One of America’s Greenest States Can't Give Up Its Oil Money

The sun isn’t setting on big oil just yet. Photo: David McNew (Getty Images)

With global temperatures on the rise and emissions from every industry compounding the issue, many states are seeking to curb their reliance on fossil fuels. But, while a pivot to greener transportation and more eco-friendly energy sources could stall climate change, few discuss the other problems we might face with this switch. Namely, who can cover the taxes we might one day lose from oil and gas?

Now, a New York Times report has investigated the financial implications for states and counties that are closely aligned with big oil. Specifically, it has looked at the loss in revenue regions might face if they try to cut their ties with oil and gas production. According to the NYT:

“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.”

Kern County produces 70 percent of California’s oilPhoto: David McNew (Getty Images)

The paper warned that cutting the country’s reliance on fossil fuels in a way that is necessary to curb climate change would result in a two-thirds drop in tax revenue by 2050. This, it says, could be worth more than $20 billion.

To find out what this would mean for local communities, the report looked at the changes seen in Taft, California. This town has had ties to the oil industry for decades and has witnessed first hand the benefits that can come from having a booming oil industry on your doorstep. It says:

“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.”

As well as producing 70 percent of California’s oil, Kern County, where Taft is located, is also the state’s largest supplier of wind and solar power. But, while we may celebrate this shift to greener energy sources, the region’s accountants are beginning to fret. That’s because the NYT reports that “renewable energy doesn’t generate as much tax revenue as fossil fuels.”

Kern County is California’s largest supplier of wind and solar powerPhoto: Patrick T Fallon/AFP (Getty Images)

As such, lawmakers in the region are trying to block moves to curb oil drilling in the area. Even going so far as backing a plan for 43,000 new wells instead of new restrictions on people looking to drill for oil.

But that won’t help the fact that oil production in the state is declining, thanks in part due to the increasingly complex extraction processes workers must carry out to try and get at their liquid treasure. The Times explains:

“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.”

This slowdown has been as harshly felt in county coffers as it has in oil company profits.

Taft: a town built on oil. Photo: David McNew (Getty Images)

According to the Times, tax revenue from oil in the region reached $197 million in 2020. This helped fund schools, hospitals, law enforcement and other public services in Kern County. But a “sharp swings in oil prices” has resulted in cuts such as “staffing reductions at fire stations and library closures.”

To make up the state’s lost revenue, residents agreed to a sales tax rise. Another solution, lawmakers say, would be to “unleash” gasoline producers on Taft, which they argue would replenish the region’s budget while also helping to curb rising gas prices.

But the future of the region’s industry remains in doubt. And Renee Hill, a resident that the NYT spoke to in the article, sums up the town’s worries in an alarming way.

“Oil supports everything we have,” she told the paper. “If oil goes away, we don’t have anything else.”