Proposition O Would Impose Tax on Oil Companies

A proposition on Tuesday's ballot that would slap a $1.44 per barrel tax on oil extracted within city limits has been cast by supporters as a new revenue source for the cash-strapped city, but opponents say it would hurt small businesses and cost jobs.

Proposition O is one of the 10 ballot measures in the March 8 municipal election and it has received considerable attention. Oil companies and other opponents have contributed more than $400,000 to the "Stop the L.A. Oil Tax, No on Prop O" committee that is sponsored by the California Independent Petroleum Association. The Committee to Support Measure O and P, the latter requiring the city to maintain an emergency reserve fund, has raised just $11,500.

Proposition O was endorsed by City Council members Jan Perry, Bernard C. Parks and Paul Koretz, who argue that it will generate $4 million annually in general fund revenue that can be spent on city services such as police and fire and programs at city parks and libraries. Other cities, such as Beverly Hills, Inglewood, Long Beach and Seal Beach, have their own extraction tax for oil companies. There are 55 known oil fields within the nation's second-largest city with wells scattered from Venice to Wilmington to Sherman Oaks to downtown.

Scott Mcdonald, a spokesman for "No on Prop. O," said the measure should be rejected by voters because imposing a new tax while the economy remains sluggish would lead to layoffs. He also said the $4 million generated by the new tax would hardly help the city's dire $350 million budget deficit.

Small-business owners have come out against Proposition O, saying it would have a trickle-down effect on local businesses.

“Small- and minority-owned businesses are especially vulnerable to a new tax that would take $4 million out of the economy each year,” said Earl “Skip” Cooper, president and CEO of the National Black Business Association. “That doesn’t just hit those working in the oil fields. Businesses from the dry cleaners to your favorite local restaurant all feel the pinch as spending is reduced because of a new tax.”

Opponents also point out that the measure doesn't target wealthy, well-known oil companies such as Chevron, Texaco or Shell.

“Despite the city’s claim, Prop. O is not a tax on big oil companies,” said Gregory Brown, executive vice president and general counsel for local oil producer BreitBurn. “It’s a tax largely directed at the small production facilities in Los Angeles, local businesses and individuals."

The editorial boards of the Los Angeles Times and the Los Angeles Daily News have come against the measure.

One of the arguments in favor of Proposition O is that it would hold oil companies accountable for drilling in neighborhoods, lowering property values and damaging the environment.

The Sierra Club and the Coalition for Clean Air have endorsed the measure.

"Oil drillers have profited for decades from our natural resources,” said Martin Schlageter of the Clean Air Coalition. “It's time for polluters to pony up—especially during this budget crisis—and mitigate the quality-of-life impacts the industry has imposed on residents.”