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Oil Tax Is Likely to Appear on Ballot

Organizers turn in 1.2 million signatures in support of an extraction levy on California crude.

May 13, 2006|Marc Lifsher | Times Staff Writer

Supporters of a ballot initiative that would slap a $400-million-a-year extraction tax on California oil producers submitted almost 1.2 million signatures to state election officials Friday, virtually assuring that the measure would go before voters in November.

Winning a place on the ballot for the proposed tax -- which is designed to raise money for research and development of alternative fuels -- could set the stage for one of the more costly initiative campaigns in state history. The initiative needs 598,105 valid signatures to qualify for the ballot.

The California Clean Air Campaign, bankrolled by Hollywood producer Steve Bing, Silicon Valley venture capitalists and pro-environment corporate executives, has collected $4.2 million and is likely to spend tens of millions of dollars campaigning for the initiative, spokeswoman Julie Buckner said.

Oil companies and their allies in the California Chamber of Commerce and other business groups are expected to spend at least that much to fight the proposal.

"This is worth a lot of money to us," said Jack Coffey, government affairs manager for San Ramon, Calif.-based Chevron Corp., which last week abandoned its effort to get an initiative on the ballot that would have limited oil company liability in some water pollution lawsuits.

The coalition-backed initiative would impose a tax on every barrel of oil produced within California or pumped from wells on state lands offshore. The tax rate would increase as oil prices rise, topping out at 6%. California produces about 773,000 barrels of oil a day, and backers estimate that the tax would raise at least $4 billion over 10 years if oil prices stay above $60 a barrel.

Proceeds from the tax would be earmarked for research, development and production of alternative vehicle fuels such as ethanol, biodiesel and hydrogen.

Opponents contend that a wellhead tax on California crude would discourage domestic oil production and make the state more dependent on foreign imports. They say the tax probably would be passed on to consumers as higher prices at the pump.

Proponents counter that the initiative's wording specifically prohibits producers from adding the tax to retail prices.

Oil prices, they say, are set on an international market that consumes 85 million barrels a day and shouldn't be affected by a tax collected only in California.

The measure has attracted support from Silicon Valley venture capitalists interested in financing research into commercially viable alternatives to fossil fuels. Three partners at the Menlo Park, Calif., firm of Kleiner Perkins Caufield & Byers have contributed $2.2 million to put the initiative on the ballot.

The measure is attracting other wealthy backers such as Robert Fisher, chairman of Gap Inc., and Wendy Schmidt, wife of Google Inc. Chief Executive Eric Schmidt.

The opposition campaign committee, Californians Against Higher Taxes, fears that the venture capitalists and other business executives could gain control of the new state agency that would distribute the money raised by the new tax.

"There are no checks and balances about where the money goes," spokesman Al Lundeen said.

The drive to boost alternative-fuel research by taxing oil companies is likely to be popular with California motorists upset over paying the highest gas prices of any state except Hawaii. The statewide average is $3.374 a gallon, according to the latest AAA survey.

"Based on the polling that we've been doing, people seem to be willing to pay, to make sacrifices if they know it means a cleaner environment," said Mark Baldassare, director of research at the Public Policy Institute of California in San Francisco.

"At this point in time, having the oil companies pay is not going to be something that concerns people."

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