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Arnie pushes PXP

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Based on Gov. Arnold Schwarzenegger’s proposed budget, if you’re against new offshore oil, you’re probably against state parks, too.

Schwarzenegger, a staunch proponent of Plains Exploration and Production Company’s (PXP) offshore oil proposal, tied millions in state parks funds to the project. The governor’s 2010-11 proposed budget would cut $140 million of general fund money for parks and offset the loss with royalties expected to come out of PXP’s project to drill in the Tranquillon Ridge of the coast of Lompoc.

“The governor’s budget assumes the State Lands Commission will approve the Tranquillon Ridge proposal,” the summary states. “If not approved by the commission, legislation will be necessary.”

But PXP’s project has already been denied—twice. First, the State Lands Commission denied the company’s proposal in 2009. The second defeat came after a bill by San Luis Obispo Assemblyman Sam Blakeslee, which sought to override the commission’s denial, passed the Assembly but stalled in the Senate.

Despite the bureaucratic lashing, PXP continued to press the project in the public-relations world, touting an ocean of supportive environmentalists. PXP’s agreement with an environmental coalition out of Santa Barbara County would shut down four offshore oil platforms in exchange for rights to drill in state waters.

Other groups, however, still oppose the project.

“We don’t really see the potential upside of a plan to stop drilling by drilling,” said Andrew Christie, director of the Santa Lucia Chapter of the Sierra Club.

Former Lt. Gov. John Garamendi, who held one of three seats on the Lands Commission and opposed the PXP project, has since moved on to a congressional seat.

“My position on the PXP deal remains unchanged,” Garamendi said in a statement. “Any decision on offshore oil drilling belongs at the California State Lands Commission. ... If Gov. Schwarzenegger insists that the fate of our state parks is derived from a single oil lease off the coast of Santa Barbara, he is presenting yet another false choice.”

Schwarzenegger’s desired sidekick, Santa Maria Sen. Abel Maldonado, could provide the swing vote at the commission. Maldonado was appointed lieutenant governor but hasn’t been confirmed by the Senate.

Why is this such a beloved project in the Schwarzenegger camp? It’s hard to say. Spokesman Aaron McLear told New Times to speak with the Department of Finance regarding any budget issues, but a call to the department wasn’t returned before press time. PXP donated $20,000 to Schwarzenegger’s re-election campaign in 2006.

PXP Vice President of Environmental Health Safety and Government Affairs Steve Rusch said the company wasn’t involved in placing the project in the state budget.

“We’re very supportive of the governor’s proposal to take this back to the State Lands Commission,” Rusch said. He added that the company has addressed many issues that contributed to earlier denials, including a lack of transparency and seeming inability to enforce the shutdown of existing platforms.

PXP hasn’t yet reapplied with the commission, and Rusch couldn’t say exactly when a new application would be submitted: “We’re still assessing the most efficient path to take at this point.”

According to PXP marketing materials, the Tranquillon Ridge project will provide California with about $4 billion over 14 years. In the budget proposal, however, the number dips to about $1.8 billion. The discrepancy is all about the expected price of oil. At $50 per barrel, for example, the estimated 90 billion barrels PXP believes are lying in the ridge would trigger a royalty rate of about 33 percent and generate about $1.8 billion for the state, State Lands Commission Executive Officer Paul Thayer said. If oil goes up to $100 per barrel, the royalty rate would be 48 percent and generate closer to $4 billion.

“The agreement is that PXP will not produce past 2022, so if the lease is approved now they’d have one less year to produce,” Thayer said. “So these figures are probably all a little high.”

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