Califonia votes to tax oil


"When you have so much spending occurring on a couple of initiatives, you have to wonder how the voters will get information on other measures on the ballot," said Mark Baldassare, executive director of the Public Policy Institute of California in San Francisco.

Tobacco firms already have committed $40 million to defeat Proposition 86, which would raise the state cigarette excise tax by $2.60 a pack to $3.47. The money would fund emergency services, children’s health care and tobacco-prevention programs.

Oil companies since January have pumped in the bulk of about $35 million contributed to kill Proposition 87, which would impose a tax on oil producers in California. The tax would range between 1.5 percent to 6 percent, depending on the price of oil per barrel. The aim is to raise $4 billion for researching and producing alternative fuels and energy.

It’s not a coincidence that the oil and tobacco industries are out front in spending money, said Steve Swatt, a senior consultant in media relations for Porter Novelli.

"These are two of the most P.R.-challenged industries. To make up that credibility problem, they have to spend huge amounts of money," Swatt said. "When you have a wealthy, deep-pocket special interest that is at risk because of one initiative, they will write checks like there is no tomorrow because so much is at stake."

Although election day is nearly two months away, the campaign contributions on these two measures already rival such previous big expenditures as an estimated $300 million that poured in from all sides for last November’s special election.

Even more surprising than the amount of money that the forces to defeat Prop. 86 and Prop. 87 have amassed is the early media blitz, Field Poll director Mark DiCamillo said.

In the case of Prop. 87, both sides started running television commercials on Aug. 8, three months before the Nov. 7 general election. No on Prop. 86 ads have been running since mid-August and will stay on the air until Election Day.

"I think election politics in California is changing. … Some campaign consultants see the advantage to start early, but the key is whether they have the resources to keep it going," he said.

R.J. Reynolds Tobacco Co. plans to fight until the end. It warned in a quarterly profits report that its earnings might be depressed this fall as it spends $40 million in four states, campaigning against anti-smoking initiatives.

"It is in our best interest to fight the proposition," said Frank McConnell, a spokesman for R.J. Reynolds, which has contributed $9 million to date to fight the measure. "The impact to our business of Prop. 86 passing is far greater than the amount of money we will spend opposing it."

Philip Morris USA Inc. has poured $26 million into another campaign account opposing Prop. 86.

"It’s perfectly predictable — when an industry is threatened, it uses its deep pockets to fight and protect its interests," said John Matsusaka, president of the Initiative and Referendum Institute at the University of Southern California.

That aggressive advertising is making it harder for other ballot measures to find a place in the market. Unlike candidates, propositions are not guaranteed a low rate for television commercials.

"It’s driving the rates up fairly significantly," said Paul Hefner, a spokesman for the Rebuild California Plan, which is promoting the bond package, which includes measures to improve flood protection and build new schools and highways.

Hefner said the bond campaign has had to adjust its strategy in the wake of the big expenditures.

"With the rates higher, our money doesn’t go as far as we want it to go," he said. "We’re buying time earlier than we might otherwise to try to lock in a rate."

But there is still a risk that the five bond measures, along with other campaigns without deep pockets, could get drowned out.

"In some ways, the bond measures are the really big one on the ballot, but voters might be going to go into the election without hearing much one way or the other," said Matsusaka. "They will end up voting on their instincts."

Anthony Rubenstein, a former Hollywood screenwriter and executive who is the mastermind behind Prop. 87, said his team decided to start its TV campaign early because it had heard that the opposition was about to start running television commercials. Prop. 87 seeks to reduce petroleum consumption by 25 percent by establishing an estimated $4 billion program for research and development in alternative fuels and energy.

Nick DeLuca, a spokesman for No on 87, said the campaign decided to run the ads early because the issue was complicated and the public needed to know why the initiative was a bad idea.

"Our intent was to communicate that this was a significant issue that can affect gas prices," DeLuca said.

If the money pouring into both campaigns so far is any indication, Prop. 87 could end up being a bloody fight until the bitter end.

Large oil companies have led the charge in opposing Prop. 87 — they have pumped in most of the $35 million contributed since January.

The fight is being led by San Ramon’s Chevron Corp., which has contributed $13.1 million, followed by Aera Energy LLP’s $12.6 million and Occidental Oil and Gas Corp.’s $4.75 million.

Not to be outdone, supporters also have been writing big checks, totaling $21.8 million since the beginning of the year.

The supporters are led by Stephen Bing, a Hollywood mogul who has been a generous donor to largely Democratic causes. So far he has contributed about $16.5 million.

Other big donors to the Yes on Prop. 87 campaign are from the Silicon Valley. Google co-founder and president Larry Page has plunked down $1 million, while legendary high-tech venture capitalist John Doerr and his colleague Vinod Khosla at Kleiner, Perkins, Caufield & Byers in Menlo Park have given $950,000 and $1.1 million, respectively.

Carla Hass, spokeswoman for the No on Prop. 86 campaign, said advertising early was part of their strategy as well.

"With 12 other propositions on the ballot, it is important for voters to be able to distinguish one from another," she said.

To date, supporters of Prop. 86 have aired only one television commercial in the Sacramento area, and they said they expect to get outspent 10 to 1. The proponents have put in $11 million, about 80 percent of that coming from hospitals.

"We’re never going to be able to keep up with big tobacco," said Jan Emerson, spokeswoman for the California Hospital Association. "People need to see through that — they are going to spend whatever they have trying to protect their bottom line."

Proposition 86

A cigarette tax increase of $2.60 per pack to fund emergency services, children’s health care and other tobacco-prevention programs. The largest share of the $2 billion that is expected to be generated annually would go toward hospital emergency care services. But the funds will also be used for everything from providing health care for all uninsured California children to prostate cancer treatment to tobacco-cessation services and research.

Contributions for: $11 million, dominated by the California Hospitals Committee on Issues ($8.9 million); American Cancer Society, California Division ($1.7 million); American Heart Association ($536,000)

Contributions against: $40.5 million led by Philip Morris USA Inc. ($26.2 million); R.J. Reynolds Tobacco Co. ($9 million); U.S. Smokeless Tobacco ($1.1 million)

Proposition 87

An oil production tax of 1.5 percent to 6 percent (depending on price of oil per barrel) to raise $4 billion a year for researching and producing alternative fuels and energy.

Contributions for: $21.8 million led by Hollywood mogul Stephen Bing ($16.5 million); Google co-founder Larry Page ($1 million), and venture capitalists John Doerr ($950,000) and Vinod Khosla ($1.1 million)

Contributions against: $35.1 million led by Chevron Corp. ($13.1 million); Aera Energy LLP ($12.6 million), and Occidental Oil and Gas Corp. ($4.75 million)


The top reported donors for and against two key state ballot measures:

Proposition 86

(Tobacco tax increase)

— For: California Hospitals Committee on Issues, $8.9 million

— Against: Philip Morris, $26.2 million

Proposition 87

(Tax on oil production)

— For: Hollywood mogul Stephen Bing, $16.5 million

— Against: Chevron, $13.1 million

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