March 1, 2024

To Be Disfavored by Sacramento

Sometimes we might feel that we are alone in California. The state legislature and regulatory agencies – spurred on by myriad special interests on the left, ranging from labor unions to environmental activists and others – moves from one new mandate on agriculture to another without pause and lacking any interest in the economic consequences to come.

But we are not alone, as the Wall Street Journal noted in a recent editorial that spotlighted Chevron’s decision to write down many of its California assets due to “continuing regulatory challenges.” It isn’t a small thing, given the economic output of Chevron and its competitors in California’s energy – rich regions, particularly Kern County.

In a comment letter to the California Energy Commission, one of the agencies with regulatory authority over energy production in the state, Andy Walz, President of Chevron’s Products Division, itemized the many state policies that have been layered on top of the state’s energy producers, drawing a conclusion that should be obvious to anyone who passed Economics 101:

California’s policies have made Chevron’s investments in its home state riskier than investing in other states, with projects being lower in quality and higher in cost. Chevron alone has reduced spending in California by hundreds of millions of dollars since 2022–California’s policies have made it a difficult place to invest so we have rejected capital projects in the state. Such capital flight reflects the state’s inadequate returns and adversarial business climate.

Walz goes on to note that Chevron has rejected and canceled capital projects – job – creating investments – due to “permitting challenges” and emphasizes that while the state’s policymakers may be attempting to drive petroleum production out of the state, its hostile policies will force companies like Chevron to reduce investment across their California portfolio, renewable energy included. That can’t be what Sacramento really wants, but that’s what happens when public policy is disconnected from economic reality.

Why would California legislators and regulators consign many thousands of their fellow Californians who work in energy – related industries to a bleak future of job cuts, regional economic stress and community disruption? Again feeling it necessary to memorialize the obvious, Walz writes that California’s “arbitrary attacks on a disfavored industry…signal to every industry, entrepreneur, manufacturer, and employer that California is closed for business.”

What struck me as I read all of this was the fact that without too much creative editing, one could easily swap out the words “Chevron” and “energy” and insert “farming” and “agriculture.” The result would be an accurate reflection of the truth of the indictment of California’s hostile policies “on a disfavored industry,” as Walz put it.

As with the energy industry, California presents natural advantages that attracted investment from the earliest days of our state’s history. That might lead policymakers in Sacramento to believe that because the land can’t move and the state’s Mediterranean climate exists nowhere else in the U.S., farming won’t leave. But the capital it takes to operate in California can be deployed elsewhere, and we’ve been seeing that increasingly in recent years.

With advancing plant breeding technologies, what is grown fresh in California can often be grown fresh in other states and countries and delivered to consumers with little or no difference in appearance, freshness and quality. And other places in the world present a very attractive offer: Ample water, labor and land along with national and regional governments that welcome agriculture investments and the jobs they create.

It is probably a safe bet that agriculture will continue to be a substantial contributor to California’s economy for now and perhaps for many years to come. The question is whether that contribution will increase or decrease, and if a decrease, what that means to real people in places like the Central Valley, the central coast and the desert regions.

We are left to posit two questions to California’s public policymakers: Is agriculture “disfavored” as a matter of public policy, and if so, why on earth would any government do that, and, do you understand the consequences you are forcing onto millions of Californians who are directly and indirectly intertwined with agriculture?

It’s not too late to turn this around. All it takes are elected leaders with the courage to reset their party’s relationship with the Californians who produce healthy foods for the world.