California Proposition 87, Alternative Energy Oil Tax (2006)
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. The great majority of the funds spent to promote Proposition 87 came from one individual, Stephen Bing, who contributed $49.5 million. 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".
If Proposition 87 had been approved, it would have:
- Added an entirely new Article XXXVI to the California Constitution.
- Added a new Section 14 to Article XIII B of the California Constitution.
Text of measure
The ballot title was:
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.
- 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.
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
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.
$61,886,129 was contributed to the campaign in favor of a "yes" vote on Proposition 87.
Donors of $100,000 or more were:
|Stephen L. Bing||$49,581,810|
|Peter S. Bing||$1,000,000|
|Lawrence E. Page||$1,000,000|
|L. John Doerr||$950,000|
|Robert J. Fisher||$500,000|
|Nathanial Simons Family Trust||$225,000|
|Mark W. Heising||$125,000|
|Jeff S. Skoll||$125,000|
|William R. Hearst, III||$100,000|
|Natural Resources Defense Council||$100,000|
|Daniel Reid Wilson||$100,000|
|Stephen M. Silberstein||$100,000|
|Irwin Mark Jacobs||$100,000|
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 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.
$94,430,014 was contributed to the campaign in favor of a "no" vote on Proposition 87.
Donors of $100,000 or more were:
|Occidental Oil and Gas||$9,550,000|
|BP North America||$3,000,000|
|Plains Exploration & Production||$2,804,217|
|Signal Hill Petroleum||$182,246|
|E & B Natural Resources||$167,000|
|Crimson Resource Management||$160,000|
|TRC Operating Company||$155,000|
|San Joaquin Facilities Management||$107,000|
|California Independent Petroleum Association||$103,500|
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.
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.
- Official California Voter Pamphlet information about Proposition 87
- PDF of the mailed November 7, 2006 voter guide for Proposition 87
- Proposition 87 in the Smart Voter Guide
- Analysis of Proposition 87 from the Institute of Governmental Studies
- Guide to Proposition 87 from the California Voter Foundation
- Summary of donors to and against 87 from Cal-Access
- Donors for and against Proposition 87 from Follow The Money
- Official declaration of the November 7, 2006 ballot proposition election results
- Los Angeles Times, "No on Proposition 87", September 26, 2006
- R Squared Energy, "Prop 87: What went wrong?", November 8, 2006
- Vinod Khosla, Venture Beat, "Don't let the big oil money confuse you on Prop 87", October 27, 2006
- Robert Rapier, Venture Beat, "Prop 87 deceptively marketed", October 28, 2006
- ↑ Gay and Lesbian Times, "Calif. initiative campaigns cost $227 million", February 12, 2009
- ↑ Follow the Money, Californians for Clean Alternative Energy
- ↑ Stephen Bing's New Endeavour
- ↑ California Voter Guide, "Arguments for and against Proposition 87
- ↑ League of Women Voters ballot measure analysis of Proposition 87
- ↑ Follow the Money, "Donors to Yes on 87"
- ↑ League of Women Voters, "Analysis of Proposition 87"
- ↑ Follow the Money, "Donors to No on 87"
- ↑ Energy firm to pay $15,000 fine for elections violation
- ↑ Cal-Access, "Expenditure Details, Yes on 87 Committee"