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Barrels of Money Fuel Oil Tax Fight

The battle over Prop. 87 pits a film producer against the industry. A spending record is likely.

October 03, 2006|Dan Morain | Times Staff Writer

SACRAMENTO — Five weeks before election day, California oil companies and a rich Hollywood producer are waging an $85-million battle over an initiative that would impose up to a $485-million-a-year tax on the oil industry.

In any other state, the $45 million that oil producers have shelled out to block Proposition 87 would be a political gusher of historic proportions. But in California this year, there's an equalizer: Stephen L. Bing, movie producer, heir to a real estate fortune and one of the biggest financiers of Democratic and environmentalist causes in the nation.

Bing has given $40 million to the campaign in favor of the initiative, which he helped launch. The sum is an unprecedented donation by an individual in a single initiative fight.

Venture capitalists and others have contributed an additional $5.7 million to the Yes-on-87 campaign, pushing the overall total toward $91 million. The fight almost certainly will set a spending record for one initiative.

The oil money dwarfs the industry's spending in other states over the last six years. It's more than oil and gas interests have donated to federal candidates and national parties in any single campaign for more than a decade, according to the Center for Responsive Politics in Washington, D.C.

With Bing's infusion, the fight over Proposition 87 is no David vs. Goliath campaign. Both sides can afford to inundate airwaves with television commercials. Backers, who launched a new ad Monday, are blasting the oil industry. Foes are questioning the wisdom of a new oil tax. The heavy spending is helping to push the cost of political advertising to new heights.

"California really is ... like a country unto itself," said Ed Bender, executive director of the Institute on Money in State Politics in Helena, Mont. "They're off the chart."

Bender's organization surveyed political spending by major oil companies in other states at The Times' request, finding that they had spent about $4.7 million since 2000. In other states, oil companies don't need to spend much, Bender said: The "political culture" in many states is such that lawmakers generally side with them, and no interest groups seriously challenge them.

"The rest of the country doesn't have a Hollywood," Bender said.

Initiative battles are by far the costliest political campaigns in California. For now, the most expensive in state history remains Proposition 5, the $93-million epic to legalize Las Vegas-style casinos on Indian reservations in 1998.

"It looks like oil is going to break it. Incredible," said Tracy Westen, chief executive of the nonpartisan Center for Governmental Studies in Los Angeles.

"Ballot measures are an extension of business, but by other means," Westen said, alluding to the saying that "war is an extension of politics, but by other means."

No-on-87 campaign spokesman Scott Macdonald said no one "should be surprised at the amount being spent," given the stakes and the record amount that Bing has contributed. "It is a remarkable situation."

California is the nation's third-largest oil-producing state. Proposition 87 would generate $4 billion over time by taxing companies that extract oil from California land. The money would jump-start alternative energy research and use.

"Here is an initiative with a direct impact on an industry," said Republican consultant Wayne C. Johnson, who is not involved in the campaign. "People respond to perceived threats. Where the threat is greater, the response is greater."

Two companies would be most directly affected by Proposition 87: Chevron and Aera Energy, a partnership of Shell Oil and ExxonMobil. Combined, they pumped 60% of the oil from California wells in 2005, state records show. Under the initiative, they could pay 60% of the tax -- and are by far the largest donors to the opponents' campaign.

Chevron has given $22 million, Aera $12.6 million. Neither company would comment.

Occidental Petroleum, the third-biggest producer last year, has given $4.75 million to the "no" side.

"California is one of our core operating areas," said Occidental Vice President Lawrence Meriage, who oversees corporate communications. "Clearly anything that is related to the energy sector is something we care about."

Year in and year out, San Ramon-based Chevron is one of the state's biggest political spenders. Since 2000, the company has poured $34.8 million into California campaigns, including the anti-87 money, secretary of state records show.

Chevron also has given $3.2 million to federal candidates and national parties since 2000, according to the Center for Responsive Politics.

But the oil companies may have found a match in Bing, 41, who inherited $600 million from his grandfather and has become a donor to liberal causes. Before getting involved in the oil tax initiative, Bing had contributed $30.5 million to state and federal campaigns since 2000, according to California records and federal records compiled by the Center for Responsive Politics.

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