Electric Utility Week
California voters are weighing in favorably on an initiative slated for the November 7 ballot that would tax oil producers to generate revenue to reduce oil consumption and develop renewables and alternative fuels, according to a recent state poll.
The initiative, Proposition 87, is pitting oil companies against a venture capitalist who has invested in ethanol and who donated about $1 million to help launch the initiative. The imitative has drawn the opposition of Governor Arnold Schwarzenegger and the support of former Secretary of State Madeleine Albright.
According to an early August Field Poll, 52% of voters sampled said they would vote for the proposition after being read its official ballot summary, while 31% are opposed. At the same time, just 19% of voters said they had heard anything about the proposition.
The initiative would impose a severance tax on oil production in California to generate revenue to fund $4 billion in energy programs within 10 years. The tax would range between 1.5% and 6%, depending on oil’s price per barrel. The tax is expected to generate between $200 and $380 million in annual revenue.
About 57% of the funds generated from the tax would be used for incentives to purchase alternative fuel vehicles and produce alternative fuels. About 27% of the money would go to grants to California universities to improve the economic viability and accelerate the commercialization of renewable technologies.
About 10% would be used for incentives to fund start-up costs, accelerate development of renewables, energy efficiency and alternative fuel, petroleum reduction technologies and products.
Supporters say the initiative would make it illegal for oil producers to pass costs for taxes to consumers. But a representative for the “No on 87” campaign took a different view. “The biggest concern is that this initiative would end up costing consumers more at the gas pump,” said Al Lundeen, communications director for the “No on 87” campaign.
If the initiative passes, consumers would likely pay for transportation, distribution and refinery costs, he said.
Another problem, in Lundeen’s view, is that a new board to oversee the program would likely include members who are pursuing other alternative energy efforts. This arrangement raises conflict-of-interest concerns, he said.
Lundeen noted that Vinod Khosla, a Silicon Valley venture capitalist who has invested in ethanol, helped get the clean energy initiative off the ground, and stands to benefit if it passes. Khosla is one of the co-founders of Sun Microsystems.
According to a December 2005 interview with Business 2.0 magazine, Khosla said new technology is transforming ethanol and making it much more efficient. Khosla said that with the right incentives, automakers could be persuaded to create vehicles that run on either ethanol or gas or a combination of the two.
The “Yes on 87” campaign has raised about $5 million, said Willon. The proposition’s supporters include the American Lung Association, the Coalition for Clean Air and the Foundation for Taxpayer and Consumer Rights.
Phil Angeledes, who is running for governor against Schwarzenegger, supports the proposition.
The governor is a strong supporter of renewables and alternative fuels. In May, he issued an executive order saying the state will produce a minimum of 20% of its own biofuels by 2010, and 40% by 2020. But Schwarzenegger opposes Proposition 87 because it would create new taxes.
The governor “opposes the initiative, but he strongly supports its goals: increased investment in clean fuels, renewable energy, advanced vehicles, and energy efficiency. The governor also believes that oil companies have a responsibility to invest aggressively in these new technologies, and that it is good for California’s economy and environment to promote investment in clean energy sources and energy efficiency,” said Katie Levinson, communications director for Schwarzenegger’s re-election campaign.
Despite the well-funded “No on 87” campaign, Doug Heller, executive director of the Foundation for Consumer & Taxpayer Rights, said he thinks Proposition 87 will prevail.
Voters have “a lot of visceral anger at oil companies that will drive passage of the initiative,” said Heller. Voters’ anger will help the initiative overcome the up to $40 million that the oil companies will raise to try to defeat it, said Heller.
