Devore Proposes $16 Billion Non-Tax Budget Solution New Oil And Gas Offshore Lease Bill Fills Three-Quarters Of Budget Hole
Assemblyman Chuck DeVore (R-Irvine) today 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. The proposal authorizes the first new oil leases in state waters off California’s coast in forty years and includes an innovative royalty system that generates as much as $16 billion dollars in the next year.
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.