Offshore drilling could help onshore education

By Aaron Ver, San Francisco Chronicle

Oil-company lobbyists and higher-education activists are unlikely political bedfellows. But if California's state leaders act to end the ban on offshore drilling in order to preserve the state's higher-education system, this might be an alliance worth forging. Royalties earned from new offshore wells could provide the much-needed funding to offset budget cuts to the state's public colleges and universities. By funding higher education, oil profits could directly promote research and development in the clean-energy industry.

California is already the third-largest producer of oil, after Texas and Alaska. Yet, unlike those two states, California does not receive any royalties from the sale of oil taken from its land. The oil industry has fought off royalty fees as low as 12.5 percent, half of what Alaska charges, for existing wells. Instead, the Legislature should impose a fee on new wells. The U.S. Department of Interior estimates that between five and 15 billion barrels of oil may sit off the coast of California, half of that resting in state waters.

Tapping new wells, when crude oil sells for nearly $100 a barrel, will provide the state with badly needed revenue. Drilling will jump-start oil-rig construction and operator hiring, trades that are generally unionized. Hiring in this field, in which unemployment is more than 13 percent, also will lessen the unprecedented demands for social services.

Oil royalties can help preserve funding for the state's crown jewels: the University of California, Cal State, and community-college systems. A similar education fund helped grow the University of Texas. Alaska created an oil fund 35 years ago; now it's worth $36 billion. A California oil fund earning 12.5 percent on every barrel produced would quickly offset budget cuts. Specifically, the fund could earmark oil profits not only for higher education but also for wind, solar, and carbon-capture products.

Moreover, with seven UC campuses ranked in the top 50 research universities worldwide, oil revenues could preserve the educational pipeline that fueled the growth of biomedical engineering, the aeronautical industry and Silicon Valley.

Some might oppose new oil drilling because oil spills are horrible environmental and economic disasters. I saw firsthand the effects of the BP spill on the fishers living along the Gulf of Mexico. But these incidents have led to landmark federal and state environmental regulations, billion-dollar lawsuits against corporate negligence and heightened oil-industry standards. Since the BP spill, federal and state regulators - as well as oil companies - are paying closer attention to drilling safety. California can capitalize on this awareness by pursing an offshore strategy with better industry scrutiny than anyone previously imagined.

Drilling in California could be the strictest and safest in the world. California can leverage its position to set more stringent drilling safety standards. The consistently high price of oil is all but a guarantee that companies will drill, pay royalty fees and adhere to strict safety regulations. Companies will want wells close to California's refineries. They will pay top dollar for access to the nearby ports of Los Angeles, Long Beach and Oakland. With these competitive advantages, the price of admission to California waters could demand the best drilling technology and strict safety measures, effectively raising the bar for the entire industry.

Proponents of an oil-extraction fee are circulating a measure to enact a 15 percent tax on existing oil production - but California's oil production has fallen 20 percent in seven years. As current oil production diminishes, an extraction tax alone will not fully offset the state's cuts to higher education.

The state Legislature must act now to preserve California's crown jewel. In the current Legislature, 64 Assembly members and 22 senators took classes through, graduated from or worked in the state's public colleges and universities. They must recognize that higher education is the economic bridge between old and new industries; it ensures that we understand our history well enough to make the best possible decisions for our future. Now is the time for these 86 legislators to make tough decisions; they must end the drilling moratorium and reinvest in the same privilege they personally enjoyed: accessible public education. 12/14/2011