Under the Influence: Money and Power in Politics
Oil

Proposed City Tax's Big Opponent: Small Oil?

Janice Hahn proposed Measure O, but then voted against it, saying the oil companies would put up an expensive fight.  (OFA California/Flickr)
Los Angeles City Councilwoman Janice Hahn, who has declared that she will run for the Congressional seat being vacated by Jane Harman, originally came up with the idea to place a new tax on Los Angeles oil. She ultimately voted against putting her own proposed tax on the March 2011 ballot. Her reason? She said big oil would pour money into the anti-tax campaign and crush the measure.


The proposed tax made the ballot anyway, however, thanks to support from the rest of the City Council. If passed by voters in March, the tax, called Measure O, would levy $1.44 on every barrel of oil extracted within city limits.

Contrary to Hahn's prediction, it has actually been small oil companies, not the major corporations, that have banded together to fight the measure.

The No on Prop O campaign has so far received $50,000 in contributions from the California Independent Petroleum PAC and has spent about $29,000 on campaign consultants, according to campaign disclosure statements from the City Ethics Commission.

Some local oil companies might just be five-person operations and especially vulnerable to any new taxes, said Scott Macdonald, a spokesperson for the No on Prop O campaign.

"The L.A City Council wants you to think that they're taxing big oil," Macdonald said. "They're not taxing big oil. There are no big oil companies in the City of Los Angeles. They are taxing small and medium-sized businesses who hire independent contractors to do their work."

Proponents of the tax argue that most states and cities already have an extraction tax. And council members say it would bring $4 million in revenue every year to the city.

The proposed extraction tax on Los Angeles oil would be more than double that of neighboring cities. "Long Beach has a 40-cent-per-barrel tax, Signal Hill 60 cents and Seal Beach 58 cents," according to the Los Angeles Business Journal.

Councilman Bernard Parks told the Business Journal that a higher tax for Los Angeles was necessary in order to sell the measure to voters.

The opposition is sponsored by the California Independent Petroleum Association, "a non-profit, non-partisan trade association representing approximately 450 independent crude oil and natural gas producers," according to its website.

CIPA has given more than $400,000 to California candidates from 2001 to 2010. Sixty-two percent of those candidates were Republicans.

It's tough to know how the supporters of the tax are doing. A committee to support Measure O was just formed, and its first campaign disclosure statement isn't due until February 24.

The opposition's next financial statement is also due February 24.

The No on Prop O website boasts opposition from various business groups, including the Los Angeles Area Chamber of Commerce.

The California Hispanic Chambers of Commerce, Regional Black Chamber of Commerce of the San Fernando Valley, the Asian Business Association in Los Angeles, the National Black Business Association and the International African and African American Chamber of Commerce are also listed as opponents.

"Before considering any tax, we want to see the local government decrease its bureaucracy," the Los Angeles Metropolitan Hispanic Chamber of Commerce wrote in an email statement.

"The economic situation that we are in currently is obviously horrendous, and unfortunately small businesses, that are often the core of these organizations, are hit the hardest," No on Prop O's Macdonald said.

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