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Archive for the ‘Tom Sheehy’ Category



Calbuzz Face-Off: Drill Baby Drill, Yea or No Way?

Tuesday, June 30th, 2009

oilrigAs the state’s budget battle drags on amid bitter debate over program cuts, there is equal acrimony over a revenue-raising proposal to allow drilling for oil in state waters off the coast of Santa Barbara. With the controversial Tranquillon Ridge project raising questions about finances, the environment and political process, Calbuzz invited the leading advocate on each side, Deputy Finance DirectorTom Sheehy and Lt. Gov. John Garamendi, to make his case for our readers. Their posts — yes and no — are linked below.

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

Tuesday, June 30th, 2009

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.

Arnold Loses Key Enviro Support on Offshore Oil Plan

Wednesday, May 20th, 2009

oilrigGov. Arnold’s bid to resurrect a disputed offshore oil drilling plan suffered a political setback Wednesday when the top lawyer for a key environmental group informed him they could not back his proposal.

While the Santa Barbara-based Environmental Defense Center still believes the controversial Tranquillon Ridge offshore drilling plan should go forward, it cannot support Schwarzenegger’s effort to undo a State Lands Commission vote against the project earlier this year, attorney Linda Krop said in a letter to the governor’s point man on the proposal.

“This is a difficult dilemma, but we simply cannot endorse this process,” Krop wrote to Tom Sheehy, deputy director of the Department of Finance.

The governor’s bid to undo through legislation the State Lands Commission vote against the complex lease arrangement with PXP oil “establishes a precedent whereby a majority vote on the SLC can be overruled by the minority,” Krop’s letter said.

Schwarzenegger is hoping to get $1.8 billion in royalties from the PXP oil company for the 13-year lease, which would be granted in exchange for a host of environmental concessions, including the company’s promise to shut down permanently its offshore drilling operations in nearby federal waters in 2022.

Calbuzz previously reported details and background on the offshore controversy here.

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

Friday, May 15th, 2009

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.