California’s nickname, “the Golden State,” can be traced by back to the discovery of the precious metal in the middle of the 19th century. For decades after World War II, it was the proverbial land of milk and honey, a destination for people and businesses in search of opportunity.
Fast forward to today, and the Golden State has lost much of its shine. California has been hemorrhaging residents and businesses for several years, and a closer look reveals that much of this outmigration is due to its poor business and regulatory climate. A look at the mining industry, an area with much potential in the state given California’s vast mineral riches sheds some light.
Once a mecca for resource developers, the state has “probably the most difficult place to obtain the permits to extract the great wealth from the ground.” In the 2011/2012 Fraser Institute Survey of Mining Companies, an exploration company manager laments: “There are NO exemplary policies in the State of California in relation to mining or the environment. They got it wrong.” And another mining executive adds: “California seems to lead the way in North America in trying to impede development of any sort.” In the Fraser Institute’s 2012/2013 ranking, California had the dubious honor of being the runner-up in the “jurisdiction-with-least-favorable-policies-towards-mining” category, surrounded by jurisdictions like the Democratic Republic of the Congo, Zimbabwe and Venezuela.
Indeed, California has some of the strictest environmental regulations and if a project passes the Federal sniff test – difficult enough given our protracted national approval process – it does not an automatically guarantee it will clear The California Environmental Quality Act. (CEQA). It’s no wonder that so many companies and public officials in Sacramento are calling for significant reform to CEQA this year.
Permitting delays are the order of the day, so much so that more than fifty percent of respondents in the Fraser Institute Survey are calling regulatory duplication and inconsistencies, as well as regulatory uncertainty, strong deterrents to investment in the state, with many even saying they would not invest.
While it is difficult to put a number or even a price tag on the opportunities lost, the U.S. Chamber of Commerce’s report, “Progress Denied: A Study on the Potential Economic Impact of Permitting Challenges Facing Proposed Energy Projects,” gives a glimpse into projects delayed by impediments like regulatory barriers, and attempts to calculate the potential losses in economic value. For California, the study lists 31 such projects, and the figures below illustrate the benefits which could be reaped from bringing these projects online.
Benefits from Proposed Energy Projects in California
(delayed or cancelled due to significant impediments such
as regulatory barriers)
Upfront Investment (total of all projects)
Total Economic Output (in PDV) $59,100,000,000
Employment Earnings (in PDV) $19,600,000,000
Average Annual Jobs 142,100
First Year of Operations (total of all projects)
Total Economic Output (in PDV) $6,500,000,000
Employment Earnings (in PDV) $1,700,000,000
Average Jobs Created in Year 1 32,200
The numbers are staggering on their own terms – but if one considers the fact that the Chamber study only covers energy-related projects, it becomes apparent just how much economic opportunity is forgone in California due to regulatory red tape.
Unfortunately, while other U.S. states like Alaska and Wisconsin are making strides towards improving their regulatory environment, there is no improvement in sight in what used to be the Golden State.