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PRI's Environmental News Magazine

Taxing California Crude

Air Date: Week of February 10, 2006

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A proposed California constitutional amendment seeks to tax state oil production to fund alternative energy research and development. Host Steve Curwood talks with Marc Lifsher, who reported the story for the Los Angeles Times.

Transcript

CURWOOD: A group of Californians has come up with an innovative way to spur the alternative energy market in their state. Californians for Clean Alternative Energy is proposing an amendment to the state’s constitution that would place a tax on oil production in California.

Many other states, including Texas and Louisiana, already have so-called “wellhead” taxes, but none of those states specifically direct the revenue towards promoting alternative fuels. The proposed California measure would go to fund research and development in wind, solar, hydrogen and other sustainable forms of energy, to the tune of nearly four billion dollars over ten years.

Opponents to the initiative say it will drive up the cost of gas at the pump. Joining me from Sacramento is Marc Lifsher. He’s been covering the story for The Los Angeles Times. How are you, Marc?

LIFSHER: I’m fine, thanks.

CURWOOD: So tell me, who’s going to be paying this tax? Californians or the oil companies?

LIFSHER: It’s totally unclear. If this makes it to the ballot and passes in November, it would put a severance tax, or an extraction tax, on oil as it comes out of the ground at the wellhead. The language of the proposed initiative says that the oil companies would have to eat the cost of this tax, but the oil industry says it will be passed along in one way or another.

CURWOOD: Now, if this initiative is approved, Marc, it could cost oil companies, what, up to about $380, maybe $400 million? So, for an oil company, or for the oil companies there in California, how much is $380, $400 million? What does that mean to their finances?

LIFSHER: Well, for a company like Exxon-Mobile or Chevron or Occidental, which are, in one version or another, in the top producers, it could…it would probably be kind of a negligible amount, considering the price is $65 a barrel or more.

CURWOOD: So, for the big boys it’s not much money?

LIFSHER: No. But they argue, and their independent oil producers and the oil companies argue, that just because California is the only oil producing state in the United States that doesn’t have one of these wellhead extraction taxes, it doesn’t mean they don’t pay a lot of taxes. California has very steep corporate income taxes. It also has high property taxes on the oil in the reserves. So, they say they’ll be paying more than the fair share they already pay.

CURWOOD: California sometimes leads the way in this country with, what, pollution regulations and such. In this case, I guess being the only state that doesn’t have a tax on oil of the wellhead it’s following the rest of the pack, but with an important twist: to apply this to alternative energy. How important is this as a precedent if it comes to pass?

LIFSHER: It would pour millions of dollars into the universities for research. It would help inventors and scientists and developers of these products all across the country, particularly in California. It would also help commercialize projects to see if they’re viable, and make them viable. So it would provide up to four billion dollars over ten years; that’s a lot of money. The federal government talks a good game, but they don’t really spend that much.

CURWOOD: Marc Lifsher is a staff writer for The Los Angeles Times based in Sacramento, California. Marc, thanks so much.

LIFSHER: Thank you.

 

 

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