CALIFORNIA:

Gov. Brown's budget proposal targets water crisis, expands oil tax

California Gov. Jerry Brown (D) signaled the severity of the water shortages yesterday by devoting a significant portion of his proposed $154.9 billion budget to shoring up water management and infrastructure.

With drought threatening drinking water supplies, crops and fish habitat, Brown advocated spending more than $600 million on expanding reservoirs, improving groundwater management and bolstering flood protection.

"The state's water system is in crisis," Brown said in his draft spending plan yesterday. "Climate change, drought, and population growth pose significant challenges."

The funding is to carry out a five-year plan for managing water supplies. Released in draft form last year and expected to be finalized in the next few weeks, the plan lists 10 goals for all levels of government, including expanding water storage capacity, improving flood protection and increasing regional self-reliance and conservation (E&ENews PM, Oct. 31, 2013).

The spending on water came in a budget that prioritized other environmental efforts but cut some green spending. Brown also proposed:

  • Expanding a tax on oil to fund spill prevention efforts. Rail shipments of crude, including North Dakota Bakken oil, are expected to jump to approximately 150 million barrels per year by 2016 from the current 3 million annually. The petroleum is "extremely flammable and its transport increases the risk of serious accidents," the budget said.
  • Spending $850 million from the sale of pollution permits under the state's cap-and-trade program for greenhouse gas emissions. The money would go to a variety of outlays, including $250 million for a controversial high-speed rail line.
  • Eliminating a $3 million adjustment that had been given last year to the California Coastal Commission to help local agencies deal with projected sea-level rise. The commission's budget would fall to $14 million from $17 million.

The bulk of the money for water efforts -- $472.5 million -- is directed to encouraging local and regional agencies to work together on management. The money is the last of a 2006 voter-approved bond that authorized $5.4 billion for water projects and is a significant increase from last year, officials said. Other expenditures include $77 million on flood protection and $7.8 million on groundwater monitoring and management.

"These investments in regional self-reliance are a huge win-win for the environment and the economy," said Doug Obegi, an attorney with the Natural Resources Defense Council's water program. "That really is an investment in a drought-resistant water supply for California."

Water agencies also praised the plan, highlighting funding for water storage, drinking water and flood control.

"In particular, we support the funds identified to expand water storage, which is greatly needed and long overdue, in addition to funding to improve drinking water and increase flood control, among other things," said Jennifer Persike, spokeswoman for the Association of California Water Agencies, which represents agencies responsible for 90 percent of the water delivered to cities, farms and businesses in California.

With California's return from the brink of fiscal insolvency in 2012, Brown's supporters said that he is managing the state's finances cautiously. There is a projected surplus of $4.6 billion. But after making a number of one-time expenditures like paying back special fund loans, that balance drops to $967 million.

Brown in the budget noted that some of the revenues came from a temporary tax increase that started last year and stock market advances that created taxable gains. Those sources will be "short-lived," he warned.

Proposition 30, a 2012 ballot measure, raised California's sales tax by one-quarter cent for four years, and for seven years boosted income taxes on people making more than $250,000 per year. Voters approved it 54 percent to 46 percent.

A Republican tea party favorite who is running for governor noted that source of money as he criticized Brown's spending plan.

"After picking the pockets and balancing California's budget on the backs of hardworking taxpayers through the largest Tax increase in State history, Governor Brown this morning declared all of California's problems magically solved," State Assemblyman Tim Donnelly said yesterday in a statement. "It must be nice to view the State's problems through such rose-colored lenses. The reality is, a magnitude of problems still face California."

The budget for 2014-15 projects about $7.2 billion in revenues from Proposition 30, the state's Department of Finance said.

High-speed rail gets carbon proceeds

Brown's budget seeks to tap revenue from the state's landmark cap-and-trade system to help bankroll a high-speed rail line.

A state court in November ordered the state to write a new funding plan for the $68 billion bullet train project. Sacramento County Superior Court Judge Michael Kenny ruled that the California High-Speed Rail Authority had failed to comply with Proposition 1A, the 2009 ballot measure that approved $9.95 billion for the train between San Francisco and Los Angeles.

Of $850 million in estimated cap-and-trade auction revenues, the governor proposed spending $250 million on high-speed rail and another $600 million on renewable energy, energy efficiency and other carbon-cutting programs(ClimateWire, Jan. 9).

Brown also pledged to return $100 million of the $500 million he borrowed last year from the sale of allowances under cap and trade. Some of the cap-and-trade money is being used for water programs, as well -- $20 million for energy efficiency improvements to water infrastructure and $30 million for watershed and wetlands restoration, which will help sequester carbon.

California EPA Secretary Matt Rodriquez said that the state was being "conservative" in projecting that it would have $850 million available from the sale of pollution permits. If the allowance auctions take in more than that amount, the money would be saved for the following budget year, when a decision would be made on how to spend it.

Rodriguez said he was confident that the state could withstand a court challenge of its decision to use money from cap-and-trade proceeds on the high-speed rail project.

"We've made the decision in the past, and I think [the Air Resources Board] has written letters to this effect, that high-speed rail should reduce greenhouse gas emissions," Rodriguez said. "It will take cars off the road, and we think that's important because ... roughly 40 percent of greenhouse gas emissions in California come from autos. If we can take autos off the road and have Californians use cleaner transportation options, then that will reduce greenhouse gas emissions."

Oil spill prevention

The $6.7 million in funds for oil spill prevention and administration is part of an effort to prepare for more oil being moved by rail, state officials said.

"We know that domestic production of crude oil has increased over the last years," said Chuck Bonham, director of the Department of Fish and Wildlife. "That increase has exceeded kind of our out-pipeline capacity. We know that that has caused a shift to moving oil by rail." At the same time, he said, the proposal "is about creating a statewide integrated program for oil spill preparedness and response."

Another California official noted that rail safety is a federal responsibility. The money in the budget, he said, is for the ability to respond to any problems.

The money would go toward prevention, emergency response preparedness, cleanup and enforcement measures. Funding would come from expanding a charge collected on barrels of oil. Currently, the state charges 6.5 cents per barrel of crude oil at marine ports. Under the proposal, it would be charged on all crude oil sent to refineries in the state.

Oil industry representatives said they hadn't taken a position on the fee yet but welcomed the acknowledgement of fossil fuels' role in California.

"We recognize and appreciate the increasing role that crude shipments by rail can play in California's energy future," said Cathy Reheis-Boyd, president of the Western States Petroleum Association. "This organization and this industry share the governor's goals to ensure the safety of the extraction, transportation and processing of fossil fuels in California."

Brown rejects severance tax idea

While Brown is proposing to expand a charge on crude oil, he dismissed the idea of an oil severance tax yesterday, saying voters have already been subjected to tax increases.

The idea was floated late last year by billionaire political activist Tom Steyer,. He said that taxing companies on each barrel of oil produced in the state would bring California up to speed with other oil-producing states.

"I don't think this is the year for new taxes," Brown said in response to reporters' questioning in Sacramento. "I think we ought to do everything we can to learn to live within our means before going back and trying to get new taxes."

The state budget cuts Coastal Commission funding to $14 million from $17 million. State officials said that the $3 million in question was money added just last year to help local agencies update their coastal plans and adapt to future sea-level rise.

During a conference call with state officials, one environmentalist advocate decried the cut. Warner Chabot, former head of the California League of Conservation Voters, said the funds are needed, "given the fact that sea-level rise is going to have such significant impacts and there are commitments to try to address adaptation."

"I'm sort of stunned by the $3 million cut to the Coastal Commission for a program that they just had started, to deal with helping over 50 local governments update their local coastal plans, " he said. "They have scrambled, they've hired 20 staff, they've put the program in place, they've allocated $1 million in grant money, they developed a sea-level rise adaptation program.

"It seems like the car has just left out of the garage and is speeding, and they've removed the tires from it," Chabot added.

A state Department of Finance official told Chabot that the $3 million added to last year's budget had been a "one-time augmentation."

In developing this year's spending plan, the official said, "there were lots of other considerations for many other programs to continue spending general funds."

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