TITLE
Recommendation to increase the current Oil Production Tax (OPT) from $0.15 per barrel to $0.40 per barrel with an annual adjustment based on the Consumer Price Index (CPI). (Citywide)
DISCUSSION
Over the course of the last two months, the Office of the City Auditor, in conjunction with the Office of the Mayor, the Office of Councilmember Gary DeLong, and the Department of Financial Management, has been reviewing and analyzing the current Oil Production Tax utilized by the City of Long Beach. The Oil Production Tax (OPT), created by City Ordinance No. C-6751 and currently codified at LBMC Section 3.80.221, mandates a set fee for "every person conducting, managing or carrying on the business of oil production from any well located in the City" at $0.15 per barrel. FY2006 oil production citywide was 14,882,817 barrels, generating a total revenue from the OPT tax of $2,232,423. The average price of oil in FY2006 was $67.28.
HISTORY OF PRODUCTION IN LONG BEACH:
In 1990 when the $0.15 OPT was passed, the average price of oil (using the West Texas Oil Index (WTI)) was $24.49. This equals approximately 0.006 cents for every dollar of oil on the WTI. Production, at the time the original ordinance was adopted, was higher than it is today. Since 1990, production in Long Beach has declined, as confirmed by the selected years of production set forth below:
Year Total Production (bbl)
1990-1991 22,861,620
1992-1993 20,784,093
1995-1996 19,458,147
2000-2001 15,767,633
2004-2005 14,823,713
Concurrently, however, the price of oil during this same period of time has steadily grown. Between 1990 and the present, the price of oil based on the WTI has fluctuated between $18.58 and $74.41. Utilizing the same ratio codified by the original ordinance (.006 per bbl on the WTI), and indexing that ratio to the fluctuation in oil prices, the OPT would have fluctuated concurrently between $0.11 and $0.46 in any given year within this time frame.
NEIGHB...
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