Ballot Boxing:

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It’s Hollywood versus the oil companies, and, for now, it’s about a draw.


Oil companies, including L.A.’s own Occidental Petroleum Corp., have put up most of the $51 million to oppose November ballot’s Proposition 87, which would impose a 6 percent tax on most oil produced in the state to fund alternative energy projects.


Normally, that would be enough money to sink any ballot measure. But into the breach has stepped Hollywood producer Stephen Bing, who has put up $40 million of his own money in support of Proposition 87, essentially matching the oil companies dollar for dollar.


Bing’s massive contributions are by far the most by an individual for or against a ballot initiative in California history.


“It’s unprecedented to have one individual going up against Big Oil, and what it means is that voters will now really get both sides,” said Robert Stern, president of the Center for Governmental Studies, a Los Angeles-based non-partisan think tank and political watchdog group.


Indeed, so much money has poured into the campaigns for and against Proposition 87 that it along with another measure imposing a $2.60 tax on cigarettes has driven up rates as much as 50 percent for television commercials.


Through its tax on oil produced from wells in California, Proposition 87 would raise an estimated $4 billion over the next 10 years. That money would then be turned over to an appointed board that would solicit bids for alternative energy projects, ranging from solar power to wind energy to ethanol production.


For California’s business community, the stakes with Proposition 87 are huge. If it passes, the measure will increase the cost of producing oil in California; opponents claim it could force marginal operations to shut down and make the state rely on expensive imported oil.


“It will make California, which is already a high-cost state for manufacturing, even more so because oil is such an essential commodity,” said Dorothy Rothrock, vice president of government relations for the California Manufacturers and Technology Association.


But proponents say the measure will open up a bonanza of investment in alternative fuel technologies, creating new industries and jobs. Indeed, besides Bing, the biggest supporters of the proposition are venture capitalists with investments in alternative fuel technologies.


“I’m not a big fan of taxes, but this is an extraordinary situation with global warming. Oil is a finite resource and we should be in the forefront in finding alternatives that offset the bad effects oil causes,” said Elon Musk, a local aerospace executive who has put $100,000 of his own money into the campaign.


Musk is the president of Redondo Beach-based Space Exploration and Technologies Inc. and a Pay Pal co-founder who also has investments in a solar power company and an electric car company.



Oil companies respond


The only major statewide poll on Proposition 87 through Sept. 28 was taken in late July, before the onslaught of commercials on both sides. At that time, according to the Field Poll, the measure had 52 percent support and 31 percent opposed.


Since then, the money has poured in by the millions; as of Sept. 28, both sides reported receiving totals of $45 million.


First came major contributions from the oil companies, particularly San Ramon-based Chevron Corp., which has put in a total of $22 million, and Aera Energy LLC, the Bakersfield-based joint venture between Shell Oil Co. and Exxon-Mobil Corp. that has contributed $12 million to date.


Occidental Petroleum, the nation’s fourth largest oil producer, has ponied up $6 million against Proposition 87.


“We have substantial operations in Kern County, Ventura County and the Sacramento Valley that would all be affected by this measure,” said Occidental spokesman Lawrence Meriage.


Furthermore, he said, “Occidental is already a substantial taxpayer in California. When people look at the industry as a whole, they forget that companies involved in the production of energy already pay substantial taxes to the state. And that’s in addition to the corporation tax which is higher than in most states.”


But the measure may have a greater impact on smaller oil operations. Take Torrance-based Drilling and Production Co., a family-run operation which produces roughly 200 barrels per day from its Bakersfield oil wells.


“Look, this industry crashed in 1986 and for the next 15 years, we deferred maintenance, laid people off and tried to hold on,” said Chris Hall, president of drilling and production. “Now, for the first time, we have some additional cash flow. I can tell you I’m spending every dime of that on rebuilding our infrastructure, fixing mechanical problems, hiring back some employees and engineers and drilling additional wells.”


Hall said that he has contributed $10,000 to the “No on 87” campaign.


“We already pay a tax on the oil produced, in addition to ad valorem property taxes, corporate taxes and sales taxes.” He added that any additional tax payouts “would keep us from implementing part of our maintenance and modernization program and boosting production levels.”


But Hall also gave another reason for his opposition, refuting proponents’ arguments that the measure would not result in higher energy costs for consumers.


“A barrel of oil that is produced in California is the cheapest and best source of oil for consumers in this state,” he said. “Passage of this measure would mean that more oil would have to be imported from other states or even overseas. Every additional barrel that is produced out of state is more expensive and therefore will cost consumers more.”


But proponents contend that small operations would not have to pay as much tax as major oil companies under the measure.


According to “Yes on 87” spokesman Yusef Robb, wells that produce less than 10 barrels of oil a day wouldn’t be taxed at all, unless the price of crude tops $50 a barrel (light sweet crude oil closed at $63 per barrel on the New York Mercantile Exchange on Sept. 28). Once the price crosses that threshold, the tax rate on these small wells is only 3 percent instead of 6 percent.


Robb added that the tax was necessary because “we need to jump start this industry. The technologies are there, but right now, the mass production necessary to make them affordable isn’t there yet.”


Sensing this opportunity, Silicon Valley venture capitalists have hopped on the Proposition 87 bandwagon, including Google Inc. co-founder Larry Page and John Doerr, who is a partner at the venture capital firm Kleiner Perkins Caufield & Byers. Both are giving in excess of $1 million.

Media shy


But none has come close to the contributions by Bing, who the Business Journal this year named as one of Los Angeles County’s richest residents with an estimated worth of $900 million.


The grandson of New York real estate tycoon Leo S. Bing (for whom the Bing Theatre at the Los Angeles County Museum of Art is named), Bing has used his fortune to launch a Los Angeles-based film production company, called Shangri-La Entertainment. One of the company’s biggest grossing films has been “Polar Express,” released in late 2004.


The media-shy Bing, 41, has been a prolific contributor to political campaigns, including $4.3 million to fight a redistricting measure on last November’s special election ballot and nearly $14 million to committees supporting 2004 Democratic presidential nominee John Kerry.


Bing’s publicist, Paul Bloch, said Bing would not comment for this story, nor would he offer any explanation for why Bing has contributed so much money.


The big question as the campaign enters its home stretch is whether Bing will continue to match the oil companies dollar-for-dollar. “In making these contributions, Bing hopes others will now step up and give themselves,” Robb said.


But even if Bing doesn’t give any more to the campaign, political analyst Stern said proponents already have more than enough money to get their message across.


“Usually, when there’s a lot of money spent on an initiative by those it targets, it goes down. But oil companies are not particularly popular right now and there’s money on the other side to exploit that,” Stern said.

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Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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