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DEPARTMENT OF CONSERVATION: CALIFORNIA'S OIL INDUSTRY OVERREGULATED; FIRST STUDY OF REGULATORY IMPACT ON STATE OIL INDUSTRY

 SACRAMENTO, Calif., March 30 /PRNewswire/ -- Declining oil and gas production in California has contributed to the spiraling unemployment in the state and has cost state and local governments millions of dollars in lost tax and royalty revenues, according to a new study commissioned by the California Department of Conservation.
 Declining oil production in California has caused a 35-percent reduction in the number of jobs associated with the oil industry in California since 1984. The oil and gas work force is among the most highly skilled in the nation with workers earning an average salary of $45,000. The loss of these jobs cost a total of $160 million in lost payroll to the state work force and accounted for a $130-million loss in tax and royalty revenues, according to the state study, entitled "Status of Petroleum Production Industry in California: The Cost of Regulatory Compliance."
 "Jobs are the number one priority of the Wilson Administration," said Ed Heidig, director of the Department of Conservation. "Maintaining our fidelity to the environment and creating economic strength in California are no longer mutually exclusive goals.
 "These figures confirm the impact overregulation has on the future of California's economy and how we must simplify the regulatory process to assist businesses with compliance," Heidig said.
 Heidig points out that at least 34 federal, state and local agencies enforce dozens of regulatory requirements. Complying with these regulations cost the industry $326 million in 1991 alone.
 "The oil is here, the overregulation is here, and that's why the jobs aren't here," said Secretary of Trade and Commerce Agency Julie Wright. "The report echoes what Governor Wilson has been stressing for years: we must grease the wheels of bureaucracy so that they don't grind exceedingly slow. Trimming unnecessary regulation is the fastest way to jumpstart California's economic engine."
 This is the first study commissioned in California designed to determine the impact of current regulatory requirements on the oil and gas industry and the state's economy. The study was conducted by Foster Economics, an impartial econometrics firm based in Washington, D.C., and California.
 The report states, "Incrementally developed regulations by multiple agencies have led to overlaps in authority as agencies expanded their sphere of influence to oversee operations believed to be within their responsibility. As a result, layers of rwgulations now delay approvals for drilling projects and explain part of the high regulatory costs."
 According to the report, the principal consequences of declining oil and gas production in California include: 1) increased reliance on foreign crude imports; 2) increased strategic vulnerability; 3) decreased unemployment; 4) decreased payroll; and 5) decreased government revenues.
 The report also noted, "Until either petroleum prices increase or regulatory costs decrease, the California production industry will continue to decline faster than the national average, even though the ratio of California's discovered reserves in relationship to production exceeds the national average by 35 percent.
 "The oil is here, but declining production shows that the incentives to produce it are not here," the report states.
 California workers earned $1.45 billion in direct payroll from the oil industry in 1990. This accounts for $2.75 billion direct and indirect contributions to the rest of the state's economy, the report states.
 "Ensuring safe and environmentally sound extraction of oil and gas reserves in California can happen simultaneously but we must streamline the regulatory process now," Heidig urged. "The oil industry is at a crossroads and we must begin implementing many of the report's recommendations immediately to maintain protection of the environment and jobs."
 The Department of Conservation will implement these recommendations in conjunction with the study advisory committee and other state agencies.
 California is the fourth-largest producer of oil in the nation following Alaska, Texas and Louisiana respectively.
 Heidig was appointed director of conservation by Gov. Pete Wilson on Feb. 14, 1991.
 -0- 3/30/93
 /CONTACT: Pamela Morris, public information officer of the Department of Conservation, 916-445-0623/


CO: California Department of Conservation ST: California IN: OIL SU:

LH-TB -- SF005 -- 1102 03/30/93 13:49 EST
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Date:Mar 30, 1993
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