Big Oil Misleads on California Renewable Energy Initiative

In a few months, Californians will vote on Proposition 87, a ballot initiative that aims to reduce gasoline usage by 25 percent over 10 years. Specifically, the initiative creates an alternative energy fund by making oil companies pay extraction fees for drilling in California, much like they do in Louisiana, Alaska, and Texas.

Not surprisingly, the oil industry-funded opposition campaign is misleading the public about its impact:

Raising the cost of California oil will make companies more willing to import foreign oil into the state, which could raise pump prices, said Al Lundeen, a spokesman for the anti-Prop. 87 forces.

“We think it will very clearly impact consumers,” he said.

The initiative also would create a new state bureaucracy to administer the tax money, he said, and while California is one of few oil-producing states without an oil severance tax like this one, the other taxes it charges oil producers more than make up for that.

The facts show otherwise:

1. Prop 87 would not increase gas prices. “Since the tax would decline as the price of oil fell, it would not hurt production or affect gasoline prices, said Severin Borenstein, director of the University of California Energy Institute. ‘No one will shut down a well because of this,’ Borenstein said, adding that at most, it will discourage new oil-production projects. ‘I have seen no evidence this incremental loss in profit (for the oil companies) is significant.'”

2) Prop 87 would not create a new level of bureaucracy. Section 6(b) of the initiative reorganizes and strengthens a current state board called the California Alternative and Advanced Transportation Financing Authority. The amendment will rename the board the California Energy Alternatives Program Authority, and expand the board from 4 to 9 members to include experts on energy markets, alternative energy, consumer advocacy, and public health.

3) Oil companies do not pay their fair share to the state of California. “Borenstein said the tax is not that high, noting that other states already have higher taxes on oil production, including Texas. California oil producers currently pay a severance fee, which is significantly lower than in other states, Borenstein added.”

UPDATE: University of California Energy Institute director Severin Borenstein contacted Think Progress to tell us his quote in the first bullet point is inaccurate. (The Stockton Record did not quote him correctly.) According to Borenstein a better quote would be, “Oil is sold in a world market and the effect on production from Prop 87 would be negligible in that market. As a result, Prop 87 will not affect oil prices and will not affect gasoline prices.”