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For small drillers, tax is fueling a world of worry

In the heart of the state's oil country, petroleum producers rally against the proposed levy.

CALIFORNIA ELECTIONS

November 03, 2006|Elizabeth Douglass, Times Staff Writer

BAKERSFIELD — At the Petroleum Club, 12 stories above this fast-growing city, $10 buys the region's oilmen the Driller Burger, billed as "one full pound of the best quality ground beef in existence."

These days, it comes with a side of anxiety over Proposition 87, the measure on Tuesday's ballot that would tax petroleum production in the state to fund alternative energy research.


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This is the heart of California's oil country. There's a particular square-mile section of the nearby Midway-Sunset field where more than 600 pumping units draw crude from deep underground. Oil helps fuel the region's economy, so it's no surprise that the folks who make a living off black gold have little use for Proposition 87.

The Bakersfield City Council singled out the ballot measure as the only proposition worthy of official action. The council -- which counts two past presidents of the local Petroleum Club among its members -- voted unanimously to oppose the initiative, which aims to raise $4 billion over the next decade.

"Bakersfield depends on the oil industry and the agriculture," said Don Arnot, a retired Chevron Corp. employee who volunteers at the West Kern Oil Museum in nearby Taft. "The biggest part is all done by the majors, but the other guys are still there plugging away, and they're the ones who will be hurt" by Proposition 87.

Chris Hall, a third-generation driller, is one of those other guys. Hall is so worried that he has donated his time and at least $10,000 to defeat the measure. Other independent oil companies have joined him in writing checks to the No on 87 campaign.

"They're concerned. Otherwise why would people pony up all this money to fight this thing?" said Hall, whose Drilling & Production Co. operates 60 wells in Kern County. "This affects their bottom line."

Smaller producers with little out-of-state business said they would be hit harder than larger companies with more diversified operations. Chevron Corp. of San Ramon, Calif., has estimated that Proposition 87 would cost it $200 million a year before taxes.

Hall and others like him, however, are bit players in California's oil business -- in production and in campaign contributions.

More than 60% of the state's yearly oil output is controlled by three producers: Chevron, Occidental Petroleum Corp. and Aera Energy, a partnership of Royal Dutch Shell and Exxon Mobil Corp. They have provided much of the nearly $100 million raised by Proposition 87 opponents.

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