California initiative Prop 87 would tax oil to aid renewables, alternatives

Published on

Electric Power Daily

California voters will decide November 7 whether to approve a ballot initiative that would tax oil producers to generate revenue to reduce oil consumption and develop renewables and alternative fuels.

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.

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 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 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 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.

Beth Willon, spokeswoman for the Yes on 87, dismissed Lundeen’s conflict-of-interest concerns, calling them “oil company fiction.” In addition to being a venture capitalist, Khosla is a “job creator, an innovator and a maverick,” and he wants to make energy more affordable for Californians, she said. Khosla donated about $1 million to the start the campaign.

The No on 87 campaign has raised about $30 million so far, according to Lundeen. Oil producers Chevron and Aera Energy have made the biggest donations, he said. The California Chamber of Commerce, California State Taxpayers Association and California State Firefighters Association are among other supporters.

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.

While the governor is a strong supporter of renewables and alternative fuels, he 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.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases