A tentative deal to close California’s $26 billion budget deficit includes provisions for reopening limited offshore oil drilling along the Santa Barbara coast. A similar compromise for boosting state revenues with the first new drilling in 40 years was rejected last January by the California State Lands Commission, but has been given new life in the budget talks (see Daily GPI, Feb. 2).

Although reports Wednesday in the Los Angeles Times indicated that the overall budget deal worked out Monday between Gov. Arnold Schwarzenegger and the state legislature might unravel, the offshore drilling compromise was still a part of the tenuous negotiations. Under those provisions Houston-based Plains Exploration and Production Co. (PXP) had support from local Santa Barbara officials and environmentalists to tap oil reserves under state waters in exchange for shutting down four existing platforms by specific dates.

The deal that was backed by the group Environmental Defense also included the company donating 200 acres of ocean-view property along the south-facing coast west of Santa Barbara and 3,700 acres in the region’s growing wine country as public parkland. The state would get an estimated $100 million in added revenue this year and up to $1.8 billion over the life of the new drilling project.

However, last January, the lands commission voted 2-1 to reject the deal, with opponents contending there would be no guarantees the federal government would go along with the proposed early closure of the four existing platforms if they were still commercially viable in 2017 and 2022, the targeted closing dates. Proponents stressed that the PXP deal eventually would have closed four of 20 offshore platforms in the region.

PXP had worked out a settlement with major environmental organizations by agreeing to date-certain endings for the Tranquillon Ridge drilling in 2022 and for another field, Point Arguello, in 2017.

The Washington, DC-based Competitive Enterprise Institute praised the budget compromise in a statement by its energy and global warming policy director, Myron Ebell, but warned this would not solve the state’s longer-term budget dilemma. Citing the institute’s recent study on the economic impact, Ebell said the state global climate change law (AB 32) that is expected to roll out fully in 2012 needs to be repealed.

“Drilling won’t be enough to save the state,” according to Ebell. “California’s budget agreement will not bail out California’s economy, [although] it won’t contribute to further decline. California must repeal the sate’s economically catastrophic global warming legislation.”

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