires, the state has moved to slash greenhouse gases that result from burning oil, gas and coal and are rapidly heating the planet.
Since 2019, the annual number of permits issued by state regulators to drill new wells or modify existing ones has fallen by roughly half, and regulators have restricted techniques like hydraulic fracturing. Kern County wants to take over permitting from the state, aiming to approve thousands of new wells by 2035, but courts have blocked those efforts.
In the Midway-Sunset field, the dusty foothills are covered by a thicket of steam pipes, power lines and pump jacks quietly bobbing up and down, pulling oil from the ground.
“It’s actually unusual how quiet it is right now,” said Fred Holmes, the chairman of a small oil company who also runs a foundation providing college scholarships to local students, surveying one of his leases beneath the unyielding sun. “If we could get permits to drill new wells, there’d be a lot of activity to see. But there’s nothing going on.”
The drilling slowdown threatens Kern County’s finances, officials say. In 2020, oil and gas generated nearly one-quarter of the county’s property tax revenue, $197 million, which helps fund schools, hospitals, law enforcement, water agencies and other programs. In recent years, sharp swings in oil prices have forced painful cuts, including staffing reductions at fire stations and library closures. The latest price spike has provided some relief, but officials say that as drilling declines, it will get harder to provide critical services in a county with 900,000 people and some of California’s highest poverty rates.
“The problem is, we’ve got crime rates going up, homelessness going up, the cost of living is going up, our population is increasing,” Mr. Alsop said. “And the revenues we need to address these things are stagnating, all because of our unique position on oil and gas.”
Last year, Taft’s voters agreed to increase local sales taxes to avert a fiscal crisis and patch up shortfalls in the firefighting budget.
“If the governor says no to new oil and gas, every part of Taft is going to feel the pain,” Mayor Noerr said. “Think of all the social programs that won’t get funded, who is that going to hurt most? It’s going to be people of color, the poor. It angers me to no end.”
As gasoline prices soar, local officials say producers should be unleashed. They argue that California’s appetite for petroleum remains high, with electric cars still a fraction of the market. The state imports over half its oil from foreign countries, including from places like the Amazon rainforest in Ecuador.
“As long as we’re still using oil, doesn’t it make more sense to get every last drop we can right here in Kern County, where it provides jobs and tax revenue?” said Zack Scrivner, a county supervisor.
To ease the transition from fossil fuels, Governor Newsom has proposed $65 million to support and retrain displaced oil and gas workers, $200 million to clean up abandoned wells and $450 million to help communities diversify their economies.
“Later is too late when it comes to climate change, and California is moving aggressively to deploy clean energy and cut pollution in our communities,” said Alex Stack, a spokesman for the governor. “This administration has committed unprecedented funding to support the vision of regional leaders to help create more diversified, inclusive local economies.”
