Domestic Policy

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  Oil Firms Vow To Fight Schwarzenegger'S Tax ProposalNovember 06, 1998 21:25 Reporting from Sacramento — California oil producers vowed Thursday to wage an all-out lobbying battle against Gov. Arnold Schwarzenegger's call for a 9.9% state tax on every barrel of crude pumped out of the ground.

The governor said the tax was an important part of a budget-balancing solution at a time of economic crisis in the state. But the oil industry warned it would mean higher gasoline prices during a recession.

The governor asked for the levy as part of a package of proposed new revenues aimed at raising $4.7 billion to fill about half of an $11.2-billion hole in this year's budget. The remainder of the deficit would be offset by proposed spending cuts.

"We have drastic problems that require drastic and immediate action," Schwarzenegger said just after calling a special session of the Legislature.

The proposed oil tax would raise $528 million in the fiscal year that ends June 30 and $1.2 billion the following year, according to the state Department of Finance.

The governor's proposal would make California producers the most heavily taxed in the nation and "would decimate drilling programs" here, said Rock Zierman, chief executive of the California Independent Petroleum Assn., a producer trade group.

Representatives of the state's top petroleum companies who met with the governor's staff Thursday morning "expressed our complete opposition to this proposal," said oil industry lobbyist Catherine Reheis-Boyd.

Currently, California, the country's third-biggest-producing state, is the only one that does not collect a substantial extraction tax on oil at the wellhead. But producers counter that they pay plenty of other taxes, including local property taxes on oil reserves and income taxes.