"Californians For Clean Energy" Seek Part of Oil Profits

by Andy Kollmorgen, Podcast Editor, RenewableEnergyAccess.com

When Exxon-Mobile reported the highest annual profit of any company in U.S. history last year ($36.1 billion), advocates of clean energy -- along with economically squeezed motorists -- saw a way to balance the scales: direct a portion of the oil companies' windfall toward alternate sources of fuel. As prices at the pump climbed and accusations of price gouging ensued, the idea gained widespread support.

In Congress, however, the notion of private corporations giving up some of their earnings for the greater public good has not gained momentum, and the oil industry has steadfastly denied jacking up prices in the face of tightening supply. According to oil industry officials, the high cost of gasoline is a function of market forces beyond its control. Lackluster production from Iraq, Bolivia and Nigeria, and increased world demand, particularly from China, has driven up prices, industry officials say.

The price gouging case may be impossible to prove, but now Californians For Clean Energy (CFCE), an organization backed by Hollywood producer Steven Bing and Silicon Valley venture capitalist Vinod Khosla, has channeled popular sentiment into proposed legislation. The Clean Alternative Energy Initiative -- which, according to CFCE, is well on its way to the November 2006 ballot -- calls for a special tax on crude oil produced in or off the coast of California.

The tax revenue is to be used to ramp up development of cleaner fuels, the cars that use them, and other renewable energy projects. The goal is to reduce gas and diesel use by 25% over ten years. If the petition in circulation is signed by a little over 600,000 registered California voters, the Initiative will appear on the ballot. If passed, it will take effect in January 2007, and a state agency will distribute the funds, which will reportedly approach $380 million over ten years.

California oil producers and anti-tax groups oppose the Clean Alternative Energy Initiative, calling it a punitive measure that takes money from one energy interest and gives it to another. The California Chamber of Commerce and Californians Against Higher Taxes say the "extraction tax" will put California's oil industry, which produces about 773,000 barrels a day, at a competitive disadvantage and will result in higher consumer prices as buyers shop elsewhere for crude. Opponents of the Initiative also question its long-term environmental benefits. California leads the U.S. in vehicular gasoline consumption, about 43 million gallons a day.

Julie Buckner, who directs the CFCE's media and communication efforts, gives little credence to such claims. "I really don't take what the Chamber and the so-called Group [Californians Against Higher Taxes] have to say," said Buckner. "I think they are essentially a front for Big Oil."

Buckner also sees a contradiction in the oil industry's claim that it does not set gasoline prices, but that the Initiative would force the industry to pass the price increase along to consumers. "What will be interesting to see as this campaign unfolds is whether Big Oil is going to get their story straight," said Buckner. "How can they say on the one hand we have nothing to do with prices, and on the other hand we're going to have to pass this along?"

The California oil industry is engaging in scare tactics, Buckner said, and the threats of price hikes are groundless. "Our Initiative specifically prohibits the oil companies from passing along this tax to consumers. It is specifically prohibited in the language of the law." The consumer protection provision of the Initiative has a precedent in a 1980s Exxon-Mobile vs. Alabama case, in which the oil conglomerate was prohibited by the U.S. Supreme Court from raising gas prices to compensate for an extraction tax.

Three other states currently levy an extraction tax: Louisiana (12.5%), Alaska (9.0%), and Texas (4.6%). The proposed California Initiative would levy a tax ranging from 1.5% to 6% per barrel, depending on the price of crude. Based on 2006 price averages, the tax would generate about $2.50 per barrel.

CFCE says that, because of overwhelming public support, it is confident that the Clean Alternative Energy Initiative will make its way to the November ballot. "People are fed up over gas prices, they are outraged over oil company profits, they are concerned that we are too dependent on foreign oil, and they recognize that it's time to find alternatives," said Buckner.

Finding supporters for the Initiative will not be a problem, said Buckner, but canvassing the state to obtain over 600,000 verified signatures presents a challenge. "We have a number of steps and hurdles we have to go through in order to run a ballot of this size in the state of California," said Buckner.