No on Measure O


The “O” in Measure O stands for “oil,” whose seekers would have to pay a premium for drilling in the city of Los Angeles if this measure passes. It’s not a terrible idea in principle, especially because L.A. is one of the few cities in the county that doesn’t already impose an extraction tax on oil drillers. But as proposed, L.A.’s tax would be excessive and duplicative, and would have a minuscule impact on city revenues.

Measure O would impose a $1.44-per-barrel tax on the companies operating the thousands of wells that tap into L.A.’s 55 known oil fields. Unfortunately, drillers have launched a disingenuous campaign to fight the tax, claiming that it would raise gasoline prices and cost local jobs. The first is an outright falsehood, and the second is unlikely. Los Angeles oil, as the drillers admit, is not the light, sweet crude that ends up in North American gas tanks; it’s lower-quality goo that’s more likely to be processed into roofing materials. The tax would have zero impact on prices at the pump, and by itself would probably lead to job cuts only if oil prices dropped precipitously, so that drillers couldn’t make enough money selling the stuff to make up for higher production costs. Nothing’s certain in life, but nobody expects oil prices to fall anytime soon.

Nonetheless, there’s a good case to be made against L.A.’s tax proposal. For one thing, it’s relatively high. Opponents point out that the average extraction tax imposed by the other cities in L.A. County that charge one is 72 cents a barrel, half what L.A. wants to charge. Moreover, most of those cities don’t impose L.A.’s high municipal business taxes, which oil drillers are already paying.


At the same time L.A. voters are considering Measure O, voters in Beverly Hills will be asked if they want to quintuple that city’s oil extraction tax. An operator of a slant well in Los Angeles who drills into an oil field below Beverly Hills (according to the Los Angeles Business Journal, there are three companies operating such wells) would have to pay both cities’ high taxes. Meanwhile, the California Legislature holds an annual debate on whether to impose a statewide oil extraction tax, a move we support. Yet if such a tax were approved and were combined with rising municipal taxes, the danger of killing jobs and causing economic damage would rise.

Los Angeles already has a terrible reputation as a city unfriendly to business; approving this tax would make that reputation worse. And it would generate just $4 million a year, an insignificant sum in a city with general fund revenues north of $4.3 billion. It’s not worth it. Vote no on Measure O.