Oil industry opposition to a proposed ban on hydraulic fracturing, or “fracking,” in the city of Los Angeles has ramped up, as trade groups have threatened to sue if such a ban is enacted.

It’s the latest development in the city’s consideration of a fracking ban, which has been in limbo for more than a year, ever since the Los Angeles City Council voted to have staff craft an ordinance to ban the practice.

That vote came despite objections from local oil companies, including BreitBurn Energy Partners of Los Angeles and Cooper & Brain Inc. of Wilmington. The industry is especially upset by the sweeping nature of the proposal, fearing it could also ban common well-maintenance practices that have nothing to do with fracking, thereby shutting down much of the oil production within city limits.

Since then, the proposal has hit several roadblocks.

City planners in the fall said that the city lacks the technical expertise to implement a ban on fracking, the controversial practice of injecting water, sand and chemicals into wells to force oil out of surrounding rock formations; the planners recommended the city hire outside consultants.

Then, earlier this year, Los Angeles City Attorney Mike Feuer informed council members in a letter that “the legal counsel for the Western States Petroleum Association telephoned me and advised that his client would sue the city should it enact an ordinance prohibiting well-stimulation treatments.”

The oil trade group has already sued the city of Compton over a similar ban. The group’s roster includes major oil companies such as California Resources Corp. of Chatsworth.

Along with his letter to the City Council, Feuer included letters he received last year from WSPA and the California Independent Petroleum Association, which represents smaller oil producers. The letters laid out the case for legal action against the city should it enact a ban. One CIPA member is Freeport McMoRan Inc. of Houston; its Baldwin Hills oil field accounts for roughly one-third of all oil extracted within L.A. city limits.

The City Council met in closed session in January to discuss the prospect of litigation should it pass a ban on fracking. There has been no public action on the proposal since.

Services Tax

A state legislator’s controversial proposal to extend California state sales tax to services made headlines again last week as the state Board of Equalization released results of a study estimating how much revenue a sales tax on services would generate.

The number is staggering: $122.6 billion a year, an amount exceeding the state’s annual general fund budget.

State Sen. Bob Hertzberg, D-Van Nuys, who authored the sales tax measure, welcomed the study, saying it validated his main point that the bulk of sales in the state comes from services, not goods.

“This landmark study confirms that California’s economy has undergone a revolution,” Hertzberg said in a statement. “Eighty percent of California’s economy is now providing services, not goods, and most of these services are untaxed, making California more dependent on income taxes, which fluctuate year to year.”

But Hertzberg noted that the study assumed all services would be taxed, while his bill specifically excludes education, health care-related services and services offered by very small businesses. Also, the study assumed a sales tax rate of 8.42 percent, the average of the total sales tax in each of the hundreds of local jurisdictions in the state.

He has said his proposal to extend the sales tax to services is preliminary and doesn’t yet specify a tax rate, though he has also said it would generate up to $10 billion in additional revenue for the state, implying a much lower tax rate than assumed by the study.

Job Killers

The California Chamber of Commerce has stepped up its campaign against bills in the state Legislature it designates “job killers.”

The chamber this month released a preliminary list of 16 job-killer bills. It’s a smaller list than in previous years, though, the chamber expects many more job-killer bills to be introduced in coming weeks.

“Although we will be opposing a number of bills throughout this year, the ‘job killer’ list represents the worst of the worst,” said Allan Zaremberg, chief executive of the chamber.

Among the bills on this early list:

• AB 357, by Assemblyman David Chiu, D-San Francisco, which would require retail employers to post work schedules two weeks in advance and pay additional wages if schedules are changed with less than two weeks’ notice.

• SB 3, by Sen. Mark Leno, D-San Francisco, which would hike the state’s minimum wage to $13 an hour by 2017 and index it to inflation thereafter.

• SB 684, by Sen. Loni Hancock, D-Berkeley, which would tie the corporate tax rate to the difference between the pay of top executives and the median worker. The greater the disparity, the higher the corporate tax rate.

Staff reporter Howard Fine can be reached at hfine@labusinessjournal.com or (323) 549-5225, ext. 227.

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