The resumption of California offshore drilling after a 40-year hiatus was rejected late last Friday as California’s legislature ended its latest annual budget drama, closing most of a $26 billion deficit and leaving the governor to make other cuts. Gov. Arnold Schwarzenegger will have to make up the added $100 million and $1.8 billion long term in added revenues projected for the state from the new drilling.

State lawmakers wrestled with the attraction of added revenues and more new natural gas supplies to help the transition to renewable energy sources for power against the state’s historic aversion to added offshore drilling since the iconic Santa Barbara oil spill in 1969 that eventually led to the creation of the state’s stringent regulation of coastal development and the creation in 1972 of the California Coastal Commission. In the end they bowed to history.

Environment California, a Sacramento-based green lobbying group, immediately lauded the action by the state legislature’s lower house Assembly, noting that the state lawmakers “understand that for California the coast is the economy and the economy is the coast.” The group’s legislative director, Dan Jacobson, said the Assembly has literally “beat back the waves of oil lobbyists” wanting to open the coast for additional oil/gas drilling.

Calling it a “difficult but necessary budget solution,” Schwarzenegger thanked both houses of the legislature for making various cuts and reforms in state government under the dire circumstances now facing the state, which has been issuing IOUs to various citizens and organizations and has established a mandatory series of work furlough days for state employees.

Going into Friday’s eleventh-hour votes, there was the potential for new natural gas supplies being unleashed as part of the deal being worked out to resolve the budget deficit (see Daily GPI, July 24). Houston-based Plains Exploration and Production Co. (PXP) was in line to be the developer of the first new offshore drilling along the California coast in 40 years.

If the legislative budget action had retained the offshore drilling deal, PXP said it was ready “to move forward with the state leasing process immediately” thereafter. But even with the state budget approval, PXP would have needed approvals from the state coastal commission and the U.S. Minerals Management Service.

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.

PXP had emphasized that there were additional benefits to the state besides the potential $1.8 billion in added revenues during the life of the new oil/gas drilling offshore Santa Barbara County. The company also offered some environmental benefits, including:

Led by the Environmental Defense Center, a coalition of 25 local environmental groups supported the PXP proposal as a way to “guarantee an end to several existing oil and gas developments off the coast of Santa Barbara County.”

But an official with the Santa Barbara-based environmental organization told NGI late last Thursday that his group did not support legislative budget negotiations overriding the California State Lands Commission that earlier this year rejected the proposed drilling resumption. “If everyone’s concerns can be worked out in the budget process, we stand ready to support the agreement,” the official said.

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