California State Assemblyman Chuck Devore Proposes Bill With New Oil Drilling and Tax Prepayments to Help Solve Budget Problems

This site had previously advocated using tax revenue from allowing oil drilling and new nuclear reactors to help solve California’s budget problems. [This is repeated below]

California assemblyman Chuck Devore introduced a proposal that generates as much as $16 billion by 2011, enough to fill more than three-quarters of California’s estimated $21 billion budget deficit. Chuck’s proposal is based on allowing new oil drilling and tax prepayments .

DeVore’s proposal creates an Interim Resources Management Board to consider bids for new oil leases within California’s waters (within 3 miles of the coast) and imposes a 40% royalty on the value of the oil and gas at the time of extraction. The measure also provides an option allowing bidders to pre-pay royalties on the value of the oil at the time a bid is accepted by the IRMB at a 20% rate, creating an incentive for leaseholders who believe oil prices will increase to pay the state royalties immediately. In addition, the bill includes a prepayment option for existing onshore leaseholders through which they may lock in their current royalty rate, generally 15-25%, by paying the state royalties on the gas and oil’s current market value.

“Allowing new offshore leases under this plan prevents cuts to education, public safety and other government services,” added DeVore. “It is simply irresponsible to continue our energy dependence on the Middle East when we can not only provide more energy right here in California, but also repair the state’s budget and economy.”

With the estimated one billion barrels of oil off California’s coast valued at approximately $70 a barrel, the state could see revenues of up to $14 billion if all new leaseholders chose the prepayment option. If only half of new leaseholders chose the prepayment option, the state could issue lease-revenue bonds for the remaining royalties. Combined with California’s corporate tax rate of 8.84%, the added value of the oil and gas ensures that California could see as much as $16 billion in new revenue in the coming fiscal year.

Advances in slant drilling techniques allow oil and gas extraction to occur from the coast or from existing platforms. No new offshore platforms would need to be constructed to reach the new leases.

This is only to get the close coastal oil. There is more oil under deeper water, but those would require offshore platforms.

Chuck DeVore has raised over one million dollars in his campaign for the Senate seat of Barbara Boxer.

Unseating Boxer is not DeVore’s only battle on the road to the U.S. Senate. He must first face former Hewlett-Packard executive Carly Fiorina in the June Republican primary.

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Previous Discussion at Nextbigfuture on Using Energy Policy to Help Solve California Budget Issues

Below are Nextbigfuture ideas and data and not related to what Chuck Devore is proposing.


California is going through a state budget crisis and has been going through chronic and persistent budget problems for over a decade. California chooses not to use its offshore oil or develop more nuclear power. Some environmentalists will say that the oil and nuclear power would not be enough to solve the energy problems of the United States. However, this will show that California could get $5-10 billion per year of tax revenue from the development of 10 billion barrels of oil and 16 trillion cubic feet of natural gas. Also, the development of nuclear energy could offset electricity purchases from out of state sources which can often be at spot prices. Each nuclear reactor could offset about $1 billion of electricity and natural gas purchases each year. California’s budget gap is projected to be $40 billion over two years. The initial issuance of oil leases would provide immediate revenue to the state of one billion/year or more. The construction to build the oil rigs and nuclear plants would provide construction jobs, taxes and fees which would provide immediate benefits as the projects are being built and before oil is pumped or electricity is generated.

Does anyone believe that California will not need $10-20 billion/year in state tax revenue in ten years or that $2-5 billion/year of tax revenue over the next several years would not help a great deal?


Alaska made about $10 billion in oil revenues in 2008. They made about $5.6 billion in oil revenue in 2007.



Alaska’s oil resources is projected to be about 13 billion barrels of oil. California’s offshore oil is of comparable scale.







California’s state budget is projected to have a $14 billion shortfall for 2008-2009 and about $40 billion for 2009-2010.

California could choose to stop screwing up its finances by having a state energy policy that would have avoided its past financial problems and could still help fix its future financial problems.

The Tennessee Brown’s Ferry nuclear plant saved 800 million for the TVA by helping avoid purchases of power on the spot market.

The current plan is for 33% of California’s power to come from renewable energy at a build-up cost of $60 billion. For $28 billion or less the equivalent energy could be provide by new nuclear power. The nuclear power choice would save $32 billion.