3/25/25 Drilling Down: Tariffs, Oil Economics, and California's Energy Puzzle

The Moneywise Radio Show and Podcast Tuesday, March 25th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Manageme instagram: MoneywiseWealthManagement Guest: Chad Hathaway, Founder/President of Hathaway LLC. website: www.hathawayllc.com/

• 0:00Speaker 00

  From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.

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  Securities offered through SEF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SEF Investment Advisors, Inc. SEF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.

• 0:39Speaker 00

  Now, let's start the Money Wise Show.

• 0:42Speaker 03

  Welcome to the Money Wise Show. We are live from the Garo Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can text into the show 24 hours a day at 661-396-1000. Today, we're your hosts, I'm Sharad Waite and...

• 1:04Speaker 04

  Dustin Weaver.

• 1:05Speaker 03

  Dustin Weaver. We're going to have Chad Hathaway on the show here shortly. Always fun to have Chad on, and a lot is happening in oil. But before we do that, I want to get to some listener questions. This first question is something else.

• 1:22Speaker 04

  Good afternoon. Can you describe the difference between ad valorem, specific, and compound tariffs?

• 1:32Speaker 03

  Yeah, so this is so interesting because like...

• 1:35Speaker 04

  You want me to cover that one?

• 1:37Speaker 03

  Yeah.

• 1:38Speaker 04

  All right, Stephen. I got you. Well, my mic's going out, hold on.

• 1:42Speaker 03

  Yeah. Yeah, I definitely had to look this up. We're not terrorist specialists, but actually, when looking it up, it made a lot of sense.

• 1:50Speaker 04

  Did it.

• 1:51Speaker 03

  What I learned, they don't even teach Latin anymore. But did you ever learn any Latin, like in any of your college?

• 1:59Speaker 04

  Hmm, maybe a little bit.

• 2:01Speaker 03

  I know, it seemed like there was, I had one class, maybe, where they kind of touched on a little bit, but...

• 2:06Speaker 04

  Ad hominem, I know, when it comes to tax, right?

• 2:09Speaker 03

  Yeah.

• 2:10Speaker 04

  Like you're arguing.

• 2:10Speaker 03

  Oh, yeah, yeah. Well, so ad valorem tariff is a tariff that's based on the value of the of the product. So in this case, or an example would be, you know, it's a it's a percentage of the value of the of the product. So for example, if you have a $30,000 product and there's a 10% ad valorem tariff, that's $3,000.

• 2:36Speaker 04

  That makes sense, like on a vehicle, right? 30 grand.

• 2:38Speaker 03

  Yeah.

• 2:39Speaker 04

  In that example.

• 2:39Speaker 03

  Yeah, yeah. And so it just goes up and down based off of, you know, the the the dollar amount goes up and down, but it's tagged to like a percentage usually. A specific tariff, though, is exactly that. It's just a fixed fee. So it doesn't matter how much it is. It's just, you know, say $5 per bottle of wine imported. Doesn't, you know, the bottle of wine might be a five million dollars, or my $5,000, but it's just $5. So that's a specific. And then a compound tariff, what would you guess that is?

• 3:10Speaker 03

  Both. It's a combination of the two.

• 3:11Speaker 04

  There you go.

• 3:12Speaker 03

  So you'd have a flat fee and then you'd have a percentage of of the tariff.

• 3:18Speaker 04

  But so what is most popular? What do we?

• 3:20Speaker 03

  I have no, I would guess that it's ad valorem, because that's what that's what we're hearing a lot.

• 3:26Speaker 04

  We hear percentages often, right?

• 3:28Speaker 03

  Percentages. I think that that probably would make more sense, but who knew? Like I said, Steven's the tariff expert, not us. That's great. That's kind of interesting, though. I just love that we get these kinds of questions. We've got a few more, though. You got the next one, Justin?

• 3:44Speaker 04

  I know you guys aren't a political show. Thank you, baby Jesus.

• 3:49Speaker 04

  They put that. But how would you suggest what Trump is currently doing when it comes to the economy? I'm not pro-Trump. I'm also not a Trump hater. I just would rather hear it from people that understand the economy a little more than I do.

• 4:02Speaker 03

  I really like this because that is what we're trying to do here on this show is trying to stay apolitical, not get caught up in the politics and really just keep it, keep it simple in terms of the economy and finance, personal finance. I mean, it's hard to completely strip out politics because obviously we have opinions and we vote and we care about things. But I think what bothers me about politics and finance is they generally don't mix well. It's, it's, it's a little bit like when you're at the, you know, Thanksgiving table, don't, don't bring up religion, don't bring up politics, just like money doesn't really care about

• 4:44Speaker 03

  your political affiliation. It's gonna treat you the same way. It's fungible and it's gonna treat you, you know, that's like business is business and doesn't really care what church you go to or what political party you back. It's like you make, you, you want to try, at least we here at Money Wise, try to give advice that is just strictly financial and then let people decide how much of their, their feelings that they want to get involved with their money. But I have seen more trouble than good that comes from people bringing in their emotions and their feelings when it comes to money.

• 5:23Speaker 04

  Yeah, because this is asking about the economy, but really, you know, within being an investment show and we give investment advice, you know, you're wondering, what do I do with my investments? Right? Leading up to the election even, we looked a lot at that chart that showed the red and blue. They kind of color coded it for us and said, historically, based on who's in charge, right? How do the markets perform? What we learned was, well, no matter what.

• 5:49Speaker 03

  Yes.

• 5:49Speaker 04

  You know, the world keeps turning. People keep selling goods and services and that's what we're buying when we're investing.

• 5:55Speaker 03

  Yeah.

• 5:55Speaker 04

  Is those companies that make money.

• 5:58Speaker 03

  And, and I know there's a few charts that have the red and the blue on them, but I love if there's, there's the chart of, it's usually the Dow and it's over the last 100 plus years and it's, it's just a graph that of course, over 100 years, it's pretty much going, it's up. It's an upward trend graph because it's the stock, US stock market. And then it has either blue or red on, bars underneath the graph that show which, which party the president was during that time of the Dow. And like you said, it's

• 6:32Speaker 03

  All parties, it's like every, every president Right. Almost has had the markets do fine. Mm hmm. You know, the economy keeps on going. Oh, yeah. Even if you've got who you think is a knucklehead in the, in the White House, like it usually still keeps on going. Just I, I still stand by my statement that no president is more powerful than the free market capitalistic system that we have Right. in this country. They, they, they can make it seem like there's something there, but that's, that is the art of politics is to make you, make you, make you emotional, get excited about it so that you can support.

• 7:13Speaker 03

  But I think we can just mention at least some of the things that, you know, obviously the tariffs is what's big right now. And, you know, what's being suggested is either universal or, or, or high tariffs, either on China or potentially Mexican goods. There's pros and cons to this. You know, the, the pros to tariffs is that it can protect certain US industries, at least in the short term. Like you think steel or auto or manufacturing. And it has potential to boost domestic production. And, you know, that's good, especially in certain industries. The cons are pretty obvious. We've been very vocal about that because again, I think this is an economic principle. The tariffs are just a tax on consumers.

• 7:57Speaker 03

  And if you have a tariff where you're, or a tax on something, the price of that imported good goes up. And we're already still dealing with the effects of inflation that we had brought on from COVID. And so that's a con. We don't like to see higher prices. And you also have the run the risk of trade wars retaliation from other countries. That just adds on more cost to our products. And it could start to fuel inflation, even though we're seeing inflation numbers pretty decent. You know, lately we're, we're essentially at our historical average Right. over the last. Hundred year historical average, right?

• 8:34Speaker 04

  Right.

• 8:34Speaker 03

  Our inflation is right, right in line.

• 8:36Speaker 04

  Yeah, a little bit, a little bit higher, but not far off, right?

• 8:39Speaker 03

  Yeah. It, it, what the problem with inflation though is that even if it comes down, if you had a period of it going up, people are still, it's still painful to deal with the, with the his, the, the recent history increase in those prices.

• 8:56Speaker 04

  Mm hmm.

• 8:57Speaker 03

  It's like it's still, prices are still going up, they're just not going up as much as they were.

• 9:01Speaker 04

  Right, the rate of inflation has slowed down.

• 9:03Speaker 03

  The rate, yeah.

• 9:04Speaker 04

  But that doesn't mean that the higher prices.

• 9:05Speaker 03

  Yeah.

• 9:06Speaker 04

  Still don't, right?

• 9:07Speaker 03

  That's right.

• 9:08Speaker 04

  They're, they're higher today than they were 10 years ago, for sure.

• 9:11Speaker 03

  Yeah, it's like, we, you know, we just got through a period, let's say it was 10% inflation, and now everything costs 10% more, and now this year, let's say inflation is just 1%. Well, you're still dealing with an 11% increase in a two-year period.

• 9:24Speaker 04

  Right.

• 9:24Speaker 03

  And for, that's a lot for, for people, even if it's like, whoa, you gotta cheer, because inflation's come down. It's like, no, it's still like 11%. It should only be like 3% higher than it was before. You know, some of the other things that President Trump is suggesting are tax cuts, potentially following up on his 2017 tax cuts that were set to expire. And President wants to make those permanent, and it also includes some new middle-class tax cuts. The, the economic pros, obviously, impact in the pros is, that is more money in the pockets of consumers that can stimulate the economy. So having low taxes does that, it boosts corporate profits,

• 10:06Speaker 03

  and, and it could have a positive impact on stock market. The cons are, is it, is, you know, by having these tax cuts and reducing the amount of revenues that the government is taking in, it adds trillions of dollars to the federal deficit. You know, you can only, you know, you have two sides of, of, of the, of the equation.

• 10:26Speaker 04

  Money in, money out, right?

• 10:27Speaker 03

  Yeah.

• 10:28Speaker 04

  Like a personal budget.

• 10:29Speaker 03

  Yeah, and it's like, you know, if you're gonna cut taxes, you gotta also try to cut your, your expenses. But as we're seeing, as we're experiencing right now, even, even if Doge is, is 100% Successful, there's, it's not coming anywhere close to.

• 10:46Speaker 04

  Still won't be enough, right?

• 10:46Speaker 03

  It won't be enough. Now, some of the energy policies, this will be great to talk to Chad about when he comes on, is that President Trump has suggested to expand domestic fossil fuel production and roll back regulations on oil and gas and coal. The pros, obviously, is we could have lower energy costs and more jobs in the energy sector. The cons, potential environmental risks, and it could slow down some of the investments that are going into innovative, clean energy. So, you know, the immigration, again, you know, there's pros and cons to the immigration policies. You know, we had, you know, there's a lot of uproar about how many people are being deported, but if you look at

• 11:27Speaker 03

  both previous Democratic presidents, they both deported a lot of people also.

• 11:33Speaker 04

  Yep.

• 11:33Speaker 03

  And, you know, the economic impacts, you know, there are certain concerns about wages being undercut in low-skill industries. And, and, but, the, the cons are that with labor shortages, especially in agriculture that we have here in the Central Valley, or construction, hospitality, if you have labor shortages, that just increases the price and the cost. And, and it reduces the overall GDP growth. So, um, you know.

• 12:05Speaker 04

  Yeah, like with most things, there's, there's two sides to each one of these things, right?

• 12:08Speaker 03

  That's right.

• 12:08Speaker 04

  Yeah.

• 12:09Speaker 03

  Yeah.

• 12:09Speaker 04

  And, uh, depending on what you're listening to, you might get just one side of the story. It's nice to uh, be open-minded and listen to both sides.

• 12:17Speaker 03

  Yeah, and I would still say, don't freak out. Don't, don't freak out. This, this, we're just, you know, it's gonna be okay. I guess it's easy for us to say we're not like federal employees and losing our jobs and, you know, that kind of thing, but I still, I don't know. I still, I still think we're gonna be okay. Um, I want to answer this one, this last question too, is it's super interesting. Before, uh, before we take a break, it says, uh, I'll go ahead and read it, it says, "What do you think of Title Lock Insurance?" He's seen it on TV, people allegedly stealing property titles and becoming owner of property.

• 12:52Speaker 04

  Title Lock?

• 12:53Speaker 03

  Title Lock.

• 12:54Speaker 04

  I'm not familiar with that, I haven't seen that.

• 12:55Speaker 03

  I, I have a vague memory of this, of seeing advertisements for this, and it, it's, it is a really good question. And, my, my suspicion, and based on my research, is true, which is, it's probably not necessary, because.

• 13:12Speaker 03

  What essentially what it is, what the claim is, is that criminals will steal your property title by forging documents and then transferring the deed to themselves. And then they try to borrow against your home, like they get a home equity loan. And then they'll, or they'll try to sell out your house from underneath you. So, I mean, do you know what, how many, like, there's so much that's involved in buying and selling a home, even getting a home equity line.

• 13:37Speaker 04

  Right.

• 13:38Speaker 03

  That generally speaking, if somebody would went through that process to steal your title from your home to be able to get that, that the, the mortgage companies or the lenders going to be on the hook for it because they didn't verify the properly.

• 13:51Speaker 04

  Yeah. And doing a quick search, it looks like the term title lock insurance is a little misleading because it's not actual insurance. It's just a monitoring service that alerts you to potential changes or fraud related to the title.

• 14:05Speaker 03

  Right.

• 14:06Speaker 04

  So it doesn't prevent it and it doesn't really offer financial protection. It's just an alert system.

• 14:11Speaker 03

  Right. Which like some counties apparently have this already. Like you get alerted if somebody has put a lien on your property, but you can, anybody can go to their local county recorder's office and find that out. Or you can, part of a lot, a lot of the credit monitoring services can alert you if somebody has filed for a loan in your name or done some of these things. And so, you know, this to me just, I don't want to say it's fraud, but it reeks of not, not appropriate for most people.

• 14:46Speaker 04

  Right.

• 14:47Speaker 03

  And also you have title insurance. Most people have title insurance on their, on their home, which would, that's actual insurance, you know, that insurance that would actually cover, cover it rather than this, which is title lock insurance isn't even insurance. They don't even, they don't even cover anything if something happens to you. They just alert you if something happens to you.

• 15:05Speaker 04

  Good reminder though, with, if we have concerns about credit or somebody getting ahold of it is you do have the ability to put a freeze on your credit.

• 15:13Speaker 03

  Yeah.

• 15:14Speaker 04

  Right. I see that as a.

• 15:16Speaker 04

  A good way to protect credit in particular.

• 15:18Speaker 03

  Yeah, yeah. Well, good stuff. We handled those questions. We really appreciate our listeners.

• 15:23Speaker 04

  Got Chad coming up.

• 15:24Speaker 03

  Yeah, let's get, let's take a break, then we're going to get to Chad Hathaway. He's our guest today. We're Money Wise. We'll be right back.

• 15:28Speaker 00

  Are you an employee with a company-sponsored retirement plan? Do you fully understand how you're invested? And whether or not you are maximizing your retirement plan's options? For more information on a free assessment, contact Money Wise's 401(k) specialist, Justin Leland, at 661-847-1000. That's 661-847-1000.

• 15:54Speaker 03

  Thanks for tuning in. We're Money Wise. I'm Sharad here with Dustin. We're your hosts. Today, we have our guest, Chad Hathaway. Chad is president at Hathaway, Hathaway LLC. Hathaway, I always want to say Hathaway Oil, but it's not Hathaway Oil.

• 16:12Speaker 05

  It's whatever you want to call it, Sharad. Hathaway, easy.

• 16:18Speaker 03

  Chad, there was a really good article in The Californian by your BFF, John Cox, in The Californian last week. Did you see this?

• 16:28Speaker 05

  No, I don't read The Californian.

• 16:29Speaker 03

  Oh, come on. I know. Well, poor California. Not only is it expensive, but now it's delivered in the mail. And there's no Sunday paper. It's just five days a week. Anyways, there was really interesting. It was a report by the Los Angeles County Economic Development Corporation's Institute for Applied Economics. And they were putting some estimates on the economic impacts of oil in California. So I want to run some of these numbers by you because it's really fascinating. The, the report for 2025 estimates that the industry supports 536,000 jobs.

• 17:12Speaker 03

  Almost three quarters of them indirect and induced while contributing $166 billion to the state's gross domestic product and almost 48 billion in state and local taxes. So this is huge. Like, that's a lot.

• 17:28Speaker 05

  We've been telling people this for a long time.

• 17:30Speaker 03

  Yeah, I know you know all this stuff. It is, obviously, oil industry in the state has taken a beating because compared to the estimates and the contributions to California's gross domestic product, it's down about 19% from the 2015 figure. So it's from 204 billion, it's now at, what'd I say, 1066 billion?

• 18:00Speaker 05

  And you can directly correlate that to one thing.

• 18:03Speaker 03

  Regulation. Yeah, I mean, essentially, you're cutting it off, cutting off so much of it.

• 18:08Speaker 05

  And then we're exporting hundreds of billions of dollars to foreign sources for crude. I mean, we're buying a ton of crude from other places. We still need the product. The demand is still there, but we're just exporting capital.

• 18:20Speaker 03

  Yeah.

• 18:20Speaker 05

  Money, every day.

• 18:22Speaker 03

  That's also part of this report. It notes that about three quarters the oil refined in California comes from Alaska and foreign sources. And it also predicts California consumers will need oil and gas for decades. I mean, it's like, you've said this before, too. It's like, well, what are you doing? You're cutting off something that, it's not like 10 years away from, I think people latch on to that we're not, you know, the no combustion engine rule, realizing that's just like a fraction.

• 18:50Speaker 05

  Yeah.

• 18:51Speaker 03

  That's just a fraction of the oil that we use, and it doesn't do anything with the combustion engines that we're just gonna need.

• 18:58Speaker 04

  Is there any kind of argument for the why behind that, Chad? I mean, what's the justification?

• 19:03Speaker 05

  It's climate change.

• 19:04Speaker 04

  Okay.

• 19:05Speaker 05

  Yeah, it's basically environmental. And it's, you know, I think it's something there where there's, we always talk about balance, and that's one thing I love about this show, like you talked about earlier, there's not a lot of politics involved, which is nice. It's stick to the facts. And I think that majority of the legislation has been driven by, some of it by really logical, reasonable type things that make sense, and some by some really extreme religious views when it comes to the environment, which is unfortunately the ones that really hurt us the most.

• 19:33Speaker 03

  Yeah, yeah. The, uh, the, the new report also estimates that the industry directly employs 184,000 people in California. So indirectly, it's over 500,000, but direct workers, 184,000 people in California. It's about a 20% decline since this report first started coming out in 2013. So again, it's kind of the, the indication of where the industry is, is going.

• 20:01Speaker 05

  It doesn't need to go that way. And it doesn't, it doesn't sit in reality. That's not really where, where we should be. And the, the supply and demand, you know, uh, reality isn't mesh with that. It doesn't mesh with that at all. It makes no sense. There's no balanced, any kind of, if, if you're, if her goal is transition, it shouldn't be rapid transition, should be transition that makes sense. And in no scenario does transition in any way, what's their shape or form, um, eliminate the need for petroleum or natural gas in our environment. A hundred years from now, we will need petroleum and natural gas in our environment. Our society, our fabric of everything we have in our lives is based on petroleum.

• 20:46Speaker 05

  Absolutely 100%. If you could tell me any differently, then I'm, I'm open to hear that. If anybody wants to call in and, and tell me how oil isn't a fabric of everything we do in our daily lives, I'd love to hear how it isn't.

• 20:59Speaker 03

  The, I'm curious to get your opinion on this because I, I have my thoughts, but the, referring again to this report that was published in the Californian last week about oil in California, says that the oil and, the oil's local and state tax contribution is about $21 billion a year across the state. And that's up 126% from the report that was released 10 years ago. Then the, the industry's federal tax payments is 16 billion per year. That's a 27% increase from, from 10 years ago. But it's interesting. It's, my, my thoughts are it will, yeah, the, the contribution to local tax

• 21:42Speaker 03

  Base to the $21 billion that goes to the state from oil companies is up 126%. But if it wasn't for some of the regulations, it'd be up like 300%, something like that.

• 21:53Speaker 05

  Well, yeah, I wouldn't say it's hard to say. You've got the regulatory induced decline of production in California is well over 100,000 barrels a day, if not closer to 200,000 barrels a day where we're at now. So equate that on an annual basis, I don't know that math off the top of my head, but it's substantial. And then you also have the property write downs that have happened also like if it had happened in each municipality, each county, like Kern County is still six of the 10 top taxpayers are oil companies.

• 22:21Speaker 03

  Right, still, even now.

• 22:23Speaker 05

  Still, and so you've got the exodus now of major corporations like Chevron leaving California. You've got Shell left California. You've got a lot of people, Seneca, you got a lot of people have left California that had a tremendous amount of tax revenue coming in, they've merged and these assets have been subsequently written down. The absence of permits to inject steam, the absence of permits to frac in places like Bell Ridge have made a major impact on values. These are all things that hurt the tax base.

• 22:58Speaker 03

  Yeah, the part of the tax base also are those who are employed by the industry. 44% of the workers are Latino and about a third are female. But that's really surprising, the fact that a third are female that work in oil and gas. Cause I think that, you know, obviously it seems like a man's job, but.

• 23:16Speaker 05

  There's some fierce, fierce women out there, I can tell you, not just fierce, but, but smart and, and people that I love. I mean, I love the people that make up the fabric of our industry. They're absolutely, you know, hated in public, but in private are some of the most interesting and probably a lot of them are your clients. And you have a lot of people that come in here that, that worked and built their fortunes and their retirements and, and all did it through the, what our industry has created for them. I think that's, that says something.

• 23:45Speaker 03

  That's right.

• 23:46Speaker 05

  We uplift a lot of people and I think that's, that's something that I'm most proud of as an employer. Seeing my employees who would otherwise don't fit the traditional college route can go out and make, you know, eighty to one hundred fifty thousand dollars a year, just based on their ingenuity and that's in a special industry where that's available to them. There's not very many industries that can say that.

• 24:09Speaker 03

  No, yeah, no, no doubt.

• 24:11Speaker 04

  So it mentioned a state, the state is down nineteen, twenty percent. What about local?

• 24:17Speaker 05

  We are eighty percent of the production in California, so it's reflective heavily on Kern County.

• 24:22Speaker 03

  Right.

• 24:23Speaker 05

  Yeah.

• 24:24Speaker 03

  Which that probably, you know, is why over forty percent of the workforce is Latino. That's mirrors almost what we have here in Kern County in terms of demographics.

• 24:34Speaker 05

  Our, our industry celebrates, seeks out and respects hard work. And the, that, that you couldn't sum up the Latino community better than anything else than those words. I mean, hard work is what, I know my family values hard work. I know we all believe that you can be as smart as you want to be, but if you don't work hard, nothing matters.

• 24:56Speaker 03

  Yeah.

• 24:57Speaker 05

  And so that's why, that's why, I mean, it, it's a natural fit for somebody who wants to come work hard and be somebody.

• 25:03Speaker 03

  Yeah, that's all right. We're joined by Chad Hathaway. He's our guest today on the show. I'm Sharad and that's Dustin. We're going to take a quick break and we'll be right back.

• 25:11Speaker 00

  Are you nearing retirement and currently working with a financial advisor? Are you not sure if you're invested appropriately? Call our offices at six six one eight four seven one thousand to sit down with a money wise financial advisor for a no obligation assessment of your investments.

• 25:26Speaker 03

  Thanks for tuning in. I'm Sharad Wade, your host with Dustin Weaver. We're joined by our regular guest Chad Hathaway from Hathaway. Chad, there was a report last week that came out that Greenpeace lost a lawsuit. They must now pay six hundred and sixty million in a case over the Dakota Access protest activities. This is a jury, a jury found this. This is, this is good, could be a death nail finding. For Greenpeace, which is, which is a organization that is based in the Netherlands.

• 26:09Speaker 03

  That has, I guess, some, a past of being very aggressive in their protests. Against, you know, pipelines and oil and gas production. This, uh, this was, this caught my attention because it's, it's, you know, usually what you see in the media is the other way around. Lawsuits being brought against, I don't know how much they're losing, but against oil companies. And this is, this seems like a strike back. What are your thoughts?

• 26:37Speaker 05

  Well, I think, you know, I, I, the, the, the win and headlines in themselves, you know, they, they basically got, they ordered to pay 660 million in damages to energy transfer partners for defamation, trespass, nuisance, civil conspiracy and other acts. So that's, that's it. I mean, they, they lost. And so, but the, the real thing is how do these types of law, like, for example, on the other side of things, like, what are we, what are we dealing with? And especially in California, how does it impact growth? And how do these environmental groups often use those tactics on the other side to stop and hurt projects? And so.

• 27:12Speaker 03

  Have you experienced it yourself?

• 27:13Speaker 05

  Yeah, we live and die by CEQA every day. CEQA is the California Environmental Quality Act. And so it impact, if you're in real estate, you know, CEQA, it's a four-letter word that we all know. And we, you know, it's, we, we, we say it all the time. We have to deal with it all the time. Every project we have is subject to CEQA. Uh, and CEQA is always the hammer that's being used or misused to stop or halt or create a nuisance or, or delay a project.

• 27:42Speaker 03

  It's usually environmental, uh, what the, the environmental study they're saying was flawed or it's usually environmentalist groups that claim that. Yeah.

• 27:52Speaker 05

  So, and just in California, you know, uh, the average real estate, and if you look at some of the biggest, the California Legislative Analyst Office found that in the state's 10 largest cities, CEQA appeals delayed projects in the average of two and a half years, just for real estate projects. Bigger projects like, you know, when you say housing developments or apartments, it's a big impact, big negative. Effect on affordable housing too. So I think they've been, you know, a significant impediment to

• 28:20Speaker 05

  infill development projects, which are those type of things, especially dense housing in urban areas. These are all things that SEQA halts. And then with energy, I mean, one example that was pretty interesting, it was just electricity, it wasn't oil and gas related. So if you look at, there was a 117 mile Southern California power line project that required five years to review under SEQA involving an 11,000 page impact report. Wow. That assessed over 100 project alternatives and necessitated 70 permits from more than two dozen agencies. This is a row of power poles going 117 miles. So you can look at SEQA and say if there's anything in California that needs to be repealed, modified,

• 29:04Speaker 05

  or attacked. And I think when we used to have a really, we had a really good assemblyman here, State Center's Michael Rubio, and he, this was his his dream to do that. He works for Chevron now, but He was a Democrat too, wasn't he? He was a Democrat, yeah. He was a great guy. And still is a great guy. But the way the way SEQA is written is it's got this broad scope and it allows for lawsuits, you know, to really affect project timelines, costs, and it's not uncommon, it's not uncommon at all for lawsuits to take several years and have substantial financial resources to cover those lawsuits and making things way more expensive over time. I think the biggest things that we see in oil and gas is that

• 29:49Speaker 05

  especially in reviews that require secret, like public input's a big part of it. Well, one of the things that we experience the most, I experienced the most is during a viable project that is recommended by the state or state staff, environmental, non-government organizations such as Greenpeace or Sierra Club or the Center for Biological Diversity will submit comments.

• 30:10Speaker 05

  Multiple pages of multiple pages of comments, many of which not laden in fact, using generalities tied to climate change, water pollution, things that don't may not even even apply, that the state has to spend the time to respond to just to delay the project. We deal with this all the time. We actually know what they're going to say.

• 30:31Speaker 03

  Right.

• 30:32Speaker 05

  We already know what they're going to say. We know how we're going to do it, but it's just an automatic free way to delay a project and that's just their mantra. We're going to do this to delay, delay, delay, distract, incur more expenses because, you know, one or two of those, we may have to submit additional technical report, like we talked about that power line and all the studies and the reporting. Yeah, you're required to submit, you know, responses to these things too as well, or the state is too, if it's, if it's a permit being issued by the state. So not only do energy companies, real estate developers, but state governments get hammered by CEQA all the time.

• 31:04Speaker 03

  Right, because they're doing projects themselves. Like the high speed rail is a good example of that.

• 31:07Speaker 05

  It's not just, it's not just environmental, because labor unions do this. NIMBY people do this. So I don't want there's something in their backyard. But it is predominantly these type of groups. So when some, something like this happens, like Greenpeace, finally, or one of these groups gets nailed for, for their bad attitude or bad actions, you're like, yeah. I mean, there's a lot of people celebrating this right now, saying, good for you, Kelsey Warren, who did this, who owns Energy Transfer Partners. Good for you for standing up for yourself. Good for you for fighting back.

• 31:36Speaker 03

  Have you, have you experienced any of the protests that have been like, you know, pickets, like picket lines or, or, you know, like, I don't know, some, some of the crazier kind of things that we're seeing now?

• 31:48Speaker 05

  No, I haven't. I'm too small, but I see it. What I have seen more lately is we've got people showing, and I'm not, I'm heavily involved with the trade associations, but we've got people showing up at trade association meetings. At the end of the meetings or during the meeting, standing up and yelling and protesting.

• 32:05Speaker 03

  Oh, yeah.

• 32:05Speaker 05

  And I think you're half crazy to do that in a bridge of oil.

• 32:09Speaker 03

  No kidding.

• 32:10Speaker 05

  You know, but I think last year, I think people showed up at the, one of the independent producer events and started yelling and screaming. And I think people started throwing food at them. And it was like, he's just, yeah, I haven't personally experienced it. To be honest with you, I, I have no problem having a discussion with somebody, but most of these people are severely irrational.

• 32:33Speaker 03

  Yeah.

• 32:34Speaker 04

  You said delays a couple of times. Do they ever actually stop a project or is it usually just delaying it?

• 32:39Speaker 05

  No, I haven't seen one, like one of ours has, we haven't been stopped. But what they do do is at blanket level, like statewide, like they say, oh, well, every single oil field now, we used to have these exemptions, right? Where they did CQ once and then it shouldn't have to be, should have to be updated on a regular basis. But now they're saying, okay, for every oil field now, you have to have a CQ document, which means going back on you guys. You had to do environmental impact reports. So to do that on each oil field is like a half a million to a million dollars in several years.

• 33:08Speaker 03

  Whoa.

• 33:09Speaker 05

  And so you're like, well, I don't really have that much to do here. So they're effectively through policy at the state or using CQ as a hammer, saying, okay, that's, that's why our Kern County ordinance that we work so hard on, that's been tied up in court for so many years, is so important because it gives us this blanket CQ coverage.

• 33:26Speaker 03

  Yeah.

• 33:26Speaker 05

  It gives us to be able to through an ordinance, check all those boxes and be able to go forward and drill.

• 33:32Speaker 03

  Are you optimistic that that's going to work out in the county's favor?

• 33:35Speaker 05

  I mean, it's been, we've been sued multiple times and it's gone, I mean, at one point, it's, it's going to be, I would hope, bulletproof. I mean, you can't shoot any more holes in it.

• 33:44Speaker 03

  Yeah.

• 33:44Speaker 05

  It's like you got, you got, the noise part, one of the things that hit them on was noise, pollution, some deficiencies in air pollution mitigation, little things like that. They'll find that whatever little tiny thing they can find to try to stop it, even though, in which there's new law out that says that if your local laws are more stringent and, and more onerous than CQ, which ours are now. That we should be allowed to drill and actually Democrats pushed that through last year. So I think there's, there is momentum to offset it, but it's just nowhere near where it needs to be.

• 34:21Speaker 03

  We have a listener question here. It says, I worked in oil for 20 years and I enjoy it when you guys talk oil. I have two questions for Chad. What are the biggest hurdles in obtaining new drilling permits today compared to a decade ago? Also, how have state and federal regulations affected oil production in town?

• 34:38Speaker 05

  Well.

• 34:38Speaker 03

  Kind of the same question.

• 34:39Speaker 05

  Yeah, it's a sequel. It's just what we're talking about right now. It's been used as the hammer. I mean, the state is, has said that we, you can't drill well until you have a complete sequel review. And that is what I just described is what one of the biggest impediments is. So they're not able to issue permits.

• 34:56Speaker 05

  We've had administration, in the Newsom administration, which has, and there's a lawsuit about this right now, that has purposely found a way to try to not grant us permits. And that's, I mean, the last, Udak, who was the last supervisor suing the state now because he refused to do anything illegal, which was deny permits. It's a lawsuit that's been going on for a while now, which he refuses to settle, which we're happy for that. But yeah, the state is directly responsible for the, the, the lack of permits. And it's a great question. And I get that all the time. Like, when's the state going to give you permits? Well, you know, our, our biggest, I think our quickest pathway is to get through court with the REIR, which has been in court several times.

• 35:36Speaker 05

  And to get that actual ordinance back in Kern County, then we will have a pathway to drill until the next lawsuit hopefully comes along. And hopefully it can stand up in court, or it can, ordinance will stand up in court against that. So that's our pathway is drilling. And so the decline that you've seen is a hundred percent regulatory related.

• 35:57Speaker 03

  Is the, how much of a decline is there in actual production? Maybe you've already said this.

• 36:01Speaker 05

  Yeah, I mean, almost 200,000 barrels at the state level. And if 80% of that production is ours and, you know, just do the math of 150,000 barrels a day is decline in Kern County. And the total production in our state was over 400 and something thousand barrels a day. We're down to like high 200s now, no, mid 200s. So it's.

• 36:20Speaker 03

  So like half, half.

• 36:21Speaker 05

  Almost.

• 36:22Speaker 03

  The production in California. How is it that prices have not? Gone up.

• 36:28Speaker 05

  Well, we're, we're, we're, oil is a global product. So like we're importing, um, we talked about earlier, we're importing 70, 80% of our crude from foreign sources. And when the foreign posting for the barrel of oil is Brent, then the price like California crude is now based on a deduction of Brent. Cause the ocean born crude, like we get paid just ballpark between, I can't say exactly, but between Brent minus six and Brent minus three, somewhere in that range. Because the crude that's on the open market to get to California has to be along those same postings. So the crude has to be in, in parallel with the foreign sources of crude coming in.

• 37:07Speaker 03

  Yeah, that makes, that makes sense. So I want to take a quick break and you stick around, Chad.

• 37:11Speaker 05

  I'm here till the, yeah, I put a lot of work on this thing.

• 37:14Speaker 03

  Yeah, good. Good. We're gonna, we're gonna take one, one final break here and we come back and talk more, more about the, the social cost of oil and gas. We're Money Wise. We'll be right back.

• 37:22Speaker 00

  Don't forget, Money Wise is more than a radio show. We're an independently owned, local wealth management firm with 60 plus years of collective experience. Our financial advisors are here to help you, Kern County. Together, let's be smart, be safe, be money wise.

• 37:42Speaker 03

  Thanks for tuning in. We're Money Wise. I'm Jared. That's Dustin. We're joined by our guest, a regular guest, Chad Hathaway. Chad is a, uh, oil, gas producer and farmer and water, water baron. Water baron. Uh, so Chad, we, we had, last time you were on the show, we had a discussion about the social cost of carbon and

• 38:06Speaker 05

  Two times ago.

• 38:07Speaker 03

  Was it two times? Yeah. We, we bring it up frequently.

• 38:10Speaker 05

  I keep recycling this old content that you skip over.

• 38:13Speaker 03

  Well, um, let's, I want to talk about it because I mean, I think we both agree that there is a cost to society. There is a benefit. We all agree that, like you said earlier in the show, petroleum products are everywhere. They're ubiquitous. We wouldn't, we would all be dead without them. We wouldn't be here without them. I'm not arguing that at all. What I'm, what I'm saying is that there is evidence and a growing evidence that pumping carbon into the atmosphere has a negative impact on society, whether it's changing climate, affecting agriculture, affecting health. There's like, there is a cost there. Maybe you don't agree with that.

• 38:59Speaker 03

  Or what do you think of that?

• 39:01Speaker 05

  Well, yeah, if you're gonna be a pro and con guy and have the ability to reason and understand, you know, there's something really good or bad, you stack up the pros and the cons. So I think we could talk about the social cost of carbon a lot, but we need to talk about the other side of that, the things that really debunk, I think, or I would say devalue that social cost of carbon. And that's what I wanted to talk about, and I think it's something important that, you know, there's different reasons why I think the social cost of carbon isn't fully understood or it's hard to pin down.

• 39:37Speaker 03

  Uh huh.

• 39:38Speaker 05

  Okay. Now, when you talk about the emissions of pollutants into the environment, you realize that just, let me just give you an example. So California has this net zero by 2045 goal, correct?

• 39:50Speaker 03

  Yeah.

• 39:51Speaker 05

  It just takes one bad fire season to eliminate all of the fact, all the work, all the money, all the efforts done towards net zero.

• 40:01Speaker 05

  So let's ask yourself, yes, we don't want to live with pollution, and that's something I've always talked about, our goal should be to reduce pollution and become efficient. But you have to, there has to be a point where, hey, this is way too much, or this doesn't make any sense. So the social, the argument against social cost of carbon, the first thing is uncertainty in climate models. Like critics argue that climate change models are used to predict future impacts of carbon emissions, and they're complex, but they have limitations. You look at, there's all these different types of models on the climate.

• 40:30Speaker 03

  Yeah.

• 40:30Speaker 05

  Hundreds of them.

• 40:31Speaker 03

  Right, but.

• 40:33Speaker 05

  None of them are generally accurate. I mean, they're all off here and there, is it three, is it two C, is it one C, is it whatever? I mean, these are, that's, that's a cost that really, we're basing everything on is that chart.

• 40:45Speaker 03

  You have to accept to some extent that it's not going to be perfect.

• 40:48Speaker 05

  Of course.

• 40:49Speaker 03

  We have lots of things like insurance, cost of insurance, okay, nothing is perfect, but you want to, you want to sort of get, get in there in somewhat of a range. So like, you know, is, is the cost $10 a ton? Is it, of, of carbon that's in the air, is it, or? You know, experts are saying somewhere between a hundred and three hundred dollars a ton of cubic carbon that's emitted, that's the cost. But maybe it's not, maybe it's ten dollars, you know, maybe it's fifty dollars. The Biden administration thought it was forty dollars. But I mean, there's, there's something there. And if you're gonna say, we don't have these, it's unknown, the impact of carbon, that goes both ways.

• 41:32Speaker 03

  That means it could be way worse than we think.

• 41:35Speaker 05

  Hmm.

• 41:35Speaker 03

  Right?

• 41:36Speaker 05

  Yeah.

• 41:36Speaker 03

  You can't, you can't just say, well, we don't know what it is, therefore it might not be bad at all. You know, you have to say, well, it might not be bad, but it also might be totally catastrophic.

• 41:46Speaker 05

  Well, I, I, I really get caution people when they hear the word experts. Because I want to be careful with that. Because they used to, they used to use when they're really hammering home climate change is ninety-seven percent of scientists agree. Agree on what?

• 42:00Speaker 03

  Yeah.

• 42:01Speaker 05

  Agree on what? That science, that climate change exists.

• 42:04Speaker 03

  Yes.

• 42:05Speaker 05

  Then you move that into the second part of the sentence. That is human cause. Not ninety-seven percent don't agree that. Can be catastrophic.

• 42:14Speaker 03

  It's probably high nineties for sure.

• 42:17Speaker 05

  Well, I'm not gonna say that. I'm not gonna say the exact number, because I don't know, but ninety-seven percent of scientists agree that climate change exists.

• 42:25Speaker 03

  Yeah.

• 42:26Speaker 05

  That's easy to agree on.

• 42:27Speaker 03

  Yeah.

• 42:27Speaker 05

  I agree on it.

• 42:28Speaker 03

  Yeah.

• 42:29Speaker 05

  But going further in details, ninety-seven percent of scientists don't agree. That was what was hammered home to us. And you've got to admit, there are people on the religious side of this, you don't, won't, and will not listen to anything else.

• 42:42Speaker 03

  Yeah. That's, I, we, we strongly, both strongly agree in that, that the tactics used against the carbon fuel industry are misguided. Similar, we're seeing it today.

• 42:54Speaker 05

  Okay, but this, I know, but let me just get into this. You're great, okay, so on number one, we agree that, yeah, that we have to have some sort of chart or timetable.

• 43:02Speaker 03

  Yeah.

• 43:02Speaker 05

  Okay, but the second thing, the valuation of climate change, the costs, the economic costs are debatable.

• 43:07Speaker 03

  Sure.

• 43:08Speaker 05

  Very debatable. So, we don't know, uh, what extreme weather costs, what, what, what sea level rising.

• 43:16Speaker 05

  Or these things, it can be all variable depending on the methodology used.

• 43:20Speaker 03

  Yeah.

• 43:20Speaker 05

  So the actual costs of carbon emissions is debatable. There's a huge swing in that, right?

• 43:25Speaker 03

  Yeah.

• 43:26Speaker 05

  Is a utility do it? I mean, does a state in California do it versus another state? These are all very wide ranging things that we don't understand. But also, the, when we say climate change, nature has a huge part of impacting climate change. Do we agree on that?

• 43:43Speaker 03

  Yes.

• 43:44Speaker 05

  So what if we adapt? And that's one thing that I think will dramatically impact the cost. So that's another part of this that I think is flawed with some of the social costs equations are being thrown out there. We as a society have, for historically have always adapted. Look at where we live now. Look at where we live in places of the world that you could never live in without the burning and use of fossil fuels.

• 44:10Speaker 03

  Yeah.

• 44:10Speaker 05

  These are all things through advancements, through technological things that we could do, the way we can treat water, the way we fight disease, the way we do things. This earth is meant to kill us, wants to kill us, and you think any day of the week that it wants us here, it doesn't.

• 44:24Speaker 03

  But there may be some things that we can mitigate that if we do it now, it's cheaper than if we don't address it till later.

• 44:30Speaker 05

  Yeah.

• 44:31Speaker 03

  Taking lead out of the fuel, like that was, you know, that was a smart move, but it took, you know, eventually got to the point where like, oh, this is just way, there's a cost for us to do it now, but it'd be way more expensive.

• 44:41Speaker 05

  But we talk about, and we're talking about adaptation, so we need to adapt. So we decided to build houses on the ocean. We decided to build houses in places where we shouldn't have built houses. We decided to do things that really we shouldn't have been doing.

• 44:54Speaker 03

  Yeah.

• 44:55Speaker 05

  But we did, so now we're having to adapt to what are bad decisions or our lack of foresight to see where we put things and why we put them there. So adapting, I think we can adapt as people, but that whole social cost isn't factored into the adaptation of this.

• 45:08Speaker 03

  Right. I mean, you have to, you definitely have to try to adapt and you have to try to, you have to expect that we're going to have technologies that are going to help a lot. We're already seeing those, those types of technologies happen. But we also, we need to do that in conjunction with recognizing the current cost. You know, that is, that is, that society is paying. Like, you can't just say, "We're gonna, we're gonna, we're gonna, you know, evolve or adapt our way out of this problem, therefore, let's not do anything." You know, we have to do something.

• 45:41Speaker 05

  Well, are we going to do it for ourselves or for the rest of the world?

• 45:44Speaker 03

  Well, you know, we're kind of responsible for it. The developed countries are going to need help. You know, that's what, there's, there's an argument that we have to have a global coordination.

• 45:56Speaker 05

  But do you think that they care about that?

• 45:58Speaker 03

  No.

• 45:59Speaker 05

  What do they want to do?

• 46:00Speaker 03

  Oh, they just want to, they just want to develop.

• 46:02Speaker 05

  They want to live.

• 46:02Speaker 03

  They want coal, they want...

• 46:04Speaker 05

  They want life.

• 46:05Speaker 03

  Yeah.

• 46:05Speaker 05

  They want prosperity. They want to do things that we've been able to do all through the use of fossil fuels.

• 46:11Speaker 03

  And those, I think those of us who've really benefited are going to have to figure out a way to step up to help them, you know.

• 46:17Speaker 05

  Well, you do it.

• 46:18Speaker 03

  Yeah.

• 46:19Speaker 05

  I'll sell them the oil.

• 46:21Speaker 03

  That's world peace.

• 46:22Speaker 05

  You do it, I'll sell them.

• 46:23Speaker 03

  We need oil, Chad. We definitely need oil. Uh, thank you so much, Chad, for coming on the show. Great discussion. If you missed any of this, you know where to find us. Remember these three things: be smart, be safe, and always be money wise.