Associated Press: Oil companies raise nearly $30 million to fight severance tax

EXTRACT: Opponents had raised $29.8 million through Friday, including $12.8 million from Chevron and $12.6 million from Aera Energy, a joint venture of Exxon and Shell oil companies.

THE ARTICLE

STEVE LAWRENCE

SACRAMENTO – Facing a potentially hostile electorate, oil companies have pumped nearly $30 million so far into a campaign to defeat Proposition 87, the November ballot measure that would tax oil producers to pay for alternative energy programs.

The proposition’s supporters have responded with $5.5 million in fundraising, and both sides have begun running unusually early television ads staking out their positions.

“You need to define yourself early in order to go up against the 800-pound gorilla,” said Beth Willon, a spokeswoman for the proposition’s supporters. “We think the oil companies realize, as we do, that there is a real consumer revolt going on right now. … We intend to give a voice to that outrage.”

Supporters have received $1 million contributions from Hollywood producer Stephen Bing, Google executive Lawrence Page and venture capitalist Vinod Khosla. Another venture capitalist, John Doerr, has chipped in $950,000.

Opponents had raised $29.8 million through Friday, including $12.8 million from Chevron and $12.6 million from Aera Energy, a joint venture of Exxon and Shell oil companies.

“It’s going to be a very busy election,” said Scott Macdonald, a spokesman for the No on 87 campaign. “There are a lot of issues. … There are benefits to starting early and getting a chance to discuss Proposition 87 when there is not a lot of competition on the air.”

The proposition, which came together out of discussions started by former screenwriter and community activist Tony Rubenstein, would impose a tax on oil production in California. It would vary depending on the price of oil and remain in effect until it had generated $4 billion for alternative energy programs.

The state legislative analyst estimates that could take less than 10 years or several decades, with revenue coming in at annual rates of about $225 million to $485 million.

Most of the money would be earmarked for loans, grants and subsidies to promote alternative fuels and vehicles – such as ethanol, battery-powered cars and hybrids – and to reduce reliance on gasoline and diesel.

There also would be money for research on alternate energy sources, public awareness campaigns promoting alternative-fueled vehicles and to train people to work with new alternative energy technologies.

“The policy behind Proposition 87 is just smart policy,” said Rubenstein, who said he “just kind of snapped” after the Sept. 11 attacks and decided something had to be done to reduce the country’s dependence on oil.

He said he’s used a combination of “calling, referrals and networking” to line up support for the ballot measure.

“I kind of joke around that I’m kind of Forrest Gump with a little laptop and a kind of hokey power point” presentation, he said.

Opponents concede that more needs to be done to promote alternatives to gasoline and diesel but contend that Proposition 87 is the wrong step, saying it would lead to higher pump prices by depressing California oil production and triggering more oil imports.

“This is just a poor program,” Macdonald said. “It is not part of the solution. It’s way to get $4 billion to spend.”

Willon calls the argument about increased oil imports “oil company fiction. It would reduce dependance on foreign oil by increasing reliance on alternative fuels,” she said.

In 2005, oil pumped from California fields met about 37 percent of the state’s demand, with Alaskan oil accounting for 21 percent and foreign oil about 42 percent, according to the legislative analyst.

Proposition 87 would prohibit oil companies from passing on the tax to consumers by boosting fuel prices, but the legislative analyst says that ban may be difficult to enforce because of the many factors that determine oil costs.

However, importing oil not subject to the tax also could limit the extent the levy is passed on to consumers, the analyst adds in a voter pamphlet review of the measure.

Oil companies have their work cut out for them in defeating the proposition.

Fifty-eight percent of Californians interviewed last year by the Field Poll blamed oil companies for high gasoline prices.

A Field Poll released earlier this month found that likely voters favored Proposition 87 by a 21-point margin, 52 percent to 31 percent, with 17 percent undecided.

Over the last 10 years, 64 percent of the ballot propositions that started out with leads of 20 points or more in the poll were approved by voters.

Poll director Mark DiCamillo said the outcome could be determined by whether opponents can weaken the strong support for the measure among Democrats and independents. Republicans oppose it, 51 percent to 34 percent, according to the poll, which had a margin of error of plus or minus 5 percentage points.

The oil companies “have huge resources and a lot at stake,” he said. “They may want to move the needle early (with their ad campaign). Usually, the strategy of campaign managers is to wait until the final month, until voters are actually paying attention to the ballot.”

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