First New Oil Drilling in State Waters in 40 Years Part of Governor’s Revised Budget Plan

SACRAMENTO — Among the proposals in the Capital A austere revised budget Governor Arnold Schwarzenegger unveiled May 14 is collecting $100 million by allowing new oil drilling in state waters off the California coast for the first time in 40 years.

Awarding the lease would nullify a January ruling by the three-person State Lands Commission, which regulates drilling in the first three miles off the California coast.

The commission rejected the lease sought by the Plains Exploration and Production Company to drill in Tranquillon Ridge, offshore from Vandenberg Air Force Base near Lompoc on a 2 to 1 vote, despite support by environmental groups.

“I am concerned about setting a precedent in approving California’s first offshore oil lease in 40 years,” said State Controller John Chiang in defending his “no” vote on the commission, which has not approved an offshore oil lease since the 1969 Santa Barbara oil spill.

The only “aye” vote came from Schwarzenegger’s representative on the commission.

The GOP governor reiterated his long-standing opposition to offshore drilling in June 2008, breaking with then-President Bush and U.S. Senator John McCain, who called for lifting the ban.

“California’s coastline is an international treasure,” Schwarzenegger said at the time. “I do not support lifting this moratorium on new drilling off our coast.”

The Schwarzenegger administration stresses that only this one lease will be sold, drilling will be done from an existing platform in federal waters and the project enjoys broad environmental support.

Fiscally, the deal is also attractive to a state facing a new budget shortfall of at least $15.4 billion because the drillers have committed to immediately write the state a check for $100 million after legislation authorizing the lease’s sale is signed into law – despite it taking months before any oil is extracted.

The right to drill in the Tranquillon Ridge Field has a checkered history. Nuevo Energy Company sought a lease to drill in 2002. Environmentalists opposed the move. Santa Barbara County, one of the entities that must approve leases, denied the bid.

In March 2005, Plains Exploration and Production Company, PXP, applied to the Lands Commission and the county to slant drill on the site, using an existing oil platform Irene, located just outside state waters. An estimated 100 million barrels of oil are in the field.

Environmentalists opposed the plan.

However in April 2008, PXP struck a deal with the Environmental Defense Center, Get Out Oil! and the Citizens Planning Association of Santa Barbara in which the Houston-based company agreed to a variety of constraints on the project and mitigation efforts.

Those concessions won the support of the environmental groups.

The concessions are:

            *End drilling at the site after 14 years

            *Dismantle and remove Platform Irene and three other platforms

            *Shutter PXP’s onshore facilities

            *Mitigate greenhouse gas emissions from the new drilling

            *Donate $1.5 million to reduce greenhouse gas emissions in the county

            *Donate 3,900 acres to public benefit

The environmental groups hailed the agreement as “historic and unprecedented” in an April 2008 press release.

Despite their support, lands commission staff recommended the members to vote down the project.

Chiang worried that the agreement to end drilling after 14 years would be difficult, if not impossible, to enforce.

Despite the environmental groups’ support, Lieutenant Governor John Garamendi, the other “no” voting commissioner, said approving the lease would encourage other oil companies to seek drilling sites off the coast.

The only “aye” vote came from Tom Sheehy of Schwarzenegger’s Department of Finance.

New drilling in state waters was banned in 1994 with the signing of the California Coastal Sanctuary Act.

An exception is contained in the ban, however, for fields in state lands that are being “drained” by drilling in federal waters. Such is the case with Tranquillon Ridge which lies near the field in federal waters Platform Irene currently pumps from.

While state law prevents legislation being introduced to benefit one firm, the Schwarzenegger administration intends to send the Legislature a bill that does not mention PXP or the Tranquillion Ridge Field by name but is written in a way that the measure applies to only that lease.

-30-