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Alternative Energy. Research, Production, Incentives. Tax on California Oil Producers.
Initiative Constitutional Amendment and Statute.

THE QUESTION

Should California tax oil producers to fund the establishment of a $4 billion Clean Alternative Energy Program with the goal of reducing oil and gasoline consumption through incentives for alternative energy, education and training?

THE SITUATION

In 2005, California produced an estimated 230 million barrels of oil, approximately 12 percent of U.S. production, and supplied 37 percent of the state's oil needs. Virtually all oil produced in California is delivered to California refineries. Oil producers pay the state corporate income tax on profits earned in California and they pay a regulatory fee which, in 2006-07, will generate total revenues of $14 million. Property owners pay local property taxes on the value of oil drilling equipment and on the value of recoverable oil in the ground.

THE PROPOSAL

Oil producers would pay a variable 1.5 percent to 6 percent tax on oil extracted in California to fund research and production incentives for alternative energy, alternative energy vehicles, efficient technologies, education and training. A reorganized California Energy Alternatives Program Authority would administer the program with the goal of reducing petroleum consumption in California by 25 percent over ten years. The proposal prohibits oil producers from passing the tax on to consumers.

FISCAL EFFECT

• The proposed tax could raise $225 million to $485 million annually, depending on how the measure is interpreted. Actual revenues will depend on oil prices and oil production in the state.
• Administrative costs are unknown.
• Local property taxes paid on oil reserves would decline to the extent that the tax reduces the value of oil reserves in the ground and related assessed property values.
• Investments in new technologies may spur economic development in California.

WHAT A YES OR NO VOTE MEANS

A YES vote means the state would impose a tax on California oil production to support $4 billion in expenditures to develop and promote alternative energy technologies and reduction of petroleum use.

A NO vote means the state would not impose a tax on oil production to fund these activities.

SUPPORTERS SAY

• Oil companies pay billions of dollars in drilling fees in Texas, Louisiana and Alaska but almost nothing in California.
• Oil companies will be prohibited from raising gas prices to pass the tax on to consumers.
• It will make oil companies pay for cleaner energy, create thousands of jobs, and reduce air pollution.

OPPONENTS SAY

• Prop. 87 will spend $4 billion to fund a new state bureaucracy that is not necessary for producing results.
• It will reduce instate oil production and increase dependence on oil from the Middle East.
• It will reduce General Fund and property tax revenues for education, public safety, health care and transportation.

FOR MORE INFORMATION

PRO 323-782-1045, www.yeson87.com

CON 650-340-0262, www.noOilTax.com