Californians will find more than a dozen initiatives on their ballot this Nov. 7, including one aimed at helping them kick the oil habit. Proposition 87 would raise $4 billion over 10 years for the California Energy Alternatives Program Authority by taxing oil produced in the state. Part of an effort to reduce oil consumption by 25 percent over the next 10 years, the tax would fund the development of alternative fuels, such as ethanol and renewable energy, and provide incentives for consumers to use them.
California leads the nation in oil use and produces about 37 percent of what it uses. The state is third behind Texas and Alaska in oil production, accounting for about 12 percent of U.S. production.
"Right now, Californians only have one choice to fuel their vehicles," says Yusef Robb, a spokesman for the Yes on 87 campaign. "Prop. 87 will bring choices to the market. Choice lowers prices. And these choices are cleaner, they’re cheaper, and they’re made right here at home in the U.S." Opponents of Proposition 87 — primarily Chevron and an ExxonMobil/Shell partnership called Aera Energy — have poured more than $53 million into fighting it. Although the measure prohibits oil companies from passing the tax on to consumers, opponents say that if it passes, Californians will pay more at the pump.
Al Lundeen, a spokesman for No on 87, says that by making oil production in California more expensive, Proposition 87 will force producers to import more oil from outside the state. Foreign oil can cost more to refine, says Lundeen, and shipping it adds expense as well. "Those are the kinds of costs," he says, "that lawfully get passed through at the gas pump." Proposition 87, he adds, is "going to make us more reliant on foreign oil, and that puts us in a more vulnerable situation."
But others say 87 is designed to do the opposite: to help California break free of reliance on oil, wherever it’s produced. With global demand — mostly from China and India — increasing dramatically, alternative fuels offer an escape from the pinch of increasing competition for oil. "The ability of the petroleum industry to come up with new supplies is not keeping pace with demand," says John Shears, the research coordinator for the Center for Energy Efficiency and Renewable Technologies in Sacramento.
Proposition 87’s supporters are serious about bringing more competition to the market. The biggest underwriter of the Yes on 87 campaign, by far, is Hollywood producer Stephen Bing, who has contributed some $40 million. But $2 million has also come from venture capitalists Vinod Khosla and John Doerr. Khosla is heavily invested in a company called Cilion, which plans to build three ethanol plants in California by 2008, and he and Doerr have invested in another ethanol-refining company called Altra.
Shears says that in the absence of any meaningful federal initiative to increase fuel economy, develop alternative fuels, or address global warming, it’s up to states to take the lead. And, he says, Proposition 87 "can work synergistically" with other new California laws, such as the recently passed Global Warming Solutions Act, which requires the state to reduce its greenhouse gas emissions 25 percent by 2020. "Not any one single pathway is going to help us deal with the climate issues," he says. "The state has to look at all of the different pathways that are available to it."
The author is HCN’s West Coast correspondent.