The NewStandard ceased publishing on April 27, 2007.

Cali. Voters May Tax Oil Coâ€TMs to Fund Green Fuels

by Shreema Mehta

Oct. 20, 2006 – On November 7, California voters will consider a proposal to tax companies that drill oil in the state and put the revenues toward alternative energy development.

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Proposition 87 would allow California to impose a tax of 1.5 to 6 percent on oil drilling until it has raised $4 billion. Proponents estimate raising that amount will take at least ten years.

The tax would apply to oil wells that produce more than ten barrels of oil a day. Revenues would go into a program designed to reduce the state’s oil consumption by 25 percent over 10 years.

The initiative promises loans and credits to "accelerate the development and deployment of renewable energy technologies" and "provide incentives to ordinary Californians to make clean alternative-fuel vehicles and clean alternative fuels."

Program funds could go toward helping consumers purchase hybrid vehicles, construction of more alternative-fueling stations, research into energy-efficient technologies, and subsidizing the start-up costs of alternative-energy businesses.

California is the nation’s second biggest oil consumer in the nation.

The initiative would strengthen the alternative-energy market, in part by transforming how government uses energy, said Bernadette Del Chiaro, an advocate with Environment California. The group wants funds to go toward installing solar panels on the roofs of the state’s schools or replacing cities’ vehicle fleets with hybrid cars.

Oil companies, business groups and advocates of lower taxes say the tax will deter oil companies from drilling in California and cause them to import foreign oil instead, driving up the cost of gas to consumers.

The California Chamber of Commerce, which opposes the measure, also criticized the organizational structure of the proposed program, in which nine political appointees would oversee the distribution of the $4 billion. The Chamber called the scheme a "recipe for waste, not progress."

But Emily Rusch, a consumer advocate with the California Public Interest Research Group, said that "the price of oil is set on the world market." She added that "the profit margin on oil is so high that it’s hard to imagine a scenario where a small drilling fee would drive oil companies out of business."

"I doubt they would turn away from that money because of that tax," she told The NewStandard.

The proposition would also prohibit oil companies from passing the price of the tax along to its customers. An analysis of the initiative by the state’s attorney general said enforcing the rule might prove difficult, but added that it is unlikely the tax would raise gasoline prices, as companies can purchase oil from sources outside California that are not taxed.

Companies and organizations on both sides of the debate have poured millions of dollars into campaigning around Proposition 87. A coalition of oil companies and business organizations has spent almost $43 million campaigning against the initiative, according to state records, though news reports estimate the amount to top $60 million.

A coalition promoting the initiative, including environmental and Democratic groups and Hollywood producers, has spent at least $41 million.

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The NewStandard ceased publishing on April 27, 2007.


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Shreema Mehta is a staff journalist.

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