Proposed Refinery Tax vs Refinery Economic Benefits
Dear Friends,
In the final hours of the 2009 Legislative Session, a massive tax increase targeted at Whatcom County’s manufacturing job base was passed by the House of Representatives. Fortunately, this job killing tax increase was blocked in the State Senate. The following report helps to explain why I am against this proposal. We cannot allow our oil refineries to be pushed out of our state like Boeing. I look forward to sharing the ideas I have to improve our economy and to preserve and eventually create jobs.
If you have any questions or if I can ever be of assistance, please send me an e-mail at ericksen.doug@leg.wa.gov or call me at (360) 786-7980.
Sincerely,
Doug Ericksen
State Representative
THE ECONOMIC CONTRIBUTION OF WASHINGTON STATE'S PETROLEUM REFINING INDUSTRY IN 2007
To read the entire report, complete with charts and graphs: http://www.houserepublicans.wa.gov/ericksen/WRCeconomicprofile.pdf
1. REPORT OVERVIEW
This report quantifies the impact of Washington's five major petroleum refiners on the state’s economy in 2007.
In 2007, the refiners directly provided 2,003 full-time jobs, paying an annual average wage of nearly $110,000. In addition, the refiners employed, at high wages, 3,144 contract workers on an average day, doing maintenance, capital repair and capital replacement. The refiners indirectly created additional
Washington state jobs in industries from which they purchased goods and services, including transportation, construction, utilities and business services. Spending of the income earned in these direct and indirect jobs created even more jobs.
The sum of all these effects was more than 20,000 jobs and one billion dollars in personal income for Washington State in 2007. From this activity, state and local government received $39.4 million in sales and use taxes and $79.8 million in business and occupation taxes.
In particular, downstream industries, which distributed refined petroleum products, paid $407million in wages to 17,326 workers in 2007. Excise taxes collected by the state from these industries came to nearly $245 million.
Because of Washington's unique tax structure, a Washington refinery’s state and local tax burden is about twice the state and local tax burden of a comparable refinery located in California.
2. SUMMARY OF FINDINGS ON REFINERS
Washington's five refineries provide nearly 4 percent of the United States' refining capacity. In 2007 they processed nearly 595,300 barrels of crude oil per day, producing 260,200 barrels of gasoline per day. Gasoline, diesel oil, and jet fuel are the largest finished product categories, representing 43 per cent, 22 percent, and 12 percent, respectively, of total production.
According to the refiners survey, the five major refineries employed 2,003 workers in 2007, paying them an average annual wage of $109,215—about two and one-half times the Washington state average.
As illustrated in Table 2.1, these jobs have a total employment multiplier of 10.16, meaning that each direct refining job generates an additional 9.16 jobs in the state, for a total employment effect of 20,350 jobs resulting from the five refineries.
Petroleum refining’s extraordinarily high capital intensivity and high wages are the major reasons for its high jobs multiplier. The WRC-REMI model, which is used here to determine the economic impact of the industry, calculates that each petroleum job adds $507,275 of state personal income, a total income contribution of more than $1 billion to the state economy.
The industry is highly taxed and regulated, producing a bounty of tax and fee revenues for state and local government.
The five refiners paid $182.9 million in state and local taxes in 2007. Each refining job directly resulted in $3,099 in sales and use collections and $35,813 in business and occupation (B&O) tax revenues, for a total of $77.9 million in sales and use taxes and B&O receipts. In addition, the refiners paid $ 70.9 million in hazardous substance tax, $19.5 million in property tax, and $8.5 million in regulatory fees in 2007.
Including the indirect and induced effects, the refining industry generated $33.4 million in sales and use and $79.8 million in B&O taxes.
Calculations of state and local taxes paid by hypothetical 160,000 barrels- per-day refineries located in Washington and California indicate that the tax burden on refineries in Washington is almost twice that in California.
Petroleum refineries have an excellent worker safety rating. In 2007, refineries nationally averaged just 1.6 injuries or illnesses per 100 full-time workers. This low rate compares quite favorably with injury/illness rates of 4.2/100 for private industry overall and 5.6/100 for manufacturing (BLS 2008).
Finally, refiners contribute generously to the communities in which they are located. The five refiners and their employees contributed $1,944,000 to various community causes in 2007. The firms themselves contributed about 86 percent of this, with the balance provided by firm-sponsored employee giving.
ACKNOWLEDGEMENTS
Washington Research Council has produced this report with funding from the Western States
Petroleum Association. Washington State's economy is simulated using the Washington Research
Council-Regional Impact Modeling, Inc. (WRC-REMI) model, based on a detailed survey of
the five oil refiners operating in Washington.
The results of this analysis are the sole responsibility of the Washington Research Council, a nonprofit organization committed to objective analysis
of economic and public policy issues in Washington State.