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California Offshore Drilling Gets New Life

Although rejected earlier this year, a proposal by a Houston-based exploration company to resume drilling in California offshore waters for the first time in 40 years has new life this fall, according to backers who are eyeing a special legislative session before year-end, or the regular session next year to get something enacted. Added revenue for the cash-strapped state and some environmental concessions would be the incentives for lawmakers to act.

Drilling proponents, led by Plains Exploration & Production (PXP), argue that the state stands to get an estimated $14 billion in revenues from the resumption of offshore oil and gas drilling about 50 miles northwest of Santa Barbara.

Last January the three-member California State Lands Commission turned down the drilling proposal on a 2-1 vote. PXP, which holds a federal lease for the offshore Point Pedernales Field, has applied for two state offshore leases to develop the Tranquillon Ridge Oil Field.

In search of legislative action, PXP still has a settlement it worked out with major environmental organizations by agreeing to date-certain ending targets for the Tranquillon Ridge drilling in 2022 and for another field, Point Arguello, in 2017.

Critics, however, contend that there was no assurance that the federal government would go along with the proposed deadlines if profitable drilling was still possible after those dates. Proponents stress that the PXP deal eventually would close four of 20 offshore platforms in the region.

Last week in the Los Angeles Times GOP state assemblyman Chuck DeVore, who represents Orange County, said proponents of offshore drilling are hoping to get a bill through the legislature this fall during the special session recently called by the governor to address budget shortfalls. If not, drilling proponents plan to reintroduce a bill early during the regular legislative session early next year.

PXP's unprecedented agreement to cease drilling in the area by 2022 would also set aside thousands of acres of land and funding for a hybrid bus system. However, even with the local stakeholders' approval, PXP's efforts failed to clear the State Lands Commission, which has the authority to override California's ban on drilling in designated offshore sanctuaries.

Drilling proponents said there may be reason to hold off until next year, when there may be a new membership mix on the three-member commission, which is composed of the state's lieutenant governor, controller and the governor's finance department director. However, Lt. Gov. John Garamendi is said to be considering whether to pursue a Congressional seat in a special election in November.

If Garamendi steps aside, Gov. Arnold Schwartzenegger may appoint and the legislature could support a pro-drilling successor, sources said. In any event, DeVore assured the Times, "this is absolutely not dead."

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