Offshore oil drilling, once abhorred, gains in the Capitol

A political fight over the first new state offshore oil drilling lease since the 1969 Santa Barbara spill has escalated sharply in the Capitol, fueled by the governor's dramatic reversal to now support drilling by a Texas-based company and by $100 million in annual payments dangled before the cash-strapped state.

At the heart of the dispute is Gov. Schwarzenegger's move to bypass a decision by the three-member State Lands Commission — the office, since 1938, with authority over state oil drilling – which voted in January to reject the plan. The governor wants to shift jurisdiction to his own Department of Finance, which writes the state's budgets. By moving it to Finance, the project would likely be approved – but only if the Legislature signs off on the agreement.

Inside the Capitol, the power shift caught many by surprise.

"It is a very bad model and it leads to bounty hunting," said Assemblyman Pedro Nava, D-Santa Barbara, a foe of the project. "The authority to approve these land deals was stripped from the Finance Department because of past scandals and conflicts of interest," Nava said.

Outside, it stirred opposition from some environmentalists already critical of the project, coastal Democrats in both houses and the commission itself.

"We think it violates the long-standing authority of the Lands Commission and provides no safeguards for the coast and water and air around Santa Barbara," said Bill Magavern of the Sierra Club "The Department of Finance doesn't have the expertise."

But the administration believes the significant dollar value of the project – some $1.4 billion to $1.8 billion – requires rigorous fiscal scrutiny. Thus, language authorizing the shift in authority is pending before the two-house conference committee that is rewriting the state budget in a search for cash to cover a $24 billion shortage.

The position is a reversal of the governor's earlier position. "I welcome the national debate on solutions to lower our energy costs, but we know offshore oil drilling is not the answer," Schwarzenegger said after President Bush announced plans to lift the moratorium on oil drilling.

The Houston drilling firm, Plains Exploration and Production Co., or PXP, wants to sink a slant well from a federal platform off Santa Barbara County and operate it through 2022. The operation would use existing infrastructure – a major selling point – and an agreement brokered by local environmentalists includes limits on future drilling by other companies. Critics of the plan say the latter provision is unenforceable.

In return, the state reportedly would get $100 million annually in payments, 4,000 acres of Gaviota-area coastal land and other benefits.

Lands Commission chairman and Lt. Gov. John Garamendi, a Democrat, opposed the project. He said before the commission's January vote that approval of the drilling plan would serve as a precedent for "new leases off the Mendocino Coast, the Orange County coast, as well as the Santa Barbara coast."

The issue is complicated by electoral politics, both local and statewide.

Nava is a candidate for state attorney general next year. His wife, environmentalist Susan Jordan, is a candidate for his Assembly seat, and she also has denounced the project. Initially, some local environmental groups backed the plan – indeed, they brokered the deal — although their support has since withered.

But their action, at least in part, prompted a challenge to Jordan from Das Williams, a Democrat and member of the Santa Barbara City Council, who previously had endorsed Jordan and reportedly sensed a chance to cut into Jordan's environmental base. Voter registration numbers in 35^th Assembly District suggest that the winner of the Democratic primary likely will win the general election.

Meanwhile, Garamendi is running in the 10^th Congressional District to replace Ellen Tauscher, who was appointed by President Obama as undersecretary for arms control in the State Department. After Tauscher is confirmed in her new job, Schwarzenegger will call a special election to fill the seat. Schwarzenegger also can appoint Garamendi's successor, if Garamendi wins the election and heads to Congress.

For 71 years, the State Lands Commission has had jurisdiction over California's offshore oil leasing. On Jan. 29, the commission rejected PXP's plan, known as the Tranquillon Ridge project, in a 2-to-1 vote. The commission's two Democrats, Garamendi and Controller John Chiang, opposed the project. The third member, representing Finance Director Mike Genest, a Schwarzenegger appointee, voted in favor.

"This project is good for California," Tom Sheehy, a ranking official of the Finance Department, said at a later hearing. Sheehy was the sole vote in favor of the plan.

The commission, and a review by the state attorney general, noted that key provisions of the agreement were not enforceable.

"They, the commission's staff and the attorney general, concluded that the purported benefits could not be enforced or guaranteed, and on that basis they denied it," said Jordan, executive director of the Coastal Protection Network.

If the lease had been approved, it would have marked the first new state oil-drilling lease in 40 years. The ban on leasing followed the 1969 spill off the Santa Barbara coast, which caused extensive environmental damage and remains a defining moment in the area's environmental history.

But the Commission's decision did not end the debate.

The new language before the conference committee says "it is in the public interest to reconsider applications from operators with existing offshore drilling platforms on federal lands…the provisions of this act are necessary for the promotion of the public interest and are of statewide concern," according to a version drafted by the Legislative Counsel's office and provided by the administration.

Nearly three dozen environmental groups wrote the governor and legislative leaders in opposition to the proposal. The groups said it "threatens to unravel" the existing system of environmental review and independent boards and commissions. U.S. Sen. Barbara Boxer, a Democrat, also opposes Tranquillon Ridge, as do lawmakers in the state Senate and Assembly representing coastal districts.

Supporters of the plan say it would generate $1.8 billion for the state and some $313 million for Santa Barbara County over 14 years. But the dollar amounts and other details are not included in the draft language, which focuses on the transfer of authority over the lease to the Finance Department.

"The oil and gas reserves are owned by the state of California, and already are being siphoned in an inefficient manner from the existing platform," said a fact sheet provided by backers of the project. "If this project doesn't go forward, then that oil infrastructure is going to sit there for decades and decades and decades," Sheehy noted.

The Porter Novelli communications company is working on building public support for the plan, and PXP's lobbyist is Aaron Read of Aaron Read & Associates, a veteran Sacramento lobbying firm.

The plan is not yet in the printed form of a bill, but it is likely to be drafted this week and go before the two-house conference committee.

At the same time that the administration is pushing the PXP project, the governor also is seeking federal stimulus money to ease, or mitigate, the environmental impacts of offshore drilling. The governor's office referred a reporter to the Legislature. There was no immediate comment.

"Mitigation monies are funds used to defray the cost of harm. You can't mitigate something unless you anticipate h
arm. If they are looking for mitigation money, they are acknowledging that there is likely to be harm," Nava said.