The November 2006 California Ballot includes a measure called “California Clean Alternative Energy Act” (Prop 87). It is a measure that is likely to drastically diminish every Californian’s quality of life, while devastating the California economy.

First of all, it is one of those measures in the State of California that are proposed from time to time, that has a private citizen sponsor, committed to a personal political agenda, that persuades voters to give control over millions of dollars in public money to unaccountable political bodies, who in turn spend funds to further the sponsor’s political agenda, and, in this case, their economic benefits.

Proposition 87 is the creation of Vinod Kholsa, a Silicon Valley venture-capitalist and founding CEO of Sun Microsystems, Inc. Kholsa has a personal political cause of reducing America’s reliance on oil, and developing alternative fuel sources. Achieving his objectives would be good for California. In funding Prop. 87, Kholsa got the support of Stephen L. Bing, movie mogul/environmental activist and John Doerr, another billionaire venture-capitalist. The three funded Proposition 87 to the tune of $3 Million, and to date, have raised another $1.8 Million.

Proposition 87 would impose a tax on oil companies - a politically unsympathetic target. But the tax is not based on oil company profits, but rather on the amount of oil that oil companies extract from California annually. In other words, it is designed as a disincentive for oil companies to produce oil in the State of California. The effect of that will be the reduction of oil supplies in California and a resulting increase in prices at the pump.

The approximately $4 Billion annually that would be raised by this tax would be placed at the disposal of a non-elected group of political appointees in a revamped bureaucracy known as the California Alternative Advanced Transportation Financing Authority. The Authority has the authorization to dole out these public monies to accelerate the development and deployment of clean alternative energy technology. Other than an “annual report” the Authority has little accountability to the public or their elected representatives in the State Legislature. They can spend the money any way they choose as long as there is some plausible connection to alternative energy sources.

Prop. 87’s two stated goals are to reduce the use of petroleum in the State of California by 25% by the year 2017, and the replacement of the lost petroleum with clean energy sources. But, what if it accomplishes the first goal but not the second? It assumes that causing pain by depriving people of life’s necessities should be used as a way to force them to conform to politically correct behavior. That falls into the pattern of typical liberal thinking.

If Prop. 87’s clean alternative energy sources are not developed, or not developed fast enough to replace the oil lost following the 25% reduction, we are likely to see a return to long lines at the gasoline pumps, designated fill-up days and the reappearance of “no gasoline today” signs, or maybe just a dramatic spike in gasoline prices. There are many more implications of this that would have a significant adverse effect on the California economy, such as reducing State and local tax revenue from fuel purchases and reducing property taxes on oil reserves, thereby reducing revenue to California schools. Knowledgable sources estimate that the loss of funds to California schools could amount to $2 Billion.

No one opposes research and development of clean alternative energy sources, but there is little to suggest that as early as 2007 or even by 2017 we will have sufficient alternative energy sources to replace the diminished oil supplies in California. We shouldn’t start reducing our oil supplies until we know we have the alternative sources to replace them.

But the real problem with this measure is that someone is advocating that California should attempt to set goals through top-down coercion, forcing people along the paths chosen by a few who want to promote their personal agenda.

Further, the leading sponsors of this measure are venture-capitalists whose personal and professional investment specialty is ethanol and alternative energy companies - the very industry that Prop. 87 is designed to benefit.

(Primary Source: M. David Stirling, Pacific Legal Foundation)

Cross-posted at BEAR TO THE RIGHT

Technorati Tags: California,Alternative Energy,Oil, Prop 87

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1. It’s worth thinking a bit about how this prop affects Khosla Ventures. While it may seem noble of them to hel pthe enviornment it wil laos line their pockets. The companies htey invest in will have additonal sources of income from state sponsored research and will have a much higher probability of reaching a profitable exit.

   Comment by Steve — September 12, 2006 @ 3:39 pm

2. Exactly, Steve. That is the point of the last paragraph. All three of the backers are heavily invested in alternative fuel companies and they will personally stand to benefit financially in Prop. 87 passes.

   It is absolutely worth thinking about.

   Comment by Gary Aminoff — September 12, 2006 @ 3:42 pm

3. Sorry for asking this, but haven’t big, multy-national oil companies been doing the same thing to us, the American gas comsumers for that past hundred years or so? Making decisiones based on what they think will be the “better” choice when it comes to our future, economic streangth and ofcourse their own economic gaines? If so, why the craying by all you guys?

   Comment by John — October 30, 2006 @ 2:29 pm

4. I feel that although there may be big investors in this ethenol case…. We as Califorinans’ should set an example for the rest of the U.S and begin to research into alternative energy.YES ON PROP 87

   Comment by David — November 1, 2006 @ 2:17 pm

5. David,

   Because of the way this Proposition is drafted it is easy to miss the point. I wholeheartedly agree that we should begin to research alternative energy. I think we should put a major effort behind it. But this Proposition requires that we reduce our gasoline supplies in California by 25% BEFORE we have any alternative energy sources. Even if you have only basic economics you can see what a 25% reduction in the supply of gasoline will do to prices.

   Yes, let’s develop alternative energy sources, but let’s not reduce our available petroleum supplies before we have something to replace them with. This will lead to economic disaster.

   Comment by Gary Aminoff — November 1, 2006 @ 3:01 pm

6. Gary-

   You say that we must have the alternatives in place before we wean ourselves of oil. Unfortunately, no one has an incentive to develop the alternatives as long as oil is still readily available.

   Let’s face it, we are addicted to oil. As with any addiction, the addicted have no reason to bother to think about how to live without their “drug” unless you take the drug away from them. If you do, sure it hurts (e.g., gas prices may rise), but then you actually start getting creative about how to live without your “fix”. If gas prices are higher, people may start using public transport, buying green cars, demanding the ability to telecommute, etc.

   As for this being a “personal agenda”, and the parties backing it profiting from it - so what? A “personal agenda” becomes “leadership” when sanctioned by the people. I.e., when you vote an elected official into office, you are sanctioning their personal agenda (unless you are naive enough to think elected officials truly “represent” the will of the people). And that’s what a Proposition does - it asks the people for their approval.

   If the backers of the Proposition make some money off it, more power to them! They have the insight and the means to make a positive impact on the future of our state and country. Why shouldn’t they be rewarded? Isn’t that the American way?

   Comment by Jack Sprat — November 5, 2006 @ 2:00 pm

7. Jack,

   You have a valid point of view. Let’s reduce oil supplies to create the incentive to find alternative fuel sources. That is the same point of view the backers of this measure have. My concern is that if we reduce the oil supplies and don’t find alternative fuel sources we can have an economic crisis - either fuel shortages or much higher gas prices or both.

   I am also troubled by the fact that this provision gives $4 Billion to a group of 50 non-elected individuals to decide how to spend it, with no accountability to the public. They can blow through the money without having found alternative energy sources….and then what have we accomplished. They can also direct the money to pet projects that may not be productive and which benefit the very people who are directing where the money is spent.

   I would rather have private industry fund the research into alternative fuel sources such as Chevron and some of the other oil companies are doing. That way you know that they are going to watch how the money is spent and that it is being spent productively. The oil companies know that they have to find alternative fuel sources. They can see the writing on the wall. They will develop them more efficiently and probably less expensively than this proposition provides - without creating the economic crisis that will result if this proposition passes.

   Comment by Gary Aminoff — November 5, 2006 @ 2:59 pm