Posts Tagged ‘PXP’



Excloo: Secret Agreement on T-Ridge Revealed

Monday, January 18th, 2010

platformnewA secret agreement between PXP oil company and a Santa Barbara environmental group sheds new light on aspects of the controversial Tranquillon Ridge offshore oil plan that are central to Governor Schwarzenegger’s latest bid to win approval for the project.

A hard copy (now available in pdf) of the previously undisclosed agreement provided to Calbuzz offers an inside look at the terms of the pact that gained the Houston-based PXP the key political support of the influential Environmental Defense Center, which has been prominent in the decades-long fight against offshore drilling in California.

The group’s endorsement of PXP’s application for a lease to slant drill into state waters, from an  existing platform under federal jurisdiction, more than three miles offshore, has bitterly divided California’s environmental community.

Financially at stake are billions of dollars in new revenue for PXP, plus as much as several billion more for the state treasury from royalties on the lease, which the governor insists are needed to address the state’s budget mess.

Despite Schwarzenegger’s aggressive push for the lease last year, the State Lands Commission rejected PXP’s lease application. After a raucous battle, the Assembly later defeated a bill to overturn that decision. Now, Schwarzenegger is pushing for the lands commission to rehear the lease deal, which is framed by the confidential PXP-EDC agreement.

As a political matter, the environmental issue boils down to this: the EDC and its allies argue that trade-offs made by PXP in the confidential agreement in exchange for environmental support ultimately will end some offshore oil drilling; environmental foes of the deal say it is absurd to attempt to end offshore drilling by allowing more of it, and say the deal inevitably will advance oil industry efforts to expand the practice.

PXP and EDC representatives told Calbuzz they have recently amended their original agreement, reached in April 2008, in order to beat back major arguments used to defeat the deal twice before. A spokesman for PXP and an attorney for EDC both said the revised agreement would be made public if PXP gets a new hearing.

krop_lg

Linda Krop

Our own review of the original agreement, which was obtained from sources who requested anonymity because of concerns about retribution, meanwhile provides the first definitive look at a host of issues that, for nearly two years, have been the focus of political gossip, rumor, speculation, charges and counter-charges.

Today we’re publishing a post of unusual length and detail because we think the PXP matter, along with the AB32 climate change controversy, represent the most important environmental issues facing California.

Our research for this piece includes the previously secret document, a face-to-face about its terms with Linda Krop, chief counsel for the Environmental Defense Center, who negotiated it, and an email exchange with Scott Winters, PXP spokesman and vice president of corporate communications. Here is a look at key issues, with a major Weed Whacker Alert:

I-Secrecy: “Negotiated behind closed doors” secrecy

PXP and EDC have declined to make their agreement public, saying it contains proprietary information that could aid the company’s competitors. Their insistence on confidentiality was a major factor in the twin defeats of the deal last year.

If granted, the requested lease would be the first by the state since Union Oil’s disastrous 1969 Santa Barbara oil spill, and opponents of the deal successfully argued that it is outrageous even to consider such a change without a full public airing of its conditions.

“The fate of public lands cannot be decided in contracts negotiated behind closed doors,” Controller John Chiang, a lands commission member, said in explaining his vote against it last year.

Our review of the document showed there is no formal confidentiality clause to legally prevent its release to the public. Linda Krop, lead attorney for EDC, who negotiated the agreement, told us in an interview:

PXP asked if the agreement could be confidential because it explains how they do business with their partners and such, and they didn’t want the rest of the industry to see that. We said, ‘sure, that’s not a problem’…That was just the agreement going in (to negotiations).

PXP and EDC said they recently incorporated amendments to the agreement to address criticisms raised at the initial State Lands Commission hearing by strengthening written assurances that the promised benefits of the agreement will materialize.

PXP spokesman Winters said, “We recognize the concern the confidential nature of the agreement generated” and pledged that the revised agreement will be made public — if and when the lands commission schedules a new T-Ridge hearing.

Krop said she was surprised by the vociferousness of the criticism about the lack of transparency, claiming it is not unusual for environmental groups to keep private the legal agreements or settlements it makes with corporations applying for permits or leases before public agencies. Said Krop:

It caught us off guard. The reason we did not think that was an issue (was) because the project was going to be decided at public hearings before the county, the State Lands Commission and the Coastal Commission…Had we known it was going to be an issue, we would have talked about it up front, but it caught us by surprise…If we get a second chance, it will be a public agreement, and we will never have a private agreement again.

II-Money: Who gets what

EDC legally repmoneyresents in the matter two other Santa Barbara non-profits, Citizens Planning Association (CPA) and Get Oil Out! (GOO). Amid the bitter debate within California’s environmental community, one of the charges leveled by T-Ridge foes is the suggestion that the non-profit EDC benefits financially from the agreement, and from its public support of PXP.

On this point, Section 1.6 of the agreement (“Reimbursement of Expenses of Environmental Parties”) states that:

Upon all Parties’ execution of this Agreement, PXP shall pay $50,000, and upon the State Lands Commission’ approval and PXP’s written acceptance of all the leases necessary for the Tranquillon Ridge Project, PXP shall pay an additional $50,000, for a total of $100,000, to the Environmental Defense Center, as reasonable compensation for work performed by EDC on behalf of GOO! and CPA pertaining to the environmental and permitting review for the Tranquillon Ridge Project, and the negotiations leading up to and implementation of this Agreement.

The oil company also made other financial commitments, in addition to the terms about oil drilling, which are discussed below.

These include ceding for conservation nearly 4,000 acres of onshore lands in Santa Barbara County now used for production and processing of oil yielded by offshore operations. These land transactions, per the agreement, are to be managed primarily through the non-profit Trust for Public Land. The agreement does not state the value of the land.

The company further agreed to a pay a maximum of $298,507, at a rate of $20 per ton, to offset any new greenhouse gas commissions from the T-Ridge project, to the Santa Barbara County Air Pollution Control District. PXP also promised to pay the air quality district $1.5 million, over 14 years, to “administer a transit bus technology program” within the county to help reduce greenhouse emissions.

PXP’s potential royalty payments to the state are estimated at several billion dollars, according to Winters, who said the county of Santa Barbara could receive several hundred million in property tax revenue on oil produced from new T-Ridge operations.

In exchange for these commitments, among others, EDC and its clients made promises of public support for PXP’s efforts to obtain the lease and all necessary approvals, saying they would:

…in a timely manner communicate…support for the granting of all approvals required for the Tranquillon Ridge Project pursuant to the agreement. These communications shall be in writing (with copies contemporaneously delivered to PXP), and include oral testimony at public hearings of Santa Barbara County, the State Lands Commission, and California Coastal Commission…

In the event PXP requests the Environmental Parties to communicate their support…to any other governmental agencies with entitlement jurisdiction, EDC shall do so on behalf of (CPA and GOO!), in which event PXP shall pay EDC’s reasonable fees, together with reimbursement for any of EDC’s reasonable and actual out-of-pocket costs incurred.

Krop termed “ridiculous” the notion that this contractual arrangement could support the perception that EDC was due a $50,000 bonus payment once PXP secured approval from the lands commission. Noting that “every settlement has a reimbursement,” she stated that PXP has now paid the full $100,000 to EDC, which she said actually “shortchanged” the many hours she and her staff devoted to the project. Krop:

For environmentalists, it’s never been about the money, it really has been about ending current oil production and stopping future oil production…We did get paid the full $100,000…because we put twice that (amount of time) by the time we were done…The reason we advocated for this is because we want the end dates (for offshore oil drilling). We want the benefits of the agreement.

As for PXP’s profit, Winters claimed “the state stands to gain as much, or more in all price scenarios, than PXP.” He characterized speculative reports that the company stands to gain upwards of $20 billion from the deal “not even remotely realistic” but declined to say how much increased income the project could mean for PXP.

III-An End to Drilling: How, When, Whether

santa-barbara-view-from-riviera-resize

As a policy matter, the most important issue raised by the PXP agreement is whether or not the negotiated “end dates” — when the company promises to stop drilling both at Tranquillon Ridge and from three other platforms located in coastal waters under federal jurisdiction — can be legally enforced.

(A bit of complicated, but unfortunately relevant, waaay in-the-weeds history:

Coastal waters up to three miles from shore are formally known as “California State Tidelands.

Since 1938, oil leases in them have been under the jurisdiction of the State Lands Commission. The three-member body includes the Lieutenant Governor, the state Controller and a representative of the governor’s Department of Finance.

Until the 1969 Santa Barbara oil spill, which galvanized the start of the global environmental movement, the state had granted 35 leases for tidelands. Since then it has granted none.

In 1994, former state legislator, and current state schools chief, Jack O’Connell of Santa Barbara, successfully passed the California Coastal Sanctuary Act, which allows new state leases only under a few conditions. Two of these include: a) areas where oil in state waters drains into federal waters and b) cases in which the lands commission determines it is “in the best interest of the state” to allow such a lease.

The U.S. government has authority over oil leases in Outer Continental Shelf waters beyond three miles from shore. Starting in 1981, there was a federal moratorium on new leases off the California coast, which expired in 2008.

Under an pre-existing federal lease, PXP now operates Platform Irene, just outside the three-mile limit. That operation sucks oil out of the sea at a point near an underwater geological formation known as Tranquillon Ridge, where oil drains from state into federal waters).

Because PXP’s state lease application apparently meets condition a), the key question for the lands commission, in deciding whether to grant a state lease at T-Ridge, is whether the project meets condition b), by being “in the best interest of the state.”

Schwarzenegger says it does, because the state needs the money; project opponents say it does not, because it would set a dangerous political and environmental precedent. The State Lands Commission backed the latter view last year, when it turned down the project, 2-to-1.

PXP first applied for a state lease in 2004; during the EIR process, EDC opposed that effort. At the suggestion of then-Lieutenant Governor John Garamendi, according to attorney Krop, the company came to EDC in 2007 seeking a compromise.

Within a few months, Krop said, they had offered to include in a possible deal three other platform operations now under federal lease, in an area known as the Pt. Arguello Project, south of T-Ridge (if you’re still with us, remember this name). The result of those negotiations was the confidential pact signed in April 2008, under which EDC now supports PXP’s application to the lands commission.

IV- What are “end dates”?

The no-longer confidential agreement calls for PXP, if granted the state lease, to end operations in both federal and state waters near Tranquillon Ridge by the end of 2022. The company also promises to shut down its onshore production facilities connected to those operations, ceding the land for public use. PXP also agrees to remove permanently, not just decommission, the infrastructure known as Platform Irene.

Recall the aforementioned Pt. Arguello Project. PXP operates it through a majority partnership it has with other oil companies.

The EDC pact says PXP will ensure the end of drilling operations from three platforms — known as Harvest, Hermosa and Hidalgo — in that federal project area, within nine years of the company receiving the T-Ridge state lease. The PXP-EDC agreement also calls for turnover for public use of onshore lands where Pt. Arguello-related production facilities now operate.

Caveat: the agreement states that unnamed “third parties are responsible for the abandonment of the three Pt. Arguello platforms.” While PXP promises not to oppose any effort to remove the actual platforms, it does not promise or guarantee they would be removed.

Will it ever end?

The so-called “end dates” for drilling are described in the agreement, variously, as “irrevocable and non-modifiable,” and “pre-determined and absolute.”

As a legal and political matter, however, the key question in the T-Ridge debate is whether these dates would be enforceable. Both the lands commission staff and the attorney general’s office reported to commissioners last year that they were not, a crucial factor in the defeat of the lease application.

Opponents of the deal say there are simply too many future unknowns and unknowables -– market conditions, the price and availability of oil and who controls the state and federal governments, for example — to assure that the promised end dates would be honored.

One key factor here is that federal leases -– including those for platforms Harvest, Hermosa and Hidalgo — are under authority of the Department of Interior’s Minerals Management Service (MMS), which ensures that federal leases generate income for the U.S. government.

In explaining his opposition to a state lease for PXP, Controller Chiang wrote this in a post for the California Progress Report:

My concerns also include the enforceability of ending the Tranquillon Ridge oil drilling operations in 2022 and the Point Arguello operations in 2017. The support of environmentalists for this project would not exist without dates certain on which drilling would stop, but neither the proposed State Lands Commission lease nor the PXP agreement can provide certainty about these end dates.

The federal Minerals Management Service receives royalties from the oil production in federal waters and is compelled by law to encourage drilling until it is no longer economically viable.

The state cannot interfere with the contracts between PXP and MMS. Because the MMS will not agree to the proposed end dates, and because we are continuing to experience severe volatility in the energy market, there is likelihood that market forces in 2022 would dictate whether or not the federal government would continue seeking revenue from this project.

V. The ultimate leverage

leverageBut Krop told Calbuzz the Controller is “not correct” in his statements about the position of the federal government.

She said she met in Washington last fall with federal officials. At that time, MMS officials told her, she said, “we want to make this happen” She added that if and when state lands commissioners rehear PXP’s application, she will present evidence the federal issue should be “off the table.”

“When we met with MMS folks back in D.C. in September, they said, ‘that’s a viable option,’” Krop told us.

Winters said the the scenarios about difficulty enforcing end dates are not realistic, because the onshore facilities to support future drilling at the sites would be removed. He also said the new agreement would make California’ attorney general a party to the pact, to give specific authority over the deal to the state. He also told Calbuzz that in the amended agreement:

…a new provision has been added that requires PXP to forfeit 100% of any profits the project generates if it operates beyond 14 years for any reason.  In addition, the agreement includes a clause that requires PXP to waive its rights to apply for any extension at the end of the life of the project.

As for the other enforceability issues, Krop strenuously argued that the original agreement she negotiated was ironclad:

Under our agreement, those (onshore) facilities cannot be used for production of oil and gas after the end dates…

By everybody’s prediction there’s going to be hardly any oil and gas left in these fields. If (MMS) were to lease them, all the new platforms, pipelines, processing facilities would have to be built. It’s just not going to happen…

You’ve got a .0000001 percent chance, (of offshore drilling taking place on the sites after the end dates). Right now you have a 100 percent chance they’re going to keep producing. That’s what’s frustrating to me, is that people in Sacramento don’t get that…We’re not supporting a new project, we’re supporting a project that is going to shut down production.

In this exchange during the interview, however, Krop acknowledged that if unforeseen circumstances led to leasing arrangements and drilling past the end dates, enforcement of the EDC-PXP essentially would be left to her group, by filing a lawsuit:

Calbuzz: So what you’re saying is, the enforceability is ultimately the legal leverage that you would have as one of the parties to this agreement.
Krop: Right.
Calbuzz: In other words, if they violated this agreement, you would have to go to court to sue to enforce it.
Krop: Right. We would go to court, (Trust for Public Lands) would go to court…

As for the political argument by opponents that granting PXP a state lease would send a powerful political message that California’s long-held consensus opposing offshore drilling is crumbling, the EDC attorney claimed that any such perception “is based on people telling untruths.”

The politics is the truth. If everyone would stick to the facts, I’m saying, if everyone would quit twisting the truth, the perception would be the truth. The truth is, the drilling’s happening and we’re shutting it down.

VI. And Now, a Word from Your Sponsors

wagging-finger

We’ve done our best to present the facts of this as fairly as possible, but figuring out who’s right among environmentalists on this one requires an ability to foresee and forecast the future — about the oil market and shifts in government leadership, among other things — which we admit we lack.

Amid the passion and strained relationships within the environmental community,  it seems to us that some people on both sides of this complicated issue share the same policy goal — to protect California’s precious coastal environment. It’s sad to watch them attack each other’s motives.

That said, as innovative, perhaps visionary, as the EDC proposal may be as an environmental policy matter, the group’s appreciation for hardball politics in Sacramento and Washington seems to us at times naive. Moreover, four decades of principled opposition to new offshore oil drilling is precedent we’d be loathe to see California forfeit on a risky bet that oil companies would willingly stop drilling for oil.

Political Potpourri: Parks, Pistols, Puppies & Pot

Tuesday, January 12th, 2010

lampoon_national_killdogPuppy vs. pistol: The famous January 1973 cover of National Lampoon magazine featured a disembodied hand holding a revolver to the head of a nervous looking black-and-white mutt with the headline: “If You Don’t Buy This Magazine, We’ll Kill This Dog.”

The bad-taste-costs-no-more image came to mind in reflecting on Gov. Schwarzmuscle’s blackmail proposal to tie $140 million worth of funding for the California State Parks system to passage of his pet project authorizing a lease for drilling in state waters off the coast of Santa Barbara.

The $140 million is the General Fund portion of the state parks budget, about one-third of the $431 million total, with the rest financed by sources like state parks fees and highway vehicle funds, according to the Department of Finance. Not surprisingly, Arnold’s take-it-or-eat it plan, his third bid to gain approval for the twice-defeated Tranquillon Ridge project on behalf of the Houston-based PXP oil company, was sharply dissed by  many environmental groups among the 100 that oppose the offshore deal, which include everyone from the American Cetacean Society to Yosemite Area Audubon.

“Pegging the fiscal future of the state park system to offshore oil drilling sets up an unacceptable tradeoff between coastal protection and park preservation,” said a to-the-point statement from the California State Parks Foundation. Sez Elizabeth Goldstein, president of the group:

Tying the funding needs of our state parks to proceeds from the Tranquillon Ridge deal is once again playing politics with our state park system. The threat of park closures over the last two years has shown that long-term, stable funding is needed for our state park system, not these desperate yearly budget attempts to give political cover, instead of true solutions. Californians are frustrated with their state park system being held hostage in the budget process…

In last week’s report on Conan’s new bid to win an official blessing for T-Ridge, Calbuzz said it wouldn’t be “changing many minds.” Now that it’s been out there a couple days, it feels more like his shoot-the-dog play will actually prove counter-productive, by making his push for a special deal for PXP more transparent than ever.

PS: Since the Sinclair Paint decision is Calbuzz bread and butter, we’d be remiss in failing to note that the Legislature could just accept Schwarzmuscle’s$140 million cut and raise park fees by the same amount — by majority vote. Take THAT Cal Forward!

yes-we-cannabis

Pot of Gold: With a new initiative to legalize marijuana heading for the ballot, count gimlet-eyed economist Bill Watkins among those who feel it would be a big boon to the state – both in revenue and big-time cuts in costs.

“Prohibition never works,” Watkins, executive director of the Center for Economic Research and Forecasting in Thousand Oaks, said in an email.

Led by Oakland’s Oaksterdam University, initiative backers have already gathered about 700,000 signatures, at a cost of a reported $1 million, and say they expect to have a professionally-run, $10 million campaign for a measure on the November ballot. The initiative measure, according to an all-you-need-to-know piece by the indefatigable Timm Herdt,

…is not a pot-lover’s pipe dream, but rather a political document designed to win votes: It sets the legal age at 21, enhances criminal penalties for sales to minors, prohibits the use of marijuana in public places and in the presence of children, gives every city the right to decide whether to allow marijuana sales, and emphasizes the ability of local and state governments to regulate and tax all sales.

Watkins and his posse at Cal Lutheran University, in their most recent forecast, offered a few thoughts on the subject from an economic theory perspective, in a little essay headlined “Marijuana, a Little Tongue-in-Cheek”:

The costs of prohibition are well known. They include law enforcement, corruption, increased crime, more prisons, lost taxes and the like…

What we need to do is completely legalize and regulate the production and sale of marijuana. Based on newspaper reports of drug raids, the stuff grows like a weed in California. Legalizing it and regulating exactly the way we regulate tobacco and alcohol production and sale would reduce its availability to kids, decrease crime, reduce prison and law-enforcement costs, increase agricultural production and profits, and generate large revenues for the state.

Imagine fields of cannabis in our Central Valley. It’s easy if you try.

Calbuzz sez Amen. That’s change we can believe in.

Toldja: Cooley heads towards AG run.

Arnold Tries Again on T-Ridge & Rumors of the Week

Saturday, January 9th, 2010

offshoreGovernor Schwarzmuscle rolled out a new version of his twice-defeated plan for expanded offshore drilling Friday, but it’s tough to imagine his latest tweaks changing many minds.

Despite his 0-2 record in pushing for a lease to allow the PXP energy company to drill in state waters off the coast of Santa Barbara, Arnold doggedly added the Tranquillon Ridge offshore oil project to his just released, ugly budget plan.

As a financial proposal, the much chronicled project (memo to those who’ve been sightseeing in Albania since May: see Calbuzz archive) is intended to generate a quick, couple hundred million bucks for the recession ravaged state treasury. Politically, however, Schwarzenegger must overcome the passionate and visceral opposition to offshore drilling which reflects longstanding California environmental policy.

The project was voted down by the State Lands Commission early last year, then rejected by the Legislature at the end of the long summer budget battle. Now Schwarzenegger is trying again, tarting up the proposal politically with some key tactical changes:

Process: The budget plan calls for T-Ridge to be sent back to the State Lands Commission for rehearing.

The change is crucial, because reconsideration by the lands commission is exactly what the faction of environmentalists who back the project, led by Santa Barbara’ Environmental Defense Center, have been seeking, as an alternative to Schwarzenegger muscling the matter through the Legislature. His move instantly paid off in the form of a quick EDC statement in support of the governor’s latest plan:krop_lg

“We look forward to the opportunity to have this project reconsidered by the State Lands Commission,” said Linda Krop, EDC’s chief counsel, expressing “appreciation” to the governor. “Reconsideration by the State Lands Commission is the only process that we support to address this unique proposal.”

Despite the new process, however, Schwarzenegger’s budget document also states that if the drilling plan is “not approved by the Commission, legislation will be necessary,” making it clear that he will take another run at the Legislature if state lands turns it down again.

Abel Maldonado: The administration’s clear political calculation is that  Senator Abel Maldonado, whom Schwarzenegger has nominated for  Lieutenant Governor, would vote for the measure on the lands commission.

The Lite Gov is one of three members of the commission, and John Garamendi, the former occupant of the office who was recently elected to Congress, cast the deciding vote against PXP’s plan last year. Although Maldonado also voted against it as a state senator, his well-earned reputation for political opportunism makes it not unlikely he’d see things the governor’s way if the Legislature confirms him.

State Parks: The money generated by the PXP project would be earmarked for state parks, many of which were slated for closure last year, until Schwarzenegger reinstated funding. By tying the new lease to parks financing, he forces a choice for the lesser of two environmental evils.

Pedro-Nava“The governor has truly sunk to a new low, by making the parks system, the jewel of California, reliant on new offshore oil drilling,” said Assemblyman Pedro Nava, who has led legislative opposition to the drilling proposal.

Warming to his task, Nava said that linking parks and offshore oil was like “offering a rent reduction to a victim of domestic violence in exchange for forcing them to go back and live with the abuser.”

That little vein in his ample forehead throbbing vigorously, he added:

“If anybody thinks there wasn’t an agreement reached by Abel Maldonado (with Schwarzenegger) then think again. This is one of the most cynical acts I’ve ever seen.”

Beyond the PXP conflict, the offshore debate is certain to become even more combative this year with the introduction by Republican Chuck DeVore, an Orange County assemblyman and contender for the U.S. Senate nomination, of legislation to effectively open up the entire California coastline to new drilling.devore

DeVore said his plan, which would impose a 40 percent royalty on offshore oil and natural gas extraction, could generate as much as $16 billion by 2011: “My proposal generates billions of dollars this year, when California needs it most,” he said.  “Allowing new offshore leases under this plan prevents cuts to education, public safety and other government services.”

T-Ridge and the DeVore measure are the latest examples of the intertwined politics of the economy and the environment moving center stage in 2010 campaigns.  Check back on Monday for more on this development.

Rumors of the week: Calbuzz hears that Steve Cooley, L.A.’s hardass, three-term district attorney, plans to jump into the Republican race for Attorney General, perhaps as early as next week.

SteveCooley_picCooley’s entry would be a game-changer in the race, giving the GOP a top-drawer candidate with a good chance to win statewide office. Cooley also offers a sharp contrast to Democratic front-runner Kamala Harris, the San Francisco district attorney who’s against the death penalty and  embroiled in controversy over a program to funnel illegal immigrant felons into a jobs program instead of prison.

Add rumors: We got no inside info on this one, but we won’t be surprised if GOP wannabe governor Tom Campbell announces a switch to the Senate soon after his impending return from his Panamanian vacaciones. Bill Whalen’s got a good post looking at the implications of such a move.

Quote of the week:* Our pal Alan Mutter, noted media analyst and Chicago deep dish pizza aficionado, was interviewed by the New York Times for a story about the struggle of newspaper owners against the rise of the web, and replied:

“One of the problems is newspapers fired so many journalists and turned Mutterthem loose to start so many blogs,” Mr. Mutter said. “They should have executed them. They wouldn’t have had competition. But they foolishly let them out alive.”

*Calbuzzer Alert: Send us your nominees for Quote of the Week, which we’ll run each Saturday. Winners get two free Calbuzz buttons; second place gets three.

Environmentalists: Why T-Ridge is a Bad Deal

Wednesday, December 23rd, 2009

oilrigsunsetToday Calbuzz posts a piece by three leading California environmentalists making their case against the Tranquillon Ridge offshore oil drilling project. The project, about which you can find some of our reporting and analysis here, here and here, has emerged as one of the most contentious environmental issues in the state, and is expected to remain the center of controversy next year. Environmental leaders Penny Elia, an Orange County coastal advocate; Fran Gibson, board president of Coastwalk California; and Mark Massara, director of the Sierra Club’s coastal programs, respond to Tuesday’s piece by attorney Linda Krop, who negotiated the proposed agreement with the Houston-based PXP oil company.

By Penny Elia, Fran Gibson and Mark Massara
Special to Calbuzz

The proposal by PXP for the first new off shore oil drilling in State waters in over 40 years has been touted as “an end to drilling off Santa Barbara”. Unfortunately, the hype is misleading and disingenuous at best.

The proposal will not end drilling because the so-called deal is not only not enforceable, it will set a precedent for new federal off shore oil drilling off Mendocino, and from Santa Barbara through the Southern California coast to La Jolla.  One reason this sounds so tempting is that the Environmental Defense Center, which signed a secret agreement with PXP, makes claims that are untrue.  The funds promised to the state over the next 14 years are not worth the risks. Here are the facts:

This project would set a precedent for new federal drilling

Allowing new drilling in state waters makes a statement it is okay to drill in federal waters because California considers financial contributions to its general fund a benefit that outweighs the risk to its coastline.  Lawmakers have said that approval of  new drilling in state waters will make it difficult to prevent new drilling in federal waters.

Allowing new drilling does not end drilling

It is perverse logic to say that allowing new drilling in T-Ridge will end drilling at T-Ridge early.  If this proposal is denied, NO drilling into T-Ridge will occur.  Other oil companies, with existing operations in state waters, are seeking to make PXP-like deals so they can expand their drilling.

Promised end dates on the project are  not enforceable

The State Attorney General and the State Lands Commission attorneys concluded the terms of the agreement that relate to the cessation of oil production were offshoreunenforceable.  The ability to enforce the end dates is hampered by such things as the ability of the federal government to exercise eminent domain, interference with the federal government’s right to use pipelines in interstate commerce and interference by the state with the contract between PXP and Minerals Management Service (MMS).  The state and Santa Barbara County could also opt out.

MMS has final say over the end date

Federal law requires MMS to extract all available oil.  MMS may agree to a termination of the PXP lease if PXP agrees to pay the federal government for any oil not extracted.  Such a requirement serves as an incentive for PXP to break its commitment.  Equally important, the ability to buy out of its lease does not prevent MMS from reselling the lease to another oil company.

EDC-PXP agreement is confidential and is NOT a settlement of a lawsuit

The confidetemp_logontial agreement between PXP and EDC is between private parties. If PXP decided to continue to drill it might, at best, result in the payment of damages to EDC but would be very unlikely to result in a requirement for PXP to cease operations, particularly if the State agreed it could continue.

There is no  requirement to remove the platforms

PXP/EDC claim this will result in shutting down operations from four platforms.  Even if the end dates were enforceable, PXP does not own three of the four platforms and there is no evidence their partners will cease operations (and pay the government penalties) as claimed.

The land deal is questionable

PXP’s submission to the lands commission says some of the land may have “insurmountable title issues”.  Because the agreement is confidential there is no ability to review the terms and conditions that run with the land or any  benefits of this. Who will hold title, how and when will the lands be conveyed,  what restrictions will be placed on the use of or future sale of the land how and by whom might it beoilspillsign managed?

More than 100 environmental groups oppose this project

In spite of what the oil industry would have you believe, offshore oil drilling is not safe.  A major spill could destroy our ocean, beaches, and coastal economy.  Spills happen on a regular basis. One-quarter of all oil spills in the past 44 years have occurred in the last decade.  Most recently, a spill in Australian waters  lasted 72 days, in spite of using the latest technology.  This spill had devastating impacts on marine life.

EDC claims that the overall risk for the PXP project is low because it will end drilling in 14 years.  This ignores that the greater the amount of oil being removed, the greater the likelihood of a spill with the chances of a spill  greatest in the early years.  These claims are contrary to every position EDC has taken in the past.  Innovation is good but it must be designed to work.

Fran Gibson

Fran Gibson

Mark Massara

Mark Massara

Why Some Enviros Back T-Ridge Oil Project

Tuesday, December 22nd, 2009

krop_lgToday and tomorrow, Calbuzz is posting pro and con arguments written by leading California environmentalists about the Tranquillon Ridge offshore oil drilling project. The project, about which you can find some of our reporting and analysis here, here and here, has emerged, along with AB32, as one of the two most contentious environmental issues in the state.  Expected to remain the focus of political controversy next year. the proposal has generated conflicts among some longtime allies in the environmental movement. Today’s piece is by Linda Krop, chief counsel for the Environmental Defense Center in Santa Barbara, who negotiated the proposed agreement with the Houston-based PXP oil company.

By Linda Krop
Special to Calbuzz

For over 30 years, the Environmental Defense Center has been among the state’s leading advocates in the battle to end oil drilling along our magnificent coast.  That’s why we’re so excited about the landmark agreement we negotiated on behalf of environmental groups in Santa Barbara County to phase out offshore oil production.

Like so many other issues misrepresented in today’s highly charged political climate, the Tranquillon Ridge proposal has been co-opted by some who seek to use it for their own political gain. That’s too bad because this agreement will finally bring an end to California offshore oil drilling.

Despite our efforts and successes along the way, there are still too many platforms drilling for oil off our coast. Pressure for more leasing abounds. In the 21st Century, we need to find new and innovative ways to solve old problems. With the Tranquillon Ridge agreement, we have found the way to do just that. That’s why this agreement is supported by a broad spectrum of groups — for whom coming together is a rare occurrence.

We recognize that there are nay-sayers and those who are nervous about any approach that falls short of removing all offshore oil drilling NOW.   But the reality is that no matter how much we want to pull these rigs from the ocean, we don’t have the legal authority or the support of any administration — Democrat or Republican — to achieve that goal.

So, we’ve found a way to get something through a negotiated agreement that we could not achieve in any other forum: an agreed termination date for four of the major oil rigs drilling off our shores. Currently these platforms operate without any end date, and can continue drilling for several more decades.

oil_platform

Under the agreement, three of the platforms would be shut down in nine years. The fourth platform would follow five years later. All related onshore processing facilities would be removed. In addition, hundreds of acres of onshore oil wells would be shut down.   And as a further bonus, the agreement requires PXP to reduce and offset all of its greenhouse gas emissions and provide approximately 4,000 acres of land to the public for permanent conservation. No new construction or facilities would be permitted.

This agreement is a total win-win for the environment. It will not only put an end to existing drilling operations, but will also provide the greatest protection against new federal leasing in California. The four platforms that will be shut down pose the biggest threat for new leasing along our coast because they can be used to access known reserves and are supported by existing infrastructure, making new drilling both attractive and economically profitable. Shutting down these platforms and removing the onshore facilities assures that they are not available for future oil leasing and development.

The signal this agreement will send is that California is serious about getting rid of offshore oil and willing to go the extra mile to make it happen. That’s why this agreement is endorsed by 20 major environmental groups in Santa Barbara County as well as our pro-environment County Supervisors, City Council members and Congresswoman Lois Capps.

The claim that such an agreement is not enforceable is misguided and wrong. While the Feds (through the Minerals Management Service, known as MMS) can fine a company for failing to continue production when there is still “profitable” oil in the ground (and thus royalties available to the government), a contract to end drilling (guaranteed under this agreement) is an enforceable contract.

It is not often that we have an opportunity to be creative and progressive in dealing with such a pressing issue facing the people of California. Rhetoric that suggests that we who support this agreement are somehow in favor of oil development is cynical and untrue, and does nothing to address the real issue of continued drilling off our shores.

goo_logo_3This agreement is an example of what we can do when people work together in an innovative way. While we on the environmental protection side have been able to win most of our battles, this approach gives us a way to end the war.

This is not an either-or situation to be pursued at the exclusion of additional approaches. An oil extraction tax, for example, is one way to help solve California’s budget woes, but it will do nothing to end offshore oil production. We need to have a variety of approaches to addressing our economic needs while protecting our environment. The proposal for an oil extraction tax can, and should, go hand in hand with a plan to stop oil drilling offshore.

We look forward to the opportunity to explain the benefits of this unique proposal, and address any concerns, should this matter be reconsidered by the State Lands Commission.

Linda Krop is Chief  Counsel of the Environmental Defense Center, a public interest law firm.  The EDC has led the fight against off-shore oil drilling for over 30 years. For more information about the Tranquillon Ridge plan,  you may visit the EDC website at www.EDCnet.org.