Sacramento Bee (California)

LOS ANGELES, CA – A little-known and rarely used California authority could soon be setting a $4 billion agenda to curb California’s “addiction to oil.”

The California Alternative Energy and Advanced Transportation Financing Authority has been in existence for more than a quarter-century. But it has no staff and hasn’t financed a project in 11 years.

This bureaucratic backwater could become the largest state-run source of alternative energy financing in the nation, if voters approve Proposition 87, one of the hardest-fought initiatives on the Nov. 7 ballot.

“Our president said that this is a nation addicted to oil, a nation that must move away from that addiction,” Los Angeles Mayor Antonio Villaraigosa said in endorsing Proposition 87. “We have to put our money where our mouth is and make the necessary investments to move to this technology.”

Voters have heard little about how Proposition 87 would accomplish that goal, despite the record spending spree by both campaigns on ads featuring, among others, former President Clinton and his vice president, Al Gore.

As the election campaign enters its final weeks, both sides are scheduling debates, press conferences and speeches to help voters understand the proposed transformation of the California Alternative Energy authority.

The authority would get a new name, the California Energy Alternatives Program Authority. It would also get a new revenue source, a new structure and a new mission — reducing California’s petroleum usage by 25 percent over 10 years.

“The point of Prop. 87 is to make cleaner, cheaper fuels and the vehicles that can run on them just as accessible and affordable as regular gasoline- and diesel- fueled vehicles are now,” campaign organizer Anthony Rubenstein said.

Opponents said they support alternative energy but oppose Proposition 87 because it would raise taxes to create a new state bureaucracy with no guarantee of cheaper or cleaner energy.

“A new tax with a new bureaucracy is just a huge mistake,” said Larry McCarthy, president of the California Taxpayers Association, which opposes the measure.

Proposition 87 would impose a new per-barrel tax of up to 6 percent of the value of almost any oil produced in the state. The tax would generate up to $4 billion to be distributed over 10 years to alternative energy programs.

The initiative says oil companies couldn’t pass the cost of the tax along to consumers in higher gasoline prices. But the legislative analyst said enforcement would be difficult, and opponents claim the tax would lead to higher prices at the pump.

Economists, some of whom were paid by the “No on 87” campaign, said the proposed tax would cause further declines in California oil production, forcing refiners to seek more costly foreign oil to meet demand. They said that would lead to higher gasoline prices.

Yusef Robb, “Yes on 87” campaign spokesman, said the initiative would increase use of alternative fuels, and that would reduce gasoline demand and pump prices.

He also claims oil companies would keep drilling — even with the tax — because they are reaping such large profits.

“If Prop. 87 were in effect today, the profit margin on a barrel of oil would be over 60 percent,” he said. “That’s plenty of incentive.”

Under Proposition 87, the new tax revenues would go into a special fund to be administered by an oversight board of nine members: the state treasurer, the energy commission chairman, the state’s environmental secretary and six public members.

The board would distribute most of the money in grants, loans, incentives and credits.

Nearly 60 percent is supposed to be spent on alternative fuel vehicles and fueling stations, and more than a fourth on alternative energy research at California universities.

Another 9.75 percent could be used for accelerating the development and production of petroleum-saving technologies. That money could be spent outside California.

The remaining 6 percent is supposed to go to vocational training, public education and administration.

Once the $4 billion is distributed, the initiative says the authority would go out of business.

By then, Proposition 87 says the program should have reduced Californians’ petroleum consumption by 25 percent. But there’s no penalty if it falls short.

Rubenstein said mandating an outcome would be “preposterous” because cutting oil consumption depends on several factors beyond the state’s control — from consumer acceptance of new technologies to the success of those technologies.

Opponents call this a lack of accountability.

“Nothing (in Proposition 87) says that anybody has to be successful,” said Ron Cottingham, president of the Peace Officers Research Association of California, which opposes Proposition 87 because the tax could cause a decline in oil company property values that could lower property tax revenues financing law enforcement.

The initiative does require the oversight board to develop a plan to cut oil consumption by a fourth. It also requires annual reports to the Legislature and annual independent audits.

But lawmakers could take few, if any, actions if Proposition 87’s programs fell short of its goals.

“With Proposition 87, the only requirement is that the money be spent,” opposition campaign spokesman Scott Macdonald said.

Rubenstein said he wanted to insulate the program from legislative influence because of the “stranglehold” the oil companies have on the Capitol.

Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, vouched for the initiative’s safeguards.

“California has some of the toughest political reform provisions and open-meeting laws in the nation,” he said. “And this existing agency will be subject to those laws. That gives consumer agencies, like mine, an opportunity to hold it accountable.”

The foundation is among a long list of supporters, and opponents have their own stable of allies. But individual interests are fueling what is expected to be a record-setting spending on a ballot measure.

Hollywood producer and environmentalist Stephen Bing set a record by donating more than $40 million of the nearly $47 million raised in support of the initiative. His contributions are believed to be the largest ever from one person for a ballot measure.

On the other side, oil companies that would have to pay the estimated $400 million a year in new taxes have donated almost all of the nearly $74 million collected by opponents — and they appear to be gaining ground.

The Field Poll found support for the measure dropped from 52 percent with 31 percent opposed in July to 44 percent with 41 percent opposed in September.

But there are many more ads to come. The two campaigns have already set a new fundraising record by collecting nearly $121 million in contributions.

The last ballot measure to come close was Proposition 5, a 1998 initiative that pitted tribal gaming interests against Nevada casinos.

Both sides spent $93 million on that initiative, an amount Common Cause policy advocate Ned Wigglesworth said is equal to $119 million today when inflation is taken into account.

“(Proposition 87) is one of the biggest battles financially in the ballot process that we have seen,” Wigglesworth said. “Prop. 87 is unique in that it has such heavy spenders on either side, and that is going to drive the spending on this even higher.”
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The Bee’s Laura Mecoy can be reached at (310) 546-5860 or [email protected]