Los Angeles Tax on Oil Companies, Measure O (March 2011)
If Measure O had approved by voters, oil producers would have had to pay a tax to the City of Los Angeles of $1.44 for each barrel of oil extracted from land located in the city.
Supporters of the tax estimated that it would generate $4.1 million in revenue for the city each year. Some opponents predicted that the tax would deter oil production and cause some oil companies to go out of business, and said that it will therefore result in "substantially less" than $4.1 million, since fewer barrels would be pumped.
The nearby cities of Beverly Hills, Inglewood, Long Beach, Signal Hill and Seal Beach have oil extraction taxes. The tax in Long Beach is 40-cents-per-barrel. In Signal Hill, the tax is 60 cents and in Seal Beach, it is 58 cents.
Measure O was one of 10 ballot measures on the March 8, 2011 City of Los Angeles ballot. It was the only one of the ten ballot measures to be defeated.
Los Angeles city councilman Paul Krekorian said, "This is an important source of revenue that we should be taking."
City councilmember Bernard Parks, in response to concerns that the tax will be tantamount to killing the goose that lays the golden egg, said that this never happens when the city raises taxes because businesses do not "put themselves out of business": "Every time we hear the same thing: Businesses are going to close and leave the city. But companies are not going to put themselves out of business. They adapt."
City council member Paul Koretz was of a like mind, saying, "We are limited in our tax proposals, and if there is a tax that could do no harm it is this one. California produces a significant amount of oil and we don’t have a severance tax, so it’s about time we do the same.… It’s a tiny fraction in the scheme of things, and it will have no impact at all on the price of gas."
Stephen Box, a writer for LACityWatch, said, "At less than 2% of the current $80 per barrel, this seems like a minimal and fair amount from the oil companies that are enjoying record levels of profits. In fact, it’s kind of shocking that it took this long or that the tax is so low. (5% proposed for med marijuana but only 1.8% proposed for crude oil?)"
"The Committee to Support Measure O and P" had raised $11,500 as of late February 2011.
- The official voter guide arguments opposing Measure O were signed by Bill LaMarr of the group, "Stop the LA Energy Tax."
- Hal Washburn of Breitburn Energy Partners LP, a company that extracts some oil in the city, said, "In Los Angeles, with so many old wells, you need continual investment and upgrades to maintain production levels. This tax would put a stop to much of that as the investment would flow to wells that don’t have such a high tax. If the investments are not made, then that’s where you see the real impact on jobs."
- Gary Toebben, chief executive of the Los Angeles Chamber of Commerce, said, "Hundreds of small businesses are dependent on the local oil industry and are struggling to hold on to their workers. The city should not be singling out this industry or any other industry for more taxes."
- Rock Zierman, chief executive of the California Independent Petroleum Association, said, "We fully expect some marginal wells to close in Los Angeles because of this tax, which will mean less jobs and a further reduction in the supply of domestic oil."
- Greg Brown, executive vice-president of BreitBurn Energy Partners L.P., said, "We think it's bad in a number of respects, starting with the justification that's given by the proponents. They refer to it as a tax on big oil. There is no big oil in Beverly Hills, there are four companies that are small to medium sized, including ours. Number two, it’s also repeatedly referred to as not being a tax on the residents and business and institutions in Beverly Hills and that's just flat wrong. The taxes are passed directly to to the mineral rights owners, so there are thousands of Beverly Hills residents that will be directly taxed by this proposal."
- Earl “Skip” Cooper, president and CEO of the National Black Business Association, said, "Small- and minority-owned businesses are especially vulnerable to a new tax that would take $4 million out of the economy each year. That doesn’t just hit those working in the oil fields. Businesses from the dry cleaners to your favorite local restaurant all feel the pinch as spending is reduced because of a new tax."
- Henry Perry, an oil-industry worker and shop steward with the United Steelworkers, said, "This is a job killer."
Opponents of Measure O included:
- California Small Business Alliance
- California Hispanic Chambers of Commerce
- Small Business Action Committee
- California Taxpayers’ Association
- Los Angeles Area Chamber of Commerce
- Valley Industry and Commerce Association (VICA)
- Regional Black Chamber of Commerce of the San Fernando Valley
- Asian Business Association – Los Angeles
- Latin Net
- Los Angeles Metropolitan Hispanic Chambers of Commerce
- National Black Business Association
- California Independent Petroleum Association
- International African and African American Chamber of Commerce
The PAC of the California Independent Petroleum Association contributed $50,000 to a committee that opposed Measure O.
Altogether, the "Stop the L.A. Oil Tax, No on Prop O" committee received over $400,000 in donations.
Oil companies in Los Angeles
Most of the oil companies that extract oil within the city limits of Los Angeles are family-run and small. "Cooper & Brain" is an example. This company has eight employees and extracts approximately 320 barrels of oil a day from "dozens of wells" in the city. It was founded in the 1930s.
"No on Measure O"
- The Los Angeles Daily News opposed Measure O, writing, "However, Measure O isn't going to stick it to the Chevrons and Valeros of the world. Instead, it puts an extra burden on local mid- to small-size companies that range from eight employees to 80, businesses that employ legions of self-employed, local vendors to maintain wells and help drill new ones. Maybe Measure O will cost jobs, as the opponents claim, and maybe it won't. It's hard to say, but it is wrong to squeeze an unpopular business unfairly just because you can."
- The Los Angeles Times opposed Measure O, writing, "...the city went a little too far by proposing an unnecessarily steep and possibly duplicative tax, which would have a minuscule effect on city revenue."
Text of measure
The question on the ballot:
|Measure O: In order to fund general municipal services, including but not limited to such matters as police protection and crime suppression services, fire prevention and suppression services, park and recreation facilities, and general improvements throughout the City, shall an ordinance be adopted to impose a tax on oil producing businesses of $1.44 per barrel of oil produced in the City of Los Angeles??|
- Official Voter Guide/City of Los Angeles/March 8, 2011 election
- Measure O ordinance language
- List of March 8, 2011 ballot measures published on "The City Maven"
- "No on O" website
- "No on O" facebook
- "No on O" Twitter
- ↑ 1.0 1.1 Los Angeles Times, "L.A. Council votes to put oil-producer tax, other measures on March ballot", November 18, 2010
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 Los Angeles Business Journal, "Small Firms Say L.A.’s Oil Tax Drills Too Deep", December 6, 2010
- ↑ 3.0 3.1 Los Angeles Times, "Decoding the March 8 ballot: Think measure L for Libraries, M for Marijuana and N for No-good-reason", December 21, 2010
- ↑ Contra Costa Times, "Measure O would allow L.A. to impose oil drilling extraction tax", February 21, 2011
- ↑ Encino Patch, "3 City Councilmen Explain Support for Upcoming Ballot Measures", January 12, 2011
- ↑ LA Streetsblog, "Streetsblog Voter Guide: Proposition O", February 3, 2011
- ↑ LA City Watch, "Ballot Measure for Measure: City Hall’s cry for help!", February 8, 2011
- ↑ Marina Del Ray Patch, "Proposition O Would Impose Tax on Oil Companies", March 4, 2011
- ↑ Beverly Hills Courier, "Measuring O: Beverly Hills’ Tax On Oil And Gas Extraction", January 20, 2011
- ↑ 10.0 10.1 Marina Del Ray Patch, "Proposition O Would Impose Tax on Oil Companies", March 4, 2011
- ↑ Los Angeles Times, "With passage of Measure O, L.A. would join other Southland cities in taxing oil extraction", March 5, 2011
- ↑ Los Angeles Times, "Efforts to right L.A.'s finances highlight March ballot", January 29, 2011
- ↑ Los Angeles Daily News, "Daily News Editorial: No on Measures O and M", February 24, 2011
- ↑ Los Angeles Times, "Times endorsements for the March 8 city elections", March 6, 2011