California Oil Tax Pits Venture Capitalists Versus Big Oil

California Oil Tax Pits Venture Capitalists Versus Big Oil

mongabay.com

September 27, 2006

Oil firms are locked in a fierce battle with venture capitalists and environmentalists over Proposition 87, California’s proposed oil tax, according to an article in today’s issue of The Wall Street Journal. California votes on the initiative November 7.

Backing the proposition, which calls for a tax on oil output to fund conservation and alternative-energy initiatives, are some of the Silicon Valleys’s most prominent figures including Vinod Khosla, a venture capitalist (VC); Larry Page, a co-founder of Google; Wendy Schmidt, wife of Google Chief Executive Eric Schmidt; and John Doerr, a one of the best known VCs. California’s oil producers and refiners strongly oppose the measure which would result in up to $4 billion in higher production costs over the next decade.

A little more than half the money raised by the Prop 87 tax would be go towards programs to cut gasoline and diesel use, while 27% fund alternative-energy research at California universities. The rest, according to The Wall Street Journal, would be used to help alternative-energy start-ups, to retrain energy workers, and for administration.

Energy efficiency helped California grow an extra $31 billion finds study. Countering Bush administration claims to the contrary, environmental officials for the state of California and the Brazilian state of Sao Paulo have found significant evidence that greenhouse gas pollution can be substantially reduced at a profit rather than a cost. The study, commissioned by the William and Flora Hewlett Foundation, found that energy efficiency has helped the California economy grow an extra 3 percent – a $31 billion gain – compared to business as usual. Further, the researchers say that each Californian typically saved about $1,000 per year between 1975 and 1995 just through efficiency standards for buildings and appliances.

Venture Capitalists, China and Green Technology. A Bay Area venture capitalist with a storied past, has set his sights on “green technology” and ultimately China, after some compelling remarks from state representatives at a recent conference. Early this spring, Chinese officials named solar and clean coal technologies as two of their three pre-eminent priorities for investment and development in the near future. For a country with burgeoning energy needs surpassing what power is presently available, this is both realistic and positive news for environmentalists and economists alike. Hoping to capitalize, John Doerr and his associates are now funneling cash into the emergent green technology sector, which he, and an increasing number of other investors believe to be the next big thing.

California adopts massive solar energy projectThe California Public Utilities Commission approved a $2.9 billion program to make the state one of the world’s largest producers of solar power. The plan would add 3,000 megawatts of solar energy over 11 years through the installation of 1 million rooftop solar energy systems on homes, businesses, farms, schools and public buildings. The amount of electricity generated would be equivalent to about six new power stations. Solar power could save California utility customers an estimated $9 billion from a reduced need to build new power plants and purchase electricity supplies at peak demand.

Because nearly 10 percent of the tax would by earmarked for start-up companies, critics of the ballot measure say the venture industry is acting its own self-interest to pass the initiative.

“It’s one thing if you see someone championing a cause that they believe, rightly or wrongly, will benefit a wide group of people,” The Wall Street Journal quotes David Combs, president of Termo Co., a Long Beach, Calif., oil company, as saying. “But this is a very self-motivated bill. It’s benefiting the ethanol industry, which is already being subsidized.”

George Anders and Rebecca Buckman, authors of the article, write that Wendy Schmidt, a philanthropist and environmentalist who happens to be the wife of Google CEO Eric Schmidt, doesn’t see a problem with venture-capital investors possibly profiting from the proposition’s passage.

“Those who have donated money to help pass the proposition ‘are not the only ones that would profit from it,’ says Ms. Schmidt… “Society broadly profits from it. The oil companies are in a position to profit from it.'”

“[Oil companies] are ripping us off. There are cheaper alternatives to oil that they don’t want us to have,” the article quotes Mr. Khosla as saying.

This article uses information and quotes from “Venture Firms Ignite Bitter Fight With Push for California Oil Tax” by George Anders and Rebecca Buckman. The article appeared in the The Wall Street Journal on Wednesday, September 27, 2006.