It adds to the cost of crude pumped from wells. California is one of a few states without an extraction tax.
But California has other taxes on the oil industry that are comparable. The bill's author says it would increase tax revenues by $1 billion a year.
Opponents say it would lead to job losses and cheaper oil from out of state.
Wednesday, the full legislature debates the democratic budget proposal, which has a similar oil severance tax. But the governor and republicans consider the budget incomplete.