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Yes: A Safe $1.8B Drilling Deal, Blessed by Enviros

Jun30

sheehyBy Tom Sheehy
Special to Calbuzz

Since going on-line this year, Calbuzz has treated its readers  to timely reporting on the twists and turns of the Tranquillon Ridge project.  As the Legislature continues to debate the components of a budget plan to close a gap of more than $24 billion, we believe there’s still an opportunity to move forward on this project in a fiscally – and environmentally – responsible manner.

To re-cap: the product of an unprecedented agreement between an oil company (Plains Exploration and Production, or PXP) and a coalition of environmental groups, the project would allow PXP to access oil on state lands from an existing platform in nearby federal waters.  In return, the firm will give the state an immediate up-front $100 million royalty advance and about $1.8 billion over the next 14 years.  But it’s not just about the money:  once the project ends, the company will give 3,900 acres of central coast property it owns for permanent conservation and public use.  It also will stop production on four of its offshore rigs and take out all of its onshore production facilities.

Despite strong support for this project, the State Lands Commission didn’t allow the project it to move forward early in the year.  But in May, Gov. Schwarzenegger proposed an innovative approach to giving the project another opportunity for review.  The Governor has asked the Legislature to approve a bill restoring authority to the State Director of Finance for a limited window off time to reconsider certain offshore oil lease applications and determine if they’re in the best interest of the state.

The Governor maintains his strong opposition to new oil drilling off California’s coast and he continues to support the moratorium.  This project maintains the moratorium on oil drilling under the California Coastal Sanctuary Act of 1994 because it would operate from an existing oil platform in federal waters. It takes advantage of a specific exemption that allows for new leases if oil is leaking from an existing state field into an actively producing federal field — which is what’s happening in this case.  A State Lands Commission report determined that the ongoing drainage is reducing the ultimate amount of oil reserves that the state could recover by as much as 260,000 barrels a month.  That is $4 million per month in lost revenue to the state.

Or, think of it this way:  at a time when we’re being forced to pare back spending in education, health care, and virtually every area of state government, we’re essentially giving $4 million a month to the federal government.

The entire infrastructure needed to conduct this project is in place and already operating.  There will be no new platforms needed for the state to realize the project’s benefits.  Approval of the project will allow the state to capture the oil in an efficient manner while securing significant revenue.

Most importantly, this proposal doesn’t “subvert the public process” as some critics have alleged.  The Governor’s proposal builds upon five years of rigorous state and local government public environmental review by the Lands Commission and Santa Barbara County, as well as a meticulous California Environmental Quality Act (CEQA) review. If approved, the California Department of Finance would only have the authority to reconsider the project after additional public hearings. If Finance decides to move ahead, the project would still have to go through the California Coastal Commission’s public review process and also gain approval from the federal Minerals Management Service (MMS).

We are also confident that when the project ends, the state is strongly empowered to enforce the shutdown of oil operations.  PXP made a firm commitment and negotiated a binding agreement with a coalition of environmental organizations to take out its platforms, remove its onshore facilities, and provide a valuable package of environmental benefits.  There also are multi-layered enforcement tools in place:  permits for this project will be enforceable by the State Lands Commission leases and the County and Coastal Commission permits.  In addition, the terms of the agreement between PXP and the environmental coalition uniquely allow the California Attorney General the right to intervene in court to enforce the agreement.

These are difficult, challenging, and unprecedented times in California.  We believe the Tranquillon Ridge Project is a common-sense, environmentally responsible approach to leveraging the state’s own resources to help generate vital new revenues at a time of great fiscal need.


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There are 2 comments for this post

  1. avatar 4oceans says:

    Tom Sheehy has single handedly done more to blow up Gov. Arnold Schwarzenegger’s environmental reputation and legacy than any other official in Sacramento or anywhere else.

    Sheehy’s argument and pro offshore oil drilling position would be just great if more of what he says were actually true. And by this late stage of the game, where his proposal has been repeatedly denied and rejected and disowned, you’d think he would get the message, or at least quiet the misrepresentations.

    The deal was bad enough when State Lands Commission rejected it following legal determinations that it was unenforceable because, simply put, the State of California cannot mandate the federal government stop oil drilling. To wit: the promise of an ‘end’ to offshore oil drilling was and is an illusion.

    But Sheehy really earned well justified indignation of both environmentalists and supporters of democratic principles for his attempt to use the budget crises as a club to steal the jurisdiction of State Lands Commission and provide for himself and and Arnie the ability to negotiate new offshore oil drilling in private back room deals.

    Even the Drill Baby Drill enviros oppose allowing the governor to overturn State Lands’ decisions.

    Yet Sheehy persists. Hoping for a last second Hail Mary without analysis in the storm of a budget hurricane. Great work if you can get it, one supposes, but is that really what Arnold wants for an environmental legacy? The great climate change governor remembered for instituting the first new offshore oil drilling in California in 40 years?

    As for the so-called ‘coalition of environmental groups’ supporting the deal, that has dwindled to almost none except those groups involved in a ‘secret deal’ involving payoffs and compensation.

  2. avatar surfrider says:

    This headline is very deceptive! This end around of the State Lands Commission is not “blessed by enviros”. In fact, there is massive opposition to Sheehy and Scharzenegger’s effort to undermine sound public process.

    Click here for a list of letters and comments from those opposed to this deal: http://tinyurl.com/lxsawj

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