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$4B California Oil Tax Measure on November Ballot

22 June 2006

An initiative proposing a state consitutional amendment that would tax oil production to fund a range of alternative energy efforts has gained enough signatures to qualify for the November ballot, according to California Secretary of State Bruce McPherson.

The California Clean Alternative Energy Initiative would establish a $4 billion program to reduce oil and gasoline usage by 25% from 2005 levels over the next ten years, with research and production incentives for alternative energy, alternative energy vehicles, energy efficient technologies, and for education and training. It would be funded by a tax of 1.5% to 6%, depending on oil price per barrel, on producers of oil extracted in California.

The initiative, which also prohibits producers from passing tax on to consumers, gathered 1,143,365 signatures, qualifying it for the ballot. To qualify by random sample, an initiative must receive a projected 110% of the required number of signatures, which for this initiative was 657,916. The initiative qualified with 705,182 projected valid signatures.

Support for the bill is led by Californians For Clean Alternative Energy; opponents by Californians Against Higher Taxes.

California is third in the United States in oil production and requires no tax on oil companies for extracting natural resources, unlike the Federal government (12.5%), Alaska (15%), Texas (4.6%), and Louisiana (12.5%), according to Californians For Clean Alternative Energy.

If voters approve the ballot measure, the state will get new revenue of between $200 million to $380 million annually from a tax of 1.5% to 6% on oil production, according to the state’s nonpartisan legislative analyst.

The money would fund research and development of alternative energy including solar and wind power and electric and hydrogen-fueled cars. Both public and private organizations will be eligible for funds.

Local governments may lose money from property taxes paid on oil reserves, which would impact the oil-producing counties of Kern and Los Angeles.

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June 22, 2006 in Oil, Policy | Permalink | Comments (22) | TrackBack (2)

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Comments

Hah! Kaliforians' will just flush the monies down the hydrogen rat hole.
Let's just keep the status quo.
Or else they may be forced to remove the oil pumps in the MacDonld's parking lots and close the city of Long Beach due to lack of revenue.

I don't suppose this will do a great deal of harm, but I would rather see initiatives to actually get people to use alternatives that are available right now. Buy a fuel efficient car, drive less, bicycle, walk, mass transit. These other initiatives are just ways to continue the car culture forever.

If you're stuck in a jam in L.A., it's going to feel pretty much the same whether use are using alterntive fuel or not. You've still paved over the landscape and you're still not going anywhere.

I agree on hydrogen. Will this just help Ahnold fuel his Hummer with expensive hydrogen?

It's always the same with these Californians - they're oh-so-green because they shift the environmental damage out of state.

They could only tax oil production that is local to California. Making that more expensive might please owners of Southern California beachfront property but it would simply increase the pressure to drill for oil elsewhere. Prohibiting oil companies from passing on this tax to their customers would exacerbate this trend, though it would take a while to become noticeable.

Investing the proceeds in alternative fuels does indeed mean hydrogen in CA. And while that fuel would indeed reduce air pollution in the traffic jams of LA and the Bay Area, the cost would be fairly astronomical. It might make more sense to investigate why so many of CA's multi-lane highways are so congested to begin with: gasoline is cheap, desirable land is extremely expensive, ergo many people have to live far from their place of work.

Instead of this populist tax on oil production, Califonians would be well-advised to consider higher taxes on gasoline. Ramped up slowly but predictably over time, these would depress demand because people would either reduce the distance between home and work or, move out of state. Either way, congestion goes down and air quality up.

Note: if you disburse the extra revenue via flat rate credits on CA income tax, you can ramp up the gas taxes more quickly. If CA does not have the right to tax fuel directly, it could make gas station licenses much more expensive instead. Same difference.

What will happen si the rigs will simply shut down., after all oil only gets more valueable the longer it sits.

i think it is funny that the legislature says they can't pass the cost on to consumers.

that is more than a bit naive.

oil, just like any other commodity, is priced according to market rates that are determined by supply and demand.

nobody sets prices.

in fact, it is illegal to set prices in the US. has been since the anti-trust laws in the early 20th century.

so, effectively, the law says that the oil companies must continue following the law.

good job, california.

an incredibly unpopular initiative that i'm surprised the CARB hasn't put through is a "clean air surcharge" for fuel sold in their area.

it'd probably be a better approach to reducing air pollution than their failed attempt at mandating ZEVs.

theoretically, they could alter the surcharge amount based on the pollution classification of the vehicle.

Shaun -

CO2 is not yet considered a pollutant in US law. Therefore, charging more for pollution (HC, CO, NOx, PM etc.) would simply encourage even more exhaust aftertreatment, which actually raises both vehicle cost and reduces mileage.

We need the US to consume less fossil fuel. Either drive fewer miles, drive a more efficient vehicle or switch to a renewable fuel. Better yet, all of the above.

Wintermane, why haven't the rigs shut down in Alaska, Texas, and Louisiana?

(I think the best criticisms are directed at the other end, how wisely the money will be spent. I'd actually prefer that it go to the general fund.)

Odograph -

Alaska has a negative state income tax. Why do you think their Senators keep trying to open up the ANWR for oil drilling?

And that kind of shows how an oil tax does not slow production. They want to drill, even though those Alaskan fees go to the population.

Pfft, maybe we should do that in California. Send everyone a check and let the SUV drivers pay.

I read about this measure some weeks ago. The people backing it are a group of already-wealthy venture capitalists in alternative energy. I guess it's just too risky to invest with their own money, though. So in the name of being Green they want to extract money from the oil companies.

Because if their ventures fail, well... it's not their money, right?

If they really want to invest in these things, they should do it with their own money and not on the backs of taxpayers.

Great idea. Now why don't they pass some taxes that will make a difference? Tax Hummers and give a credit to hybrids. Here is something even a lib is afraid to do. Tax gasoline. (This is not my idea) Raise the tax on gasoline one cent per gallon, per month, forever. That will cause efficiency.

Great timing to supress domestic oil extraction.

if you believe "peak oil" you want to supress domestic extraction, and use up "theirs" first.

Because alaska and texas are pro oil and work with oil rather well oil is perfectly happy to pay out the big bucks.. cal on he other hand... Now if cal was willing to be a hell of alot more friendly and all it would likely be well in the interests of the oil companies to pay out fairly big bucks.. if there is enough oil to make it worth the effort.

California produces 40% of the oil it consumes. So, if the oil companies want
to stop producing in the largest consuming state to avoid taxes, that is their choice.

what i don't get is why they are taxing only local producers. why not tax oil that is imported? 42% of petroleum consumed in CA comes from foreign (i.e. international) sources - why not tax them on entry?
stats, see http://www.energy.ca.gov/html/energysources.html

Lensovet:

State government have no jurisdiction in inter-state trade. It is strict prerogative of feds.

With gas prices bouncing up and down 10% in a week how could anyone tell if a 1.5% tax is or is not being passed on.

The tax will be passed on, but the price at the pump will remain high so that we don't slip back into our old ways of doing things.

yeah, but what about international trade? can't we regulate that shit?

'Chevron' backs the failure of this proposition. That's good enough for me to vote a big "YES" for its passage.
Maybe big oil will pull out of California, maybe they won't. However, if there is a true SHORTAGE of oil in the world, and that is the real reason why prices keep soaring (and not their need for a 400% profit margin), than it is certain that after big oil stops pouting they will be back in California with vengeance to get their hands on our oil tax or no tax.

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