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2002
ANNUAL REPORT
Legislation
Industry a Prime
Target:
State budget deficits, political volatility breed rash
of tax and fee legislation
Industry government affairs forces found themselves
on the front line of defense in 2002 as looming state
government deficits and a volatile election year climate
threatened a torrent of new taxes and regulatory fees
on business. WSPA's Government Affairs Committee and
advocates in individual states deflected much harmful
legislation but expect continued assaults as states
frantically search for budget-balancing revenues next
year. It is a good bet the petroleum industry will be
a prime target for proposals to increase taxes and regulatory
fees.
This climate was particularly intense in California
which underwent a long, contentious legislative struggle
in enacting a budget to handle an estimated $24 billion
shortfall. As the debate ensued, special interests attempted
to broaden regulatory restraints and increase fees and
penalties to further their anti-petroleum agendas. The
groups were emboldened by the success in this election
year of legislation long opposed by business.
Other Western states faced similar budget deficit
problems in 2002 with Arizona, Oregon and Washington
working to address deficits of $500 million, $1.5 billion
and $2.4 billion respectively.
Of particular concern in California was the impact of
a court decision in the Sinclair Paint vs The Board
of Equalization case which in effect makes it much easier
to penalize industry by passing new taxes under the
guise of "fee increases." Fees can be approved
by majority vote in the Legislature whereas a two-thirds
vote is required for tax increases. Special interests
attempted to use this device to pass a "refinery
gate fee" that would have cost the industry almost
$200 million annually. This effort was thwarted in committee
following a concerted effort by WSPA and its coalition
partners.
WSPA believes the use of "fees" to camouflage
tax increases constitutes a major threat to business,
especially when state budgets are in deficit. The California
budget deficit also triggered more straightforward attempts
to raise fees to increase funding for state programs
such as waste discharge and oil spill clean-up. WSPA's
team negotiated improvements in these bills but fee
increases were included in the final versions.
The volatile climate was also evident in the successful
fight to improve highly-publicized legislation to reduce
greenhouse gas emissions from vehicles. A coalition
initiated by auto manufacturers and supported by WSPA
launched a public education campaign to force improvements
in the initial bills. After much debate, the legislation
was made more realistic and enacted. Even so, the California
Air Resources Board is still required to achieve the
"maximum feasible cost effective reductions"
of CO2 and other climate change gas emissions from autos
and light duty trucks before January 1, 2006.
The California Energy Commission and Air Resources
Board in the meantime initiated six studies and held
workshops on concepts that would lead to increased government
regulation of refining, marketing and distribution of
gasoline. One effort even focused on enactment of special
taxes and surcharges on gasoline to reduce the state's
dependency on petroleum products. WSPA, with the leadership
of the California Petroleum Resources Group and the
Cleaner Burning Gasoline 3 (CBG3) Task Force, commissioned
economic and technical studies and developed a communications
campaign to bring reality to these efforts. The results
of these studies are certain to impact WSPA's California
advocacy well into 2003.
On other fronts, WSPA and its member companies were
successful in arguing for improvements in state initiatives
on environmental justice, endangered species act reform
and a host of water related and other environmental
issues. The volatile climate and the onslaught of unrealistic
remedies evidenced this year is not expected to improve
any time soon.
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