California Proposition 87, Alternative Energy Oil Tax (2006)

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California Proposition 87 was on the November 7, 2006 ballot in California as a combined initiated constitutional amendment and state statute, where it was defeated.

Proposition 87 would have imposed a severance tax, effective in January 2007, on oil production in California to generate revenues to fund $4 billion in alternative energy programs over time.

Campaign spending on Proposition 87 set a record, with a total of $154.3 million coming from both sides.[1] The great majority of the funds spent to promote Proposition 87 came from one individual, Stephen Bing, who contributed $49.5 million.[2] According to the Los Angeles Times, Bing's contributions to Proposition 87 amounted to "the biggest single personal investment in a ballot proposition in state history."[3]

See Energy policy in California for a full explanation of energy policy across the state.

Election results

Proposition 87
Defeatedd No4,635,26554.6%
Yes 3,861,217 45.4%

Constitutional changes

If Proposition 87 had been approved, it would have:

Text of measure


The ballot title was:

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


Proposition 87 2006.PNG

The question on the ballot was:

"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 official summary provided to describe Proposition 87 said:

  • Establishes $4 billion program with goal to reduce petroleum consumption by 25%, with research and production incentives for alternative energy, alternative energy vehicles, energy efficient technologies, and for education and training.
  • Funded by tax of 1.5% to 6% (depending on oil price per barrel) on producers of oil extracted in California. Prohibits producers from passing tax to consumers.
  • Program administered by new California Energy Alternatives Program Authority.
  • Prohibits changing tax while indebtedness remains.
  • Revenue excluded from appropriation limits and minimum education funding (Proposition 98) calculations.

Fiscal impact

See also: Fiscal impact statement

The fiscal estimate provided by the California Legislative Analyst's Office said:

  • New state revenues—depending on the interpretation of the measure—from about $225 million to $485 million annually from the imposition of a severance tax on oil production, to be used to fund $4 billion in new alternative energy programs over time.
  • Potential reductions of state revenues from oil production on state lands of up to $15 million annually; reductions of state corporate taxes paid by oil producers of up to $10 million annually; local property tax reductions of a few million dollars annually; and potential reductions in fuel-related excise and sales taxes.



"Yes on 87" website logo

The official voter guide arguments in favor of Proposition 87 were signed by:

  • Laura Keegan Boudreau, CEO, American Lung Association of California
  • Winston Hickox, former Secretary, California Environmental Protection Agency
  • Jamie Court, president, Foundation for Taxpayer and Consumer Rights
  • Dr. Mario Molina, Nobel Prize in Chemistry, University of California, San Diego
  • Tim Carmichael, president, Coalition for Clean Air[4]

Arguments in favor

Supporters of Prop 87 argued that:

  • California is the third-largest oil producing state and the only state that does not collect an oil extraction fee. Oil companies pay billions of dollars in drilling fees in Texas, Louisiana and Alaska.
  • California is the number one oil-consuming state. Fifty percent of the state's imported oil comes from Saudi Arabia and Iraq.
  • California consumers pay among the highest gas prices in the nation.
  • California air quality is the second worst in the nation. Pollution from gas powered vehicles is responsible for hundreds of thousands of cases of asthma and lung disease each year
  • Proposition 87 prohibits oil companies from raising gas prices to pass the tax on to consumers.
  • It provides consumers with rebates to buy clean cars and use clean energy.
  • It will make oil companies pay for cleaner energy, create thousands of jobs, and reduce air pollution.[5]


$61,886,129 was contributed to the campaign in favor of a "yes" vote on Proposition 87.[6]

Donors of $100,000 or more were:

Donor Amount
Stephen L. Bing $49,581,810
Vinod Khosla $2,043,051
Sergey Brin $1,000,000
Peter S. Bing $1,000,000
Wendy Schmidt $1,000,000
Lawrence E. Page $1,000,000
L. John Doerr $950,000
Robert J. Fisher $500,000
Mary Bing $400,000
Nathanial Simons Family Trust $225,000
Mark W. Heising $125,000
Jeff S. Skoll $125,000
William R. Hearst, III $100,000
Norman Lear $100,000
Natural Resources Defense Council $100,000
Western Milling $100,000
Daniel Reid Wilson $100,000
Stephen M. Silberstein $100,000
Irwin Mark Jacobs $100,000
Jill Laplante $100,000


"No on 87" website logo


The official voter guide arguments opposing Proposition 87 were signed by:

  • Larry McCarthy, president, California Taxpayers Association
  • Daniel Cunningham, president, California Small Business Alliance
  • Marian Bergeson, past president, California School Boards Association
  • Kevin R. Nida, president, California State Firefighters’ Association
  • Ray Holdsworth, past chair, California Chamber of Commerce
  • Allan Zaremberg, president, Californians Against Higher Taxes

Arguments against

Arguments made in opposition to Proposition 87 included:

  • Proposition 87 is not the way to advance needed energy alternatives.
  • It would spend $4 billion to fund a new state bureaucracy of 50 political appointees that is not required to produce results or be accountable to taxpayers
  • It allows the Authority to operate outside the state budget review process and the normal checks and balances that govern other agencies.
  • It allows the sale of billions of dollars in bonds it may not be able to repay and could force a state bailout at taxpayer expense.
  • Prop 87 does not require all the new taxes to be spent in California, much less in the U.S.
  • Economists report that higher taxes on in-state oil production would reduce in-state oil production and increase dependence on oil from the Middle East.[7]


$94,430,014 was contributed to the campaign in favor of a "no" vote on Proposition 87.[8]

Donors of $100,000 or more were:

Donor Amount
Chevron $38,000,000
AERA Energy $32,824,243
Occidental Oil and Gas $9,550,000
Conoco Philips $3,025,000
BP North America $3,000,000
Plains Exploration & Production $2,804,217
Berry Petroleum $1,200,000
Seneca Resources $530,000
Breitburn Energy $450,000
Veneco $276,910
DCORR, LLC $240,000
MacPherson Oil $183,776
Signal Hill Petroleum $182,246
E & B Natural Resources $167,000
Crimson Resource Management $160,000
TRC Operating Company $155,000
Linn Operating $130,500
San Joaquin Facilities Management $107,000
California Independent Petroleum Association $103,500
Vaquero Energy $100,000

Campaign finance fine

Aera Energy agreed on November 2, 2007 to pay a $15,000 fine to the Fair Political Practices Commission in California because it did not properly disclose through electronic filings three contributions totalling $5 million it made to fight Prop 87 in the waning weeks of the intense political struggle over this ballot measure.

Aera filed written disclosures of the late contributions. However, it failed to file the disclosures electronically. This meant that the discloures were not available for immediate placement on the state's website for public viewing.

California financial disclosure laws require that late contributions be electronically disclosed with 24 hours of being made. In this case, the donations should have been electronically disclosed by October 28, 2006.

A representative for Aera said the violation was inadvertent. The FPPC said there was no evidence the violation was intentional. The contribution was electronically disclosed by the recipient committee within the mandated time period.[9]

Path to the ballot

See also: California signature requirements

As an initiated constitutional amendment, 598,105 valid signatures were required to qualify Proposition 87 for the ballot.

Kimball Petition Management was paid $2,382,280.00 for its work collecting the required signatures.[10]

See also

External links

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Additional reading