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Legislature says no to drilling in state waters

Upholding a State Lands Commission ruling, the legislature decides against authorizing a PXP lease agreement

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The California Legislature refused to approve a budget provision the governor sought that would have permitted the first offshore drilling in state waters in 41 years, thereby upholding the long-standing authority of the State Lands Commission to approve leases.

Commission chair Lt. Gov. John Garamendi called the attempt by Gov. Arnold Schwarzenegger to bypass the commission a “terrible precedent” and cautioned it would have opened the floodgates for more offshore leases in both state and federal waters.

“For almost 80 years, the State Lands Commission has protected the property of the citizens of California,” Garamendi said. “This is the first attempt in those 80 years to do an end run around the State Lands Commission’s work.”

Originally proposed in 2008, a lease agreement would have allowed Houston-based Plains Exploration and Production Company (PXP) to slant drill from Platform Irene into the Tranquillon Ridge Oil and Gas Range, located in state waters three miles off the coast near Lompoc.

The agreement first came before the State Lands Commission in January, which rejected it by a 2-1 vote. In May, the state’s Department of Finance proposed authorizing the lease as part of Schwarzenegger’s Budget Revision. In response, commission members Garamendi and State Controller John Chiang voted 2-0 on July 1 to approve a resolution condemning the governor’s plan.

 The bill passed through the State Senate 21-18 before it reached the Assembly, where it failed by a vote of 
43-28.

In a statement released just after the vote, Garamendi congratulated Assembly members for denying what would have been a “bad public policy.”

“The timing could not have been worse, because the federal government has expressed an interest in drilling off our pristine coast,” Garamendi said in the release. “Today, the California Assembly showed that they will not tolerate actions that will endanger our coast with a flawed drilling proposal.”

 If the bill had passed, it would have taken the leasing authority out of the hands of the State Lands Commission and established an ad hoc committee, made up of the attorney general and two Schwarzenegger appointees, the director of California Environmental Protection Agency and Secretary of Resources.

Garamendi said the move amounted to “bragging rights” for the Governor and added that he supports an oil extraction fee that could generate $1.2 billion in immediate revenue for the state.

California is the only state that doesn’t bill oil companies for the right to drill on state property. Gov. Schwarzenegger, who once opposed offshore drilling, announced his support for adding the charge earlier this year.

Had the lease agreement been approved, PXP would have shut down its four platforms off the coast of Santa Barbara County by 2022. The pledge helped gain support for the project from the Environmental Defense Council, Get Oil Out!, and the Citizens Planning Association of Santa Barbara.

As matters stand, the offshore platforms, which currently are drilling in federal waters, will continue to operate indefinitely.

“That’s not to say that by 2022 they haven’t decided that it makes sense to shut them down,” said Kevin Drude, Santa Barbara County energy specialist. “But we don’t put any time on them. That’s driven by economics.”

Linda Krop, attorney for the Environmental Defense Center, said her group still supports the terms it negotiated with PXP and that the concessions would benefit the state in the long run.

“Not only would we shut down more platforms, but this is an area that’s a target for more federal oil and gas leasing,” she said. “If these platforms are shut down, there’s less of a threat of new leasing in our area.”

In the wake of the budget decision, Krop said the project is back at square one.

“This was an attempt to set up a new body to consider it, so it’s not like it was denial of the project,” Krop said. “We would still like to bring this back to the full State Lands Commission at some point.”

The original lease agreement also had the support of Rep. Lois Capps, a Santa Barbara Democrat, who later felt the budget crisis was the wrong circumstance for a decision of such magnitude.

“Relying on offshore drilling as a band-aid for the state’s budget woes sets a bad precedent,” Capps’ spokeswoman, Emily Kryder, said in an email. “These decisions on important energy and environmental policy should remain with the appropriate policy makers—the State Lands Commission and the Coastal Commission—rather than allow legislators and the governor to try and use offshore drilling as a silver bullet for their budgetary challenges.”

PXP expected the project to bring $100 million to the state immediately, a loan against future royalties that would have to be repaid within the next several years.

Over the 14 years of the proposed project, PXP estimated the state would have received a $1.8 billion windfall.

In a press release following the budget vote, company spokesman Scott Winters said the company isn’t giving up on the project.

“The T-Ridge project continues to maintain strong support and has benefited from the attention it received during the recent high profile budget debate,” Winters said in the release. “PXP intends to continue pushing for the project based on its merits to the state of California and address any misconceptions that groups may have regarding the project.”

Also in the release, Steve Rusch, who’s vice president of environmental, health and safety, and government affairs of PXP, said the company would continue working with state leaders on an agreement “to build on the momentum generated by the administration’s and Senate’s bipartisan support.”

 In addition to eventually shutting down their offshore platforms, PXP would have also eliminated two process facilities near Lompoc and Gaviota, donating about 4,000 acres of land to the Trust for Public Land for conservation. PXP had also pledged to donate $1.5 million to Santa Barbara County for new bus technology and to lessen greenhouse gas emissions caused by oil extraction and production.

Whether the state would have had the power to actually enforce the terms of the lease is up for debate.

Garamendi said the state doesn’t currently have the authority to shut down production from the platforms—which are located in federal waters—and the platforms can’t be removed without the permission of federal government and their owners.

Jeremy Thomas is a staff writer at New Times’ sister newspaper, the Santa Maria Sun. Contact him at jthomas@santamariasun.com.

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