The current political brawl over offshore oil drilling between the State Lands Commission and Governor Arnold’s Department of Finance has historic roots in a Depression-era scandal that helped shape today’s energy politics in California.
The Commission and the Finance Department have clashed in recent weeks over the governor’s push to resurrect a proposed lease for drilling off the coast of Santa Barbara. The Commission rejected the plan in January, but the Department of Finance this week released draft legislation to overturn that decision and give authority over the disputed lease to the Schwarzenegger administration.
Ironically, the State Lands Commission was created in 1938 precisely to take away from the Department of Finance the power over oil drilling on public lands, in the wake of a bribery and kickback scandal that helped bring down the administration of Republican Frank Merriam at the hands of Democratic reformer Culbert Olson.
“Olson accused Merriam of having let the Department of Finance…become ‘the agency of private interests,” according to “Crude Politics,” a UC Press history of state oil policy by Paul Sabin. “The…scandal and the investigator’s report on legislative corruption, both in 1938, opened a window on internal administrative and legislative corruption in Sacramento.”
Among other things, the book recounts how oil companies seeking leases on state land were told to “go see Rosie,” a reference to Merriam’s chief political consultant, Joe Rosenthal, while famed lobbyist Artie Samish meanwhile doled out slush fund cash to lawmakers backing the Finance Department’s plays on behalf of Standard Oil and other companies.
The scheme unraveled in 1938, when Samish was arrested for refusing to testify at a grand jury looking into allegations that Department of Finance executives held up oil companies for stock, cash, kickbacks and nepotism, in exchange for the rights to drill on state oil tidelands and sites offshore Southern California.
“Vast Tideland Oil Fraud,” screamed the Chronicle on August 14, 1938, disclosing details of the scandal that eventually capped a decade in which oil politics dominated the Capitol and the courts.
At issue in Olson’s victory over Merriam was the charge that oil companies, not the public treasury, were receiving maximum benefit from oil drilling on state lands. Over the next decades, the politics of the issue changed dramatically, so that the central concern became conservation of beaches and tidelands, not financial exploitation of the minerals beneath them.
The current controversy over the Tranquillon Ridge project reflects that political framework – alas, it has no exciting charges of bribery and corruption, at least to date – as Lands Commission chairman and Lite Gov. John Garamendi is accusing Schwarzenegger’s Department of Finance of trading long-term environmental protection for short-term economic gain. Led by chief deputy director Tom Sheehy, the finance department insists the deal would benefit both the environment and the budget.