Key Schwarzenegger Aide: Governor’s Offshore Plan Not An End Run


Governor Schwarzenegger’s bid to capture $1.8 billion by resurrecting a controversial deal to expand offshore oil production near Santa Barbara is not a backdoor attempt to short-circuit anti-drilling policies in state coastal waters, a top administration official said Friday.

“This is not an attempt to circumvent the California Sanctuary Act,” protecting coastal waters, Thomas Sheehy, chief deputy director for policy of the Department of Finance, told Calbuzz. “This is in no way a camel’s nose event.”

As new details emerged about the governor’s plan to authorize a new offshore oil lease, unveiled in his latest budget proposals, leaders of a key environmental group that earlier favored the disputed deal over the drilling area reacted cautiously to Schwarzenegger’s move.

“We’re still processing,” said Linda Krop, lead attorney for the Santa Barbara-based Environmental Defense Center told us, moments after finishing a conference call with Sheehy in which he briefed her on the proposal. “My first reaction was ‘What? You’re going to take this action without full public (participation)?’

“They’re addressing some of our concerns,” she added. “It’s still unfolding.”

As a political matter, the support of Krop and her group is crucial to Schwarzenegger’s hope of renewing the deal on offshore drilling, long a third-rail issue in California politics.

At issue is what is known as the Tranquillon Ridge project. Earlier this year, the Environmental Defense Center (EDC), representing a broad coalition of coastal protection groups, and the Houston-based Plains Exploration & Production oil company (PXP) hammered out an agreement that would allow the company to drill in state waters at Platform Irene, located off the coast near Vandenberg Air Force Base.

The company now drills in federal waters on one side of the ridge, and there is no end date for them to stop doing so. At the same time, the California Sanctuary Act of 1994 has blocked the company from drilling in state waters, which extend three miles out from the coastline.

In exchange for a state lease to expand drilling for oil and gas, which drain from federal into state waters at Tranquillon Ridge, the company agreed to a series of environmental concessions sought by EDC.

Chief among these was an agreement to permanently shut down Platform Irene in 2022, ending all drilling in both federal and state waters. PXP also promised funds to permanently protect thousands of acres of onshore lands, about $350 million of tax revenue for local government, plus $1.8 billion in royalty payments to the state over the next 14 years.

Despite support from both the company and most local coastal protection groups, the deal was rejected by the State Lands Commission in January by a vote of 2-to-1. Lieutenant Governor John Garamendi and Controller John Chiang opposed it while Sheehy, the Department of Finance representative on the panel, voted in favor.

With the state now facing a budget deficit of $15-21 billion, depending on the outcome of next week’s election, Schwarzenegger is now trying to breathe new life in the proposal, through legislation that would overcome the State Lands Commission’s disapproval of it. His new plan for addressing the budget crisis counts $100 million in new revenue for the coming fiscal year, an advance on the royalties from PXP.

In a prepared statement, PXP said that, “We are encouraged that the governor recognizes the merits of the project, which includes substantial monetary value to the state.

“PXP is ready to move forward with this project following its approval by the governor and the California state legislature,” the statement said.

Krop said that her first thought after hearing of the proposal Thursday was that the governor was trying to end run the normal, comprehensive public hearing and multi-agency processes involved in such an environmentally sensitive project, which could establish a precedent for doing so. After hearing from Sheehy, however, she said she felt somewhat reassured.

“Is it really a precedent?” she told us. “This is the only place in the state” that would be affected.

(Wonk Alert! Next section goes deep into policy and process weeds).

Department of Finance officials said the governor’s plan included these elements:

— A budget trailer bill that would allow the Director of Finance to “reconsider” an offshore deal that conformed with legislative language defining six specific circumstances which apply only to the PXP deal; the most important is that oil and gas are draining into state waters at the site, and Tranquillon is the only project that meets that criteria.

— A process by which the Department of Finance would hold a public hearing in Santa Barbara, the Coastal Commission would also have hearings, and federal Minerals Management Service would review the deal in a manner that officials said would be “fully transparent.” The State Lands Commission would not get another opportunity to vote on it, although finance department officials would consult with staff about its environmental concerns.

— A provision to sunset in January 2011 the legislation giving special authority to the Director of Finance to review offshore projects that meet special conditions.

“Tranquillon is the only project that fits” the narrow criteria in the legislation, Sheehy said. “This project has tremendous environmental benefits for California, and we can’t turn a blind eye to the financial benefits.”

But Susan Jordan, a longtime advocate for coastal protection, who broke with her longtime allies at EDC and opposed the PXP deal back in January, was not persuaded.

“They’re giving special treatment to this project,” she said. “The most important issue is, they’re not following existing legal process and (they’re) taking away existing legal protections” that govern offshore projects.

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There are 15 comments for this post

  1. avatar Anonymous says:

    Great news, our Governor is willing to rewrite the laws of California for the benefit of an oil company, giving unprecedented powers of environmental certification to…here it comes..the State Finance Director. (A political appointee who serves at the pleasure of…you guessed it…the Governor.)

    But looking at Genest’s resume it is clear why our EnviroGov would want to bypass the State Lands Commission and its two elected representatives (who are actually accountable to the public), and vest responsibility for protecting California’s precious coastline from oil spills in this one man’s hands. I mean, Genest’s wealth of environmental expertise leaves one speechless. (I can’t believe such a seasoned environmentalist scientist even knows how to use Excel.)

    Hey Arnold, here’s an idea, while you’re rewriting our laws to find short cuts to new revenue, why don’t you rewrite the law that says the minority party gets to hold the budget hostage for months, exacting permanent tax cuts that drive the state into ever-deeper deficits?

    It’s a little out of his field, but Genest might be able to explain the benefits of my idea to you. Just a thought.

  2. avatar Anonymous says:

    so why is it any different to give that power to Genest than to the various environmental groups, who incidentally are neither elected nor appointed but just self-annointed? and the two elected are NOT accountable to the public or would not have changed their votes midstream even with 65% of Ca voters supporting expanded off shore production.

  3. avatar Anonymous says:

    “UP THE CRICK, without a paddle” while also simultaneously “OUT TO SEA, without a rudder”?

  4. avatar Marty from SB County says:

    Written like a true environmental supporter, who advocates saving the coastline because it ‘belongs to all of the people of California, and must be protected at all costs.

    Well, if you take that perspective with the coastline, how about the ‘resource’ of oil, which then should also belong to all of the people of California-a resource that in this project will have a minimum negative effect on the environment (underground, diagonal drilling from onshore, in well holes that already exist, thereby essentially eliminating any of those dastardly ‘spills’ that are inferred by the projects opposition that would have devastating effects on the ocean’s habitat. A position, by the way that continually negates to recognize the tens of thousands of gallons of oil and millions of cubic feet of natural gas that seep out the earth underwater every year…hmmm….or, is the real disaster they fear the potential loss of tourism dollars, that Santa Barbara has at risk, based on their insatiable expenditures to bolster an industry that allows the excessive taxation of visitors via the extra sales tax, bed tax, communication tax that non citizens of the area pay but have no say in adoption??? hmmm…..

    But, besides the minimal negative environmental potentialities, this ‘resource’, to use the environmentalists own reasoning, belongs to the People of California, and its extraction is paid for by royalties, thereby creating revenues that the could help alleviate the concerns of the first post with respect to the ‘minority party’ holding a budget process hostage. If one could step back and actually listen to the argument of that minority party, it seems that their position of funding and spending for the People of California would have at least helped foster an economic environment that would have at least been solvent-something each one of us must do in our daily lives…what can’t our government be required to do the same?

    Flat out, Garimendi and Chaing’s vote were totally political, not based in any merit. The EDC is not a conservative organization by any standard means test. The benefit of this project would have been a win-win for all, but in their efforts to continue to remain in the political arena and earn the equivalent of a gang members ‘bones’, these buffoons voted against this project not on its merits or failings, but solely to be able to say they voted against it. Shameful.

  5. avatar Anonymous says:

    Turely amazing. Setting aside the issue of PXP, the un-enforceability of the agreement and the precedent it sets for allowing off shore oil drilling by PXP and others, the Governor now wants to give to himself the ability to over-ride the State Lands Commission if it makes a decision he or any other Governor doesn’t like. Contrary to Krop’s assertion, this totally undermines the public process

  6. avatar Anonymous says:

    The second comment is just silly. The choice is NOT between Genest and the environmental groups. I suggest you read up on the purpose and history of the State Lands Commission. Also, the assertion that elected officials are not accountable to the public (as compared to, say, an appointed official like Genest) is laughable.

    Let’s test your theory. I dare you to go to Concord and stage a press conference denouncing Congressional Candidate John Garamendi because he refused to expand off-shore oil drilling. (You might want to refer back to Drillin’ Dan Lungren’s 1998 gubernatorial campaign performance on this topic to better prepare for the response you will receive from the voters.) I just dare ya.

    As to Marty, setting aside the predictable rehash of “trust us we won’t spill it” arguments, we’re left with the bribe of “we’ll help you out of your fiscal mess.”

    Marty, the state budget is a mess because the same people who advocate for more off shore oil drilling (let’s call them “Republicans”) are the same people who have extorted over $12 billion in unsustainable tax cuts in recent years. Your failed trickle-down laffer curve voo doo bull-pucky has only yielded massive tax breaks for corporations while bankrupting the state.

    Now the very same oil companies who bought the Republican politicians who trashed California’s budget are saying we have to give them more profits and put the coastline at risk to get us out of the fiscal mess they created. This is the height of hypocrisy.

    On the other hand, you do point out that oil seeps naturally into the ocean anyway, so off shore oil drilling surely poses just a “minimal negative environmental potentiality.” (Dude, that phrase is so awesome.)

    Do people make illogical, unscientific, conspicuously absurd arguments just so oil companies can make higher profits? People do.

  7. avatar Lupe Anguiano says:

    So, what are California voter to believe; is CA Governor Arnold serious about a healthy environment, clean air, clean water, and most important building a Renewable Energy Economy in California? or has he changed his mind and now believes in continuing a fossil fuel energy economy?

    It seems obvious the Governor is going back to his old ways of thinking – controlled by oil companies who continue (even now) spilling oil in our Ocean and polluting our water and land – going the path of polluting our air – which is more and more causing health problems to California’s health.

    Mr. Arnold in all honesty you are not making a movie – you are playing with people’s lives. This is serious.

    With all due respect to the CA office of the Governor.
    Lupe Anguiano
    Oxnard, CA 93036

  8. avatar Anonymous says:

    I love that the oil company guys are so hateful of democracy. They blast politicians by saying “it’s all politics” and compare voting the wishes of your constituency to gang membership.

    What they mean by this “just politics” spin is that Californians detest the thought of offshore drilling so much they will vote against anyone who supports it. This process is called “democracy” – and the only thing worse than politicians who represent the public, is politicians who don’t.

    It only costs $2 million to put something on the ballot. If these oil company shills had any guts, and if they really believed in the poll numbers they are quoting here, they would have put this half-cocked scheme on the ballot years ago.

    Face it slick boys — the voters figured you out a long time ago: you detest the people, you detest truthfulness, you detest democracy, and you detest any regulation or regulatory process that stands between you and higher oil company profits. Period.

    Thank goodness John Chiang and John Garamendi refuse to be bought by your obscene campaign contributions, and shame on Arnie for trying cut our elected officials out of the process of protecting our coastline.

  9. avatar Marty from SB County says:

    At least some of use a name to put with our comments, but addressing comments about what I wrote, ‘Do people make illogical, unscientific, conspicuously absurd arguments just so oil companies can make higher profits? People do.’ and that because one makes statements in support of a project related to oil development along the California coast, there must be direct correlation to billions of tax cuts that lined our pockets, only shows a continuation of rhetoric that still didn’t address the issue-this particular project poses a minimal potential effect to the ocean environment.

    Have there been spills? Absolutely. But for those of you who wish to rant about spills and the danger posed to the ocean along California, particularly in Santa Barbara County, you fail to speak from direct knowledge. I will state right now I an not an oil employee, do not make any living related to the oil industry, and have in fact been in an oversight position directly related to the Santa Barbara County oil industry. The practices used today, which have been designed over the decades, are a direct result of that infamous 1969 oil spill, which by the way, happened not in the extraction of oil from the ocean surface, but from the transfer of extracted oil to tankers that used to sit off shore and be filled directly from platforms in the ocean. Things today are so very different.

    Witness Exxon Valdez…an tanker leak, not an extraction/pipeline leak. Are there pipeline leaks? Sure there are…we have an operator in SB County that has had local and national attention for their lack of controls with respect to their operations. We have worked very diligently to see that their operations do follow protocols that are designed to minimize incidents. But, the concept of let’s shut down all aspects of oil in California, the West, the Gulf, and off Florida, flies direct in the face of so many President’s declaration of trying to ‘reduce America’s dependence on foreign oil’. What I keep asking is why, when we do collectively own a ‘resource’ do some wish to eliminate any potential to utilize that resource, only to decry the country’s dependence on oil from sources outside our control??? I’m confused.

    As for statements about ‘just politics’, sorry…but like you, I am entitled to my opinion. In fact, you may want to research a little more and find that over the last few years, not only including the time frame when gasoline was over $4 per gallon, sometimes by only a simple majority, but many other times by a much wider margin, poll data show people of not only this State, the the Nation as a whole, support the idea of development of our own resources, including off shore oil. Is that true of people immediately adjacent to the coastline areas? Not always. Those folks did change their stripes however when the prices rose to unsustainable levels…so when they are affected personally they sing a differing tune…how is that for selfishness?

    And, I don’t know which anonymous I need to address, but I wouldn’t mind an initiative asking the question about this PXP project….are you willing to put your protest where your mouth is? But be careful about what you ask for…you might just get it…and what will you say if your belief is on the losing end?

    I can only guess it will go something like ‘Well, the people of California don’t realize the disastrous position they put our environment in, and so we will appeal to the Supreme Court to find that the initiative process was flawed, and seek to overturn this vote, which can only be explained as the People of California being hoodwinked by the oil industry’.

    Let’s rock.

  10. avatar Anonymous says:

    HEY, Marty of SB County — send your oil drillers to Utah, if you don’t want the stuff pumped over there. Last month I met two Canadian(!) helicopter crews at the Richfield (UT) Municipal Airport [Sevier County]. Those Canadians are in UTAH looking for oil, not that the Alberta Province reservoir plans to run dry soon — but guess where the black gold is located: Surprise! Surprise! Under the nearby Escalante federal protection zone, per an eleventh hour presidential executive order signed by Bill Clinton during one of those all-nighter blitzes on leaving office. And Utah’s Governor [Jon Huntsman] is leaving for Beijing as US Ambassador, soon after conducting a brief State Legislative ‘clean-up special session’ [starting May 20th] to clarify intents of electors during last month.

  11. avatar Anonymous says:

    Marty from SB,

    Your arguments are filled with contradictions.

    1. You attack me for choosing to be anonymous, and yet you haven’t told us who you are! I could be Ted from Oildale or Jane from Eureka. I could be an environmentalist, an oil industry executive, or a janitor. The point is unless you’re prepared to tell us who you are, and state your qualifications, you’re just as anonymous as anyone else. Which is fine because arguments aren’t bolstered by puffery. But don’t be a hypocrite, please.

    2. You say you are confused about the nature of resource ownership but you allege to be an expert on oversight of offshore drilling. (I suggest that you know quite well what the responsibilities are of the federal and state government agencies in issuing leases and onshore facility permits.) But your argument seems to be a setup for your claim that having elected officials in charge of this process is somehow thwarting the will of the people.

    3. Which leads us to your powerful, thoughtful, and compelling response to my argument that you simply despise democracy whenever you don’t get your way. Given the challenge to put your ideas before the voters all you could come up with was “be careful about what you ask for…you might just get it.” Whoa Marty, let’s not get all brave and action-oriented. I’m surprised you didn’t end that with a gutsy “let’s roll” or even better, “bring it on!”

    Let’s make a deal: You stop undermining the democratic process by casting aspersions on elected officials who vote their conscience and represent their constituents, and I’ll abide by the outcome of any statewide proposition you chose to put before the voters. (In other words, I’ll continue my support of democracy if you stop being a hypocrite — pretty good deal for me I must say.)

    So get the rest of the Extraction Community together and let ‘er rip big guy. File that initiative to ease regulation on oil companies seeking to expand drilling off California’s coast! Throw in onshore oil, logging, and mining if you like, or not.

    Oh, and now that you’re being all non-anonymous, would you mind repeating your phrase “minimal negative environmental potentiality” on video for my TV ads? I also want some sound on that thing you said about how drilling is okay because oil seeps into the ocean naturally anyway.

    Looking forward to it.

    P.S. Oh my! You did put “Let’s rock” right there are the bottom of your message! OMG, I was writing my response in Word and didn’t scroll down far enough to see that phrase until just now! Oh Marty, I just knew you wouldn’t disappointment me! Can I get some video of you saying that too?

  12. avatar Anonymous says:

    You don’t need Mysterious Marty, just run the Sarah Palin “Drill Baby Drill” video. We’ll win in a landslide.

  13. avatar Marty from SB County says:

    Expert? No…particpant in oversight? Yes.

    Despise democracy? No I agreed that an initiative for this project would be fair.

    I’ve voted in every election since I turned 18, so I have participated in over 17 election cycles, not including special elections. Have I been disappointed in some of the outcomes? Sure.
    Have I always voted for only one philosophical or political ideology? No. Can you say the same?

    But I have a question for you…it seems pretty obvious you don’t support anyone who may be Republican, but how do you feel about Republicans who vote their conscience, voting what their constituents prefer? Can you answer without being the hypocrite you suggest I am?

    Do I believe if the project was supported by a vote of the people in that initiative one of these anonymous posters challenged to take place (as I said, I agreed with the concept) would there be a lawsuit to still delay or deny the project? Yes I do, because it seems to be standard operating procedure for staunch environmentalists…folks who really just want to get their way despite the ‘will of the people’.

    It clear to me that no one in your opinion, regardless of their qualifications can put forth real arguments related to the merits of the project that would find any favor in your mind.

    As for the statement of the seeps and minimal effect of this project, these are not my words, but words of a highly respected professor of oceanographic geology from UCSB…hardly a bastion of oil loving, hard right wing fanatics eager to destroy our planet.

    Besides, I never said that drilling is ok because oil seeps from the ocean floor, but thanks for trying to put words in my mouth…I said that many who protest against drilling offshore for oil because of the potential effects fail to even acknowledge the thousands of barrels and millions of natural gas seeps. So it must be in your mind that Mother Earth, God, or whoever you believes controls the planet should be brought to task for endangering fish and ocean plant life, along with the effects on the air quality in South Santa Barbara County. Good luck with that.

    As for video, sound bites and the rest…how about those (who knows, maybe you’re one) who show up at Coastal Commission/County Supervisor meetings dressed as dolphins, snowy plovers, seaweed, or some other sea creature (pick one), to dramatize their case? Do you offer recorded whale singing or other animal sounds to help them feel more realistic as they protest or demonstrate for whatever the flavor of the day may be?

    My name is Marty, I am from Santa Barbara County, and you still are anonymous.

    By the way…my ‘Let’s Rock’ was trumped by your OMG. Way to go big guy (or girl).

  14. avatar No shineola says:

    Garamende and Chang believe we need to stop using fossil fuels. Allowing Schwarzenegger to circumvent our public processes with a back room deal will just postpone the day we achieve true energy independence. EDC is in the tank. The oil tank. What a shame.

  15. avatar Anonymous says:

    Anonymous Marty, we’ll see you at the ballot box! Signed, Other anonymous guy (or gal).

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