The California Coastal Sanctuary Act of 1994 authorizes the State Lands Commission to enter into a lease for the extraction of oil or gas from state-owned tide and submerged lands in the California Coastal Sanctuary if the commission determines that the oil or gas deposits are being drained by means of producing wells upon adjacent federal lands and the lease is in the best interest of the state.

This bill would enact the California Coastal Protection Act of 2015, which would delete this authorization. The bill would make related legislative findings and declarations.

The California Coastal Sanctuary Act of 1994 authorizes the State Lands Commission to enter into a lease for the extraction of oil or gas from state-owned tide and submerged lands in the California Coastal Sanctuary if the commission determines that the oil or gas deposits are being drained by means of producing wells upon adjacent federal lands and the lease is in the best interest of the state.

This bill would enact the California Coastal Protection Act of 2015, which would delete this authorization. The bill would make related legislative findings and declarations.

The California Coastal Sanctuary Act of 1994 authorizes the State Lands Commission to enter into a lease for the extraction of oil or gas from state-owned tide and submerged lands in the California Coastal Sanctuary if the commission determines that the oil or gas deposits are being drained by means of producing wells upon adjacent federal lands and the lease is in the best interest of the state.

This bill would enact the California Coastal Protection Act of 2015, which would delete this authorization. The bill would make related legislative findings and declarations.

Date of Hearing: July 15, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 788

Author:(McGuire) – As Amended Ver:June 2, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill deletes the provision allowing the State Lands Commission (SLC) to enter into leases for the extraction of oil or gas from state-owned tide and submerged lands in the California Coastal Sanctuary if SLC determines the oil and gas deposits are being drained by producing wells on adjacent federal lands and the lease is in the best interest of the state. Additionally, this bill makes various legislative declarations and findings.

FISCAL EFFECT

Potential forgone offshore oil revenues (GF) estimated to range between $48 million and $173 million per year (based on a per barrel oil price of $50) for 30 to 35 years if SLC entered into a lease off of the Vandenberg Air Force Base into the Tranquillion Ridge. The variability in the estimated cost depends on the royalty rate, life of the project, and the per barrel rate.

Given past and current SLC policies, it is uncertain how many, if any leases would be offered.

COMMENTS

1. Purpose. This bill repeals the remaining provision in state law that allows SLC to enter into new offshore oil and gas leases.

2. Background. The California Coastal Sanctuary Act was established in 1994 (AB 2444, O'Connell) and placed the entire coast from the Mexican border north to the California-Oregon border in permanent sanctuary, except for existing offshore oil and gas leases in effect on January 1, 1995, in Santa Barbara, Ventura, Los Angeles, and Orange Counties and waters in the Sacramento/San Joaquin Delta east of the Carquinez bridges. This exception no longer applied if the lease was deeded or otherwise reverted to the state.

AB 2444 also repealed an existing provision of law that authorized SLC to lease offshore lands, under certain conditions, to prevent state oil and gas from being drained by wells on adjacent lands and instead recast the provision to limit its application to leases in which state resources are drained from adjacent "federal" lands. This bill repeals that provision, which has never been used to issue state leases.

3. Federal Drainage of State Resources. According to SLC staff, there are potentially 10 fields, with an estimated 600 million barrels of oil that cross the state-federal boundary line. Of those, only 5 have existing federal infrastructure. Of those five, only one has confirmed drainage (Tranquillion Ridge from Platform Irene) and two have a potential for drainage (Rocky Point and Jalama). Under the existing law this bill repeals, only the Tranquillion Ridge could be leased.

4. 2009 Offshore Lease Proposal. In 2009, SLC considered a proposal to approve an offshore oil and gas lease that would have involved the Tranquillon Ridge oil and gas field located within the state's jurisdiction off the Santa Barbara County coast.

The project proposal called for up to 17 wells from Platform Irene (approximately 4.5 miles off the coast in federal waters) into two new state leases, with all the drilling and production to cease on or before December 31, 2022. According to the SLC staff report, total production from this project would have been in the range of 40 to 90 million barrels of oil. The produced oil and gas would have been piped onshore through an existing pipeline to be processed and shipped to a refinery.

SLC considered this proposal because an independent study showed that an existing well (Well A-28) drilled from Platform Irene into the OCS drains a relatively low amount of natural gas from the state side of the Tranquillon Ridge field. SLC ultimately rejected the lease proposal concluding that it was not in the best interest of the state.

After SLC rejected the Platform Irene-Tranquillon Ridge lease proposal, there were several failed legislative attempts to bypass the Commission's offshore oil and gas leasing authority: AB 1536 (Blakeslee, 2009), ABX4 23 (DeVore, 2009), AB 2719 (DeVore, 2010), and Governor Schwarzenegger's 2010-11 Proposed Budget.

5. Proposal to Drill Tranquillon Ridge from the Coast. Around the same time the Commission was processing the Platform Irene-Tranquillon Ridge lease application, a different party, Sunset Exploration, submitted an offshore lease application that proposed to drill into Tranquillon Ridge from the Vandenberg Air Force Base lands using land-based extended reach technology.

SLC did not consider this proposal viable due to the lack of the surface owner's (U.S. Air Force) approval for a surface location for the project. However, according to news reports last year, the U.S. Air Force is more seriously considering allowing the base to be used for the drilling project.

6. Refugio Oil Spill. On May 19, 2015, a pipeline, known as Line 901, ruptured, spilling up to 101,000 gallons of heavy crude oil along the Gaviota coast in Santa Barbara County. Line 901, is a common carrier pipeline that transports oil produced on platforms offshore in both state and federal waters to be refined in Santa Maria or Kern County. Many offshore platforms have halted production because of the spill from Line 901 and the denial of an emergency permit to truck the oil produced.

7. Support and Opposition. This bill is supported by a broad coalition of environmental and coastal tourism and protection organizations who argue this bill closes the final loophole allowing new offshore drilling leases, and as such, will prevent future oil spills.

It is opposed by business and taxpayer organizations and oil companies and associations who argue that if state resources are being drained by federally approved leases, the state should be compensated. Sunset Explorer further argues that a state lease allowing land-based infrastructure provides the state with an opportunity to limit resource opportunities available to federal marine platforms, such as platform Irene.

8. Prior Legislation. Last year, SB 1096 (Jackson) was amended in the Assembly to delete its contents and instead contain provisions functionally identical to this bill. SB 1096 failed passage on the Assembly Floor.
   
   
   

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: June 29, 2015

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Das Williams, Chair

SBPCA Bill Id:SB 788

Author:(McGuire) – As Amended Ver:June 2, 2015

SENATE VOTE: 23-14

SUBJECT: California Coastal Protection Act of 2015

SUMMARY: Eliminates the exception in the California Coastal Sanctuary Act of 1994 (AB 2444, O’Connell) (CCSA) that allows the State Lands Commission (Commission) to issue an offshore oil lease if state oil or gas deposits are being drained by wells on federal lands and the lease is in the best interests of the state.

EXISTING LAW:

1. Pursuant to the CCSA,
   
   

   1. Makes findings and declarations that offshore oil and gas production in certain areas of state waters poses an unacceptably high risk of damage and disruption to the marine environment of the state. (State waters generally extend out three nautical miles from the shore.)
      
      

   2. Establishes the California Coastal Sanctuary (Sanctuary), which includes all state waters subject to tidal influence west of the Carquinez Bridge, except oil or gas leases in effect on January 1, 1995, unless the lease is deeded or otherwise reverts to the state after that date.

3. Generally prohibits a state agency or state officer from entering into any new lease for the extraction of oil or gas from the Sanctuary.

4. Authorizes the Commission to enter into any lease for the extraction of oil or gas from state-owned tide and submerged lands in the Sanctuary if the Commission determines that those oil or gas deposits are being drained by means of producing wells upon adjacent federal lands and the lease is in the best interest of the state.

5. Authorizes the Commission to adjust the boundaries of an existing offshore oil and gas lease to encompass all of an oil and gas field partially contained in the lease.
   
   

1. Pursuant to the federal Outer Continental Shelf Lands Act (OCS Lands Act),
   
   

   1. Defines the ‘‘Outer Continental Shelf’’ (OCS) as all submerged lands lying between the seaward extent of the states' jurisdiction and the seaward extent of federal jurisdiction.
      
      

   2. Declares, among other things, that it is the U.S. Policy that the OCS is a vital national resource reserve held by the federal government for the public, which should be made available for expeditious and orderly development, subject to environmental safeguards, in a manner that is consistent with the maintenance of competition and other national needs.

3. Requires the Department of the Interior (Interior) to prepare, periodically revise, and maintain an oil and gas leasing program that consists of a schedule of proposed lease sales indicating, as precisely as possible, the size, timing, and location of leasing activity that the Interior determines will best meet national energy needs for the five-year period following its approval or reapproval. Gives priority leasing consideration to areas where the combination of previous experience; local, state, and national laws and policies; and expressions of industry interest indicate that potential leasing and development activities could be expected to proceed in an orderly manner.
   
   

FISCAL EFFECT: According the Senate Appropriations Committee, this bill has unknown costs, estimated between $48 million and $173 million per year based on a per barrel oil price of $50, to the General Fund for foregone offshore oil lease revenue that could have been received if the State Lands Commission (SLC) entered into a lease off the Vandenberg Air Force Base into the Tranquillon Ridge. The variability in the estimated cost depends on the royalty rate, life of the project, and the price of oil.

COMMENTS:

1. Author’s statement.

California’s coast acts as a meeting point for the warm waters from the South and the cold waters of the North. As a result, California’s coast is recognized as one of only five locations in the world that produces such diverse sea life, marine ecology and vegetation.

Allowing for new offshore oil drilling, at the same time stating it poses too great of a risk, is a contradiction within the Coastal Sanctuary Act. This glaring inconsistency is compounded as a result of the subsequent passage of the MLPA, which provided stringent new marine protection guidelines in the same coastal regions that remain open to new offshore oil drilling that is authorized under the Coastal Sanctuary Act.

As a result, the Coastal Sanctuary Act and Marine Life Protection Act have conflicting mandates, which allow for offshore drilling in areas that were subsequently designated to protect and conserve marine life.

2. Strengthening the CCSA. This bill would repeal the exception to the CCSA that allows for the Commission to issue a new offshore drilling lease based on the CCSA's drainage provision. By doing this, the state would be bringing in a large portion of the Pacific Ocean off the coast of Santa Barbara County, where the exemption has been proposed to be used, into the full protection of the CCSA.
   
   

3. The Legislature and Offshore Oil. The Legislature has a long history of excluding areas from leasing for offshore oil and gas development. Beginning in 1921, and many times since, the Legislature has enacted laws that set aside offshore areas where oil and gas leasing is generally prohibited. The 1921 Leasing Act prohibited the issuance of any prospecting permits or leases within one mile of any municipality. The 1921 Act was amended in 1929 to prohibit the issuance of any new lease in offshore state waters. Between 1938 and 1955, leases could only be issued by the Commission if drainage of the state’s oil and gas could be shown. In 1955, the Legislature authorized new oil and gas leases in state offshore waters but has steadily increased the area that is closed to these leases. Finally, in 1994, the CCSA removed all state lands underlying the Pacific Ocean from the Commission’s oil and gas general leasing authority. The CCSA contains two limited exceptions that allow the Commission to approve new offshore oil and gas production in state waters. One exception is if the Commission determines that state oil or gas deposits are being drained by means of producing wells upon adjacent federal lands and a new oil and gas lease is in the best interests of the state. The other exception allows the Commission to adjust the boundaries of an existing offshore oil and gas lease to encompass all of an oil and gas field partially contained in the lease.
   
   

4. The Commission and Offshore Oil. Since 1938, the Commission has had jurisdiction over the leasing of oil and gas from offshore state lands. Between 1938 and 1968, over 50 offshore oil and gas leases were issued by the Commission. In a manner common to most oil and gas leases, the leases that the Commission issued were either devoid of a fixed end date or were subsequently amended to remove an end date. The lease terms typically provide that the leases last as long as oil and gas is being produced in paying or commercial quantities. Once production ceases, the leases are to be quitclaimed back to the Commission.
   
   

Two August 1968 leases, one to Continental Oil Company and the other to Standard Oil Company, were the last new offshore oil and gas leases that the Commission entered into prior to the January 1969 Santa Barbara oil spill. The spill was the result of a well drilling blow-out at an offshore platform located in the federal OCS off the coast of Santa Barbara County. The cause was inadequate protective wellpipe casing. The event lasted 11 days and spilled between 80,000 and 100,000 barrels of crude oil. Two hundred square miles of ocean and 35 miles of California coastline were oiled and thousands of animals were killed.

At its February 1969 meeting, the Commission deferred the acceptance of outstanding bids for new leases and subsequently deferred deadlines for additional drilling from existing leases. Since then, the Commission has not entered into any new offshore oil and gas leases. Since 2001, the Commission adopted several resolutions opposing the resumption or expansion of federal offshore oil and gas lease sales in the OCS. The foundation for each resolution was the same: that the danger of an oil spill like the 1969 Santa Barbara oil spill was too high and that oil development and potential spills would adversely affect fishing, tourism, and environmental, recreational, economic, scenic, and other values. The resolutions are also based on and expressive of the state’s policy and practice of not issuing new offshore leases. Further, the Commission’s staff has been proactive in obtaining quitclaims of existing offshore oil and gas leases from oil companies back to the state.

5. 2009 Offshore Lease Proposal. On January 29, 2009, the Commission considered a proposal to approve an offshore oil and gas lease that would have involved the Tranquillon Ridge oil and gas field located within the state's jurisdiction off the Santa Barbara County coast. The project proposal called for up to 17 wells from Platform Irene (approximately four and a half miles off the coast in federal waters) into two new state leases, with all the drilling and production to cease on or before December 31, 2022. According to the Commission’s staff report, total production from this project would have been in the range of 40 to 90 million barrels of oil. The produced oil and gas would have been piped onshore through an existing pipeline to be processed and shipped to a refinery. (It is worth noting that this pipeline experienced a rupture on September 28, 1997, spilling crude oil into the ocean about two and a half miles from the shore. The oil spread approximately four miles, oiling wildlife and killing hundreds of seabirds. Studies concluded that the leak was caused by a faulty weld.)
   
   

The Commission was authorized to consider this proposal under the CCSA because an independent study showed that an existing well (Well A-28) drilled from Platform Irene into the OCS drains a relatively low amount of natural gas from the state side of the Tranquillon Ridge field. (The state is compensated for production from Well A-28 even though it occurs on federal property. Pursuant to a 1997 agreement between the state and federal government, the state receives a royalty share of 50% of all hydrocarbons produced from Well A-28 originating within 500 feet of the state/federal boundary. In addition, pursuant to the OCS Land Act, because Well A-28 is located within three nautical miles of the state/federal boundary, the state receives payment of 27% from the federal royalty production of the well.)

The Commission ultimately rejected the lease proposal concluding that it was not in the best interest of the state. The Commission's decision was based, in part, on a determination that "environmental, tourism, recreational, economic, fishing, scenic, and other values are threatened by offshore oil development and that these values were more important [than the benefits of the lease]." Additionally, the Commission was concerned about the message the lease would send to Washington, D.C. As indicated above, the Commission and the Legislature have opposed new offshore oil drilling for decades. The state relied on this history when calling on the President and Congress to continue its moratorium on new offshore federal leases off the California coast. In 2008, President George W. Bush lifted the presidential moratorium on federal offshore leases and Congress refused to re-enact its own moratorium. On January 16, 2009, the Interior announced plans to conduct lease sales in different parts of the country, including three off of the California coast. The Commission was concerned about "the impact a new lease would have on the potential for new federal leasing off of California…."

After the Commission rejected the Platform Irene-Tranquillon Ridge lease proposal, there were several failed legislative attempts to bypass the Commission's offshore oil and gas leasing authority: AB 1536 (Blakeslee, 2009), ABX4 23 (DeVore, 2009), AB 2719 (DeVore, 2010), and Governor Schwarzenegger's 2010-11 Proposed Budget. Governor Schwarzenegger's proposal came as a surprise to many since, in 2006, he entered into the "West Coast Governors’ Agreement on Ocean Health," in which he agreed to "[s]end a joint message to the President and Congress reinforcing [California, Oregon, and Washington's] opposition to oil and gas leasing, exploration, and development off our coasts."

6. Proposal to Drill Tranquillon Ridge from the Coast. Around the same time the Commission was processing the Platform Irene-Tranquillon Ridge lease application, Sunset Exploration submitted an offshore lease application that proposed to drill into Tranquillon Ridge from the Vandenberg Air Force Base. The Commission did not consider this proposal viable due to the lack of the surface owner's (U.S. Air Force) approval for a surface location for the project. However, according to news reports last year, the U.S. Air Force is more seriously considering allowing the base to be used for the drilling project. U.S. law authorizes military services to lease non-excess land for nonfederal development if the use does not conflict with mission requirements and is beneficial to the military service leasing the property. As such, the Commission again could be faced with deciding whether to approve its first offshore oil lease since 1968.
   
   

7. Refugio Oil Spill. On May 19, 2015, a pipeline owned by Houston-based Plains All American Pipeline ruptured, spilling up to 101,000 gallons of heavy crude oil along the Gaviota coast in Santa Barbara County. It is estimated that as much as 21,000 gallons of the oil went down a storm culvert onto cliffs and into the Pacific Ocean. The immediate oil spill area stretched over nine miles of California coastline, and tar balls have washed up as far as one hundred miles from the spill site. The pipeline that ruptured, known as Line 901, is a common carrier pipeline that transports oil that was produced on platforms offshore in both state and federal waters to be refined in Santa Maria or Kern County. Many offshore platforms, including operations at Heritage, Harmony, Hondo, and Holly have halted production because of the spill from Line 901 and denial of an emergency permit to truck the oil produced. In a July 30, 2014 letter sent by the Governors of Washington, Oregon, and California to the Secretary of the Interior opposing new federal leases off the pacific coast stated, “while new technology reduces the risk of a catastrophic event such as the 1969 Santa Barbara oil spill, a sizable spill anywhere along our shared coast would have a devastating impact on our population, recreation, natural resources, and our ocean and coastal dependent economies.” The Refugio oil spill shows, despite new technology, the risk remains with existing oil production and any potential new production.

8. Prior Legislation. SB 1096 (Jackson, 2014) was almost identical to this bill. SB 1096 failed passage on the Assembly Floor.
   

REGISTERED SUPPORT / OPPOSITION:

Support

Absolute Board Company

Action Expo

Agency Glow

Agenda

Ambsn

Angel/Anarchy Eyewear (Quantum Optics)

ARC Sustainability

Arnette

Asian Pacific Environmental Network

Audubon California

Azul

Beach Riot

Billabong USA

Black Surfers Collective

Blue Business Council

Boardworks

Body Glove International

Braven

Brewer Surfboards

Brightline Defense

California Coastal Alliance

California Coastal Protection Network

California Coastkeeper Alliance

California Environmental Justice Alliance

California League of Conservation Voters

California Sea Urchin Commission

California Sport Fishing League

California Trout

Captain Fin

Carpenteria Valley Association

Catch Surf

Center for Biological Diversity

Center for Climate Protection

Channel Island Surfboards

Channel Islands Outfitters

CIT Commercial Services

Citizens Planning Association

Citizens Planning Association of Santa Barbara County

City of Arcata

City of Santa Monica

Clean Water Action

Coast Seafoods Company

Coastal Playground

Community Environmental Council

Coastal Environmental Rights Foundation

Creatures of Leisure

D’BLANC

Dakine

DC Shoes

Defenders of Wildlife

DEPACTUS

Dewey Weber Surfboards

Dragon

Duvin Design Company

Eastern Surf Magazine

Electric

Environment California

Environment in the Public Interest

Environmental Action Committee of West Marin

Environmental Defense Center

Environmental Defense Fund

Erin Feinblatt Photography

E-Tech Boards

Ethika

Ezekiel

FCS/Surf Hardware Int’l

Fillirate

Fins Unlimited

FireWire Surfboards

Fishing Vessel Corregidor

Foam Magazine

Former Superintendent of Public Instruction, Jack O’Connell

Fox

Freestyle Watch Col

Friedmann & Friedmann

Friends of the Earth

FUEL TV

Futures

Get Oil Out!

Global Surf Industries

Globe Shoes (OSATA)

Golden Gate Salmon Association

GoPro

Graffy, Inc.

Guy Takayama Surfboards/Carve Sports, Inc.

Habematelel Pomo of Upper Lake

Hayden Surfboards, Inc.

Heal the Bay

Hippy Tree

Hog Island Oyster Company

Holt Building Group, Inc.

Hooklit

Howler Brothers

Humboldt Bay Harbor, Recreation, and Conservation District

Humboldt Bay Tourism Center & Oyster Tours

Humboldt Baykeeper

Humboldt County Board of Supervisors

Huntington Glassworks

Hydroflex Technology

Imperial Capital

Insight

Iron & Resin

Jelly Handboards & Skateboards

Jetty Life

Judicci, Inc.

Kameleonz

Karuk Tribe

Kayak Zak’s

Kid Creature

Klean Kanteen

L*Space

Land Trust of Santa Cruz County

League of Women Voters of California

Lib Tech

Liquid Tribe

Lira Clothing

Los Angeles Waterkeeper

Lost International

Luv Surf

Mad River Alliance

Manhattan Beachwear

MapCargo

MasterCraft Boat Company

Matix

Mizu, Inc.

Monterey Bay Aquarium

Moss Adams

Naples Coalition

Natural Resources Defense Council

New Era Cap Company

Nixon, Inc.

Noll Surfboards

NRI Distribution/NRI USA

O’Neill Clothing and Wetsuits

Oakley

Ocean Conservancy

Ocean Outfall Group

Olukai, Inc.

Orange County Coastkeeper

Orange County SEO

Otis

OurCaste

Pacific Coast Federation of Fishermen’s Association

Patagonia

Patagonia Surf

Planning and Conservation League

Prana

Pro-Llite

QuickSilver

Raen Optics

Reef

Richer Poorer

Rip Curl

Roark

Roxy

Rusty North America

Rusty Surfboards

RVCA

Salt Life

San Diego Coastkeeper

San Francisco Baykeeper

San Luis Obispo Coastkeeper

Santa Barbara Adventure Co.

Santa Barbara Board of Supervisors

Santa Barbara Channelkeeper

Santa Barbara County Action Network

Santa Barbara Lodging & Restaurant Association

Santa Cruz Surfboards

Santa Ynez Vacation

Santa Ynez Valley Alliance

Sanuk

Save The Bay

Savenaples.org

Scott Guinto Surfboards

Sector 9

Seea

Shaper Studios

Sherwood Valley Band of Pomo Indians

Shout Public Relations

Sierra Club California

Skullcandy

Slyde Handboards

SME

Smiley’s Schooner Saloon

Smith River Rancheria

Smith Sport Optics

So. Cal Industries, Inc.

Sojourner Café

Solforce Energy

Southern California Trawlers Association

Spy Optics

Stance Steele Distribution

Sun Bum

SuperBrand

Suplove

SURFFit

Surf Diva

Surf DNA Graphite Master

Surf Expo

Surf Industry Manufacturers Association

Surf Right Project

Surfer / Surfing

Surfline

Surfrider Foundation

Surfrider Foundation, Santa Barbara Chapter

Surfrider Foundation, South Bay Chapter

Surfrider Foundation, West LA/Malibu Chapter

Surftech

Steel Distribution

Swappow LLC

T&C Surfboards

Tavik

The ActivEmpire

The Fund For Santa Barbara

The Northcoast Environmental Center

The People’s Movement

The Surfer’s Journal

The Trust for Public Land

The Wheat Group

The Wildlands Conservancy

Under Armour

Union of Concerned Scientists

Vans

Ventura Coastkeeper

Verde Brand Communications

Vertra

Vestal Watch, Inc.

Vissla

Volcom

VonZipper

Wave Zone, Inc.

Wells Fargo Capital Finance

West Marin Environmental Action Committee

Wholly H2O
Wildcoast

Wishtoyou Foundation

Xcel Wetsuits

Yulex

Opposition

California Chamber of Commerce

California Independent Petroleum Association

California Manufacturers & Technology Association

Sunset Exploration

Western States Petroleum Association

Analysis Prepared by: Michael Jarred / NAT. RES. / (916) 319-2092

 THIRD READING 

Bill No: SB 788

Author: McGuire (D), et al.

Amended: 6/2/15

Vote: 21

SENATE NATURAL RES. & WATER COMMITTEE: 7-1, 4/28/15

AYES: Pavley, Allen, Hertzberg, Hueso, Jackson, Monning, Wolk

NOES: Stone

NO VOTE RECORDED: Vidak

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SUBJECT: California Coastal Protection Act of 2015

SOURCE: Author

DIGEST: This bill deletes the exception to the California Coastal Sanctuary Act that allows for a new oil and gas lease if such a lease is in the state’s interest and the state’s oil and gas deposits are being drained from adjacent federal lands.

ANALYSIS:

Existing federal law under the federal Outer Continental Shelf Lands Act (43 U.S.C. §1337(g)(2)), provides that California is entitled to 27% of the federal royalty for production from oil and gas wells within three nautical miles of the state/federal boundary. The state may also receive additional royalties. For example, under separate agreement, the state’s royalty share in the federal well known to drain the state’s Tranquillon Ridge field (described below) is 50% as it is within 500 feet of the state/federal boundary. There is no current federal law, ongoing federal appropriations moratoria or executive order banning new oil and gas leasing off of California. There are 43 existing active leases under the federal Outer Continental Shelf Lands Act in federal waters offshore California.

Existing state law:

1. Provides and has provided the State Lands Commission (commission) exclusive jurisdiction over the leasing of offshore state lands for oil and gas production since 1938. According to the commission, it issued over fifty offshore oil and gas leases between 1938 and 1968. In general, lease terms provide for the leases to remain in effect so long as oil and gas production continues in paying or commercial quantities.

2. Extends, through the California Coastal Sanctuary Act of 1994 (act) (Public Resources Code (PRC) §§6240 et seq.) the California coastal sanctuary which removed the authority of the commission to issue new oil and gas leases for unleased tide and submerged lands underlying the Pacific Ocean with limited exceptions. The Legislature had, beginning in 1921 and repeatedly since, passed laws that excluded offshore areas of the state from oil and gas leasing. Legislative findings stated that “offshore oil and gas production in certain areas of state waters poses an unacceptably high risk of damage and disruption to the marine environment of the state.” (PRC §6241).

3. Allows, pursuant to PRC §6244, the commission to consider issuing a new oil and gas lease if the commission determines that (1) state oil and gas resources are being drained by production on adjacent federal lands, and (2) the lease is in the state’s interest.

4. Specifies state-level marine protected areas under the Marine Life Protection Act (Fish and Game Code §§2850 et seq.) are designed to protect or conserve marine life and habitat. In and around the Santa Barbara Channel there are a variety of protected federal and state marine areas, including the Channel Islands National Marine Sanctuary and several protected locations near the Tranquillon Ridge field.

This bill:

1. Deletes the exception to the act that allows for a new oil and gas lease if such a lease is in the state’s best interest and the state’s oil and gas deposits are being drained from adjacent federal lands.

2. Makes numerous uncodified legislative findings to support the removal of this exception.

Comments

Deliberate government actions have foregone offshore oil and gas revenue. As noted herein, the policy of various levels of state government over many years has been to purposefully limit or seek to limit oil and gas revenue to the state from offshore sources in both state and federal waters.

The Tranquillon Ridge oil field. There is one known offshore oil field that meets the existing criteria established by PRC §6244 – the Tranquillon Ridge field located to the west of Points Pedernales and Arguello in Santa Barbara County. Studies have shown that production from federal platform Irene is draining the hydrocarbon resources in the state’s portion of this oil and gas field. Reservoir pressure on the state side is also being reduced, which may ultimately decrease the recoverable hydrocarbon reserves from the field. The amount of economically recoverable oil in the state’s portion of the Tranquillon Ridge field is uncertain, and a recent estimate places it in the range of 40 to 150 million barrels.

Development of the state portion of Tranquillon Ridge was first proposed in 1999. In 2008, the Santa Barbara Board of Supervisors approved a highly controversial subsequent proposal which utilized drilling into state waters from a federal platform. However, the commission voted in January 2009 against issuing a new oil and gas lease pursuant to the exception to the act provided by PRC §6244. Additionally there has been at least one proposal made to access the state portion of Tranquillon Ridge field by slant or extended reach drilling from Vandenberg Air Force Base. If certain criteria are met, the military may allow non-military activities on its property. Recently a potential on-base site was identified. (See the Senate Natural Resources and Water Committee analysis for further information.)

It remains unknown, but possible, that other oil and gas pools in state waters within the coastal sanctuary extend into federal waters and could potentially meet the PRC §6244 criteria to be considered for a new state oil and gas lease. No definitive information is available, however.

The commission’s leasing history and related activities. The commission has not issued any new oil and gas leases since the January 1969 oil spill in Santa Barbara where a well blowout from one of the federal platforms resulted in a spill of approximately 80,000 – 100,000 barrels of crude oil. This spill oiled two hundred square miles of ocean and thirty-five miles of state coastline, and killed thousands of animals. In addition, the commission has repeatedly passed resolutions in recent years opposed to the resumption or expansion of federal offshore oil development and production. According to the commission, the risks associated with oil development and potential spills were too high and both could negatively affect fishing, tourism, and environmental, recreational, economic, scenic and other values.

Federal offshore leasing plans. There are no locations offshore California in the current five-year federal leasing schedule/plan, and none are proposed for the 2017 – 2022 federal leasing schedule/plan. Last year, the Governors of Oregon, California and Washington wrote a joint letter to the federal government opposing new oil and gas leasing in federal waters off the entire West Coast for the 2017 – 2022 period.

The act contains additional exceptions to the coastal sanctuary. In the event of certain presidential and gubernatorial findings and actions related to an energy shortage, and legislative action, new oil and gas leasing in state waters could occur.

Existing offshore leases can have new drilling. Both state and federal regulators continue to approve new oil and gas well drilling permits in existing active state and federal offshore oil and gas leases.

Online petition support. The author’s office reports over 15,000 individuals signed an on-line petition in support of this bill.

Recent related legislation

SB 1096 (Jackson, 2014) would have removed the provision in the act allowing new state oil and gas leasing in the event federal activity was draining a state field. This bill failed on the Assembly floor.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, this bill has unknown costs, estimated between $48 million and $173 million per year based on a per barrel oil price of $50, to the General Fund for forgone offshore oil lease revenue that could have been received if the State Lands Commission entered into a lease off the Vandenberg Air Force Base into the Tranquillon Ridge. The variability in the estimated cost depends on the royalty rate, life of the project, and the price of oil.

SUPPORT: (Verified 5/29/15)

Audobon California

Azul

Black Surfers Collective

Brightline Defense Project

California Coastal Protection Network

California Coastkeeper Alliance

California League of Conservation Voters

California Sea Urchin Commission

California Sportfishing League

California Trout

Center for Biological Diversity

Center for Climate Protection

Clean Water Action

Coast Seafoods Company

Coastal Environmental Rights Foundation

Community Environmental Council

Defenders of Wildlife

Environmental Action Committee of West Marin

Environmental Defense Center

Environmental Defense Fund

Environment California

Doreen Farr, Supervisor, Santa Barbara County Board of Supervisors

Fishing Vessel Corregidor

Get Oil Out!

Golden Gate Salmon Association

Greater Santa Barbara Lodging and Restaurant Association

Habematolel Pomo of Upper Lake

Heal the Bay

Hog Island Oyster Company, Inc.

Humboldt Bay, Harbor, Recreation, and Conservation District

Humboldt Baykeeper

The Karuk Tribe

Kayak Zak’s

Land Trust of Santa Cruz County

The League of Women Voters of California

Mad River Alliance

National Parks Conservation Association

Natural Resources Defense Council

Northcoast Environmental Center

Ocean Conservancy

Ocean Outfall Group

Pacific Coast Federation of Fishermen’s Associations

Planning and Conservation League

City of Santa Monica

Santa Ynez Valley Alliance

Sherwood Valley Band of Pomo Indians

Sierra Club California

Smith River Rancheria

Southern California Trawlers Association

Surfrider Foundation

The Trust for Public Land

Union of Concerned Scientists

Wildcoast

The Wildlands Conservancy

2 individuals

OPPOSITION: (Verified 5/29/15)

California Chamber of Commerce

California Independent Petroleum Association

California Manufacturers & Technology Association

Western States Petroleum Association

ARGUMENTS IN SUPPORT: According to the author, “California’s coast is extraordinarily diverse. Its natural splendor attracts over 150 million visitors annually from all around the world seeking to witness its unparalleled beauty. […] Coastal communities contributed $40 billion annually to the state’s economy and provide nearly half a million important jobs.” The author further notes the multi-billion dollar annual revenue from commercial fisheries, ocean-dependent tourism and recreational fishing.

“In 1969, Santa Barbara experienced one of the nation’s worst oil spills. […] As a result, California has taken a position to intentionally forgo any revenue from new offshore oil development due to the unacceptably high risk, and has instead focused on developing clean renewable energy.” The author characterizes PRC §6244 as a “loophole” in the act and continues “… the [act] and the Marine Life Protection Act have conflicting mandates, which allow for offshore drilling in areas that were subsequently designated to protect and conserve marine life.”

“Protecting our coastal resources, which act as a major economic engine, benefits all Californians and will help the state achieve its greenhouse gas reduction targets and the Governor’s vision of reducing petroleum use by up to 50 percent. SB 788 repeals PRC 6244 to ensure that the [act] and the Marine Life Protection Act are able to provide their intended protections.”

The Pacific Coast Federation of Fishermen’s Associations adds, “[s]ustainable seafood production and the family fishing way of life are threatened by the presence of offshore oil facilities in California’s coastal waters. Unfortunately, that destruction lasts long after removal of surface oil [in the event of an oil spill]. The National Oceanic and Atmospheric Administration recently stated that the effects of the [Deepwater Horizon] spill are likely to last ‘generations.’ PCFFA stands vigorously opposed to any infrastructure projects that could literally suck the ocean’s wealth into a few corporate coffers at the expense of marine life, productive fisheries, and our cultural heritage.”

ARGUMENTS IN OPPOSITION: Writing in opposition, the Western States Petroleum Association characterizes PRC §6244 as a “narrow exemption in the best interest of the state” to the act and further states that “if the [commission] makes a finding […] that drainage of state resources is occurring from oil and gas operations in federal waters and that the loss of valuable state resources is occurring and will continue to occur, the [commission] may enter into a lease for the development of those resources in state waters if it determines that it is in the state’s best interest. Additionally, any state tideland oil and gas lease granted by the [commission] under these federal drainage conditions must be formally approved by multiple government agencies, including 1) land use permitting by local government, and 2) coastal plan amendment by the California Coastal Commission. At each step, detailed environmental review must be conducted by the relevant agencies, which include extensive public review and comment. SB 788 would not impact the ongoing drainage of state resources from oil and gas operations in federal lands. Instead SB 788 would only prohibit the state from capturing oil and gas resources that otherwise will continue to be drained by adjacent wells outside of the state’s purview.”

Prepared by: Katharine Moore / N.R. & W. / (916) 651-4116

6/2/15 18:36:03

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 788 (McGuire) - California Coastal Protection Act of 2015.

SUSPENSE FILE. AS AMENDED.

Bill Summary:

SB 788 would delete the exception to the California Coastal Sanctuary Act that allows for a new oil and gas lease if such a lease is in the state’s interest and the oil and gas deposits are being drained from adjacent federal lands.

Fiscal Impact (as approved on May 28, 2015): Unknown costs, estimated between $48 million and $173 million per year based on a per barrel oil price of $50, to the General Fund for forgone offshore oil lease revenue that could have been received if the State Lands Commission (SLC) entered into a lease off the Vandenberg Air Force Base into the Tranquillon Ridge. The variability in the estimated cost depends on the royalty rate, life of the project, and the price of oil.

Background:

The California Coastal Sanctuary Act of 1994 (PRC §6240 et seq.) removed the authority of the SLC to issue new oil and gas leases for unleased tide and submerged lands underlying the Pacific Ocean with limited exceptions by placing those lands into permanent sanctuary. One of the exceptions allowed the SLC to consider a new lease if the state oil and gas resources were being drained by production on adjacent federal lands and the lease is in the state’s interest.

To the west of Vandenberg Air Force Base and Points Pedernales and Arguello in Santa Barbara County, there is an oil and gas field called Tranquillon Ridge that is under both state and federal waters. Studies have shown that production from federal Platform Irene is draining the hydrocarbon resources in the state’s portion of this field. Reservoir pressure on the state side is also being reduced, which may ultimately decrease the recoverable hydrocarbon reserves from the field. The amount of economically recoverable oil in the state’s portion of the Tranquillon Ridge field is uncertain, and a recent estimate places it in the range of 40 to 120 million barrels.

Proposed Law:

This bill would delete the ability for the State Lands Commission (SLC) to enter into a lease for the extraction of oil and gas from state-owned tide and submerged lands in the California Coastal Sanctuary if the SLC determines that the oil or gas deposits are being drained by producing wells on adjacent federal lands and the lease in the best interest of the state.

Related Legislation:

SB 1096 (Jackson, 2014) was functionally identical to this bill. SB 1096 failed passage on the Assembly Floor.

Staff Comments:

Drilling into state waters would require a lease from the State Lands Commission (among numerous other permits). By deleting the ability for the SLC to approve a new lease for an oil or gas well, the bill prevents the collection of potential future lease revenue. The only definitive situation that could be affected by this bill is Tranquillon Ridge. The SLC estimates that should Tranquillon Ridge be developed today, the state would receive between $48 million and $173 million per year to the General Fund for the next 30-35 years based on the per barrel oil price of $50. This projection is highly volatile along with the price of oil and may also vary based on the life of the project and the royalty rate. A few years ago, the SLC identified two possible fields that do or may cross the federal-state boundary and could be reached by existing federal infrastructure.

The potential loss lease revenues are partially offset by two types of royalties that the state receives. First, for oil and gas production in an area that extends within three miles from the state’s seaward boundary, the state receives a royalty based on the portion of the oil field that occurs within the state’s boundaries. In the case of Platform Irene, the state’s share is 3.35% of production (27% of the federal royalty of 12.5%). These revenues are meant to compensate the state for bearing the risk of offshore oil and gas development.

Second, the federal government can share additional royalties with the state for leases on the state-federal boundary to compensate the state for drainage of its resources in a side-agreement. There may only be one well with such a side-agreement, well A-28 on Platform Irene. For well A-28, the state receives 50% of the federal royalties (i.e. 6.25% of the total production value) from that well to compensate the state for drainage. Staff notes that the production from well A-28 has been low and so there has been minimal revenues from this agreement.

Committee amendments (as adopted on May 28, 2015): Amend to make a technical change to the findings and declarations. Add Senator Jackson as a joint author.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 788 (McGuire) - California Coastal Protection Act of 2015.

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 788 would delete the exception to the California Coastal Sanctuary Act that allows for a new oil and gas lease if such a lease is in the state’s interest and the oil and gas deposits are being drained from adjacent federal lands.

Fiscal Impact:

Unknown costs, estimated between $48 million and $173 million per year based on a per barrel oil price of $50, to the General Fund for forgone offshore oil lease revenue that could have been received if the State Lands Commission (SLC) entered into a lease off the Vandenberg Air Force Base into the Tranquillon Ridge. The variability in the estimated cost depends on the royalty rate, life of the project, and the price of oil.

Background:

The California Coastal Sanctuary Act of 1994 (PRC §6240 et seq.) removed the authority of the SLC to issue new oil and gas leases for unleased tide and submerged lands underlying the Pacific Ocean with limited exceptions by placing those lands into permanent sanctuary. One of the exceptions allowed the SLC to consider a new lease if the state oil and gas resources were being drained by production on adjacent federal lands and the lease is in the state’s interest.

To the west of Vandenberg Air Force Base and Points Pedernales and Arguello in Santa Barbara County, there is an oil and gas field called Tranquillon Ridge that is under both state and federal waters. Studies have shown that production from federal Platform Irene is draining the hydrocarbon resources in the state’s portion of this field. Reservoir pressure on the state side is also being reduced, which may ultimately decrease the recoverable hydrocarbon reserves from the field. The amount of economically recoverable oil in the state’s portion of the Tranquillon Ridge field is uncertain, and a recent estimate places it in the range of 40 to 120 million barrels.

Proposed Law:

This bill would delete the ability for the State Lands Commission (SLC) to enter into a lease for the extraction of oil and gas from state-owned tide and submerged lands in the California Coastal Sanctuary if the SLC determines that the oil or gas deposits are being drained by producing wells on adjacent federal lands and the lease in the best interest of the state.

Related Legislation:

SB 1096 (Jackson, 2014) was functionally identical to this bill. SB 1096 failed passage on the Assembly Floor.

Staff Comments:

Drilling into state waters would require a lease from the State Lands Commission (among numerous other permits). By deleting the ability for the SLC to approve a new lease for an oil or gas well, the bill prevents the collection of potential future lease revenue. The only definitive situation that could be affected by this bill is Tranquillon Ridge. The SLC estimates that should Tranquillon Ridge be developed today, the state would receive between $48 million and $173 million per year to the General Fund for the next 30-35 years based on the per barrel oil price of $50. This projection is highly volatile along with the price of oil and may also vary based on the life of the project and the royalty rate. A few years ago, the SLC identified two possible fields that do or may cross the federal-state boundary and could be reached by existing federal infrastructure.

The potential loss lease revenues are partially offset by two types of royalties that the state receives. First, for oil and gas production in an area that extends within three miles from the state’s seaward boundary, the state receives a royalty based on the portion of the oil field that occurs within the state’s boundaries. In the case of Platform Irene, the state’s share is 3.35% of production (27% of the federal royalty of 12.5%). These revenues are meant to compensate the state for bearing the risk of offshore oil and gas development.

Second, the federal government can share additional royalties with the state for leases on the state-federal boundary to compensate the state for drainage of its resources in a side-agreement. There may only be one well with such a side-agreement, well A-28 on Platform Irene. For well A-28, the state receives 50% of the federal royalties (i.e. 6.25% of the total production value) from that well to compensate the state for drainage. Staff notes that the production from well A-28 has been low and so there has been minimal revenues from this agreement.

-- END --

SENATE COMMITTEE ON NATURAL RESOURCES AND WATER

Senator Fran Pavley, Chair

2015 - 2016 Regular

Bill No: SB 788 Hearing Date: April 28, 2015

Subject: California Coastal Protection Act of 2015

BACKGROUND AND EXISTING LAW

1. California is a major oil and gas producing state from both onshore fields and offshore fields under its jurisdiction. California recently ranked third for oil (2013) and thirteenth for natural gas (2012) among the 50 states. In 2013, offshore oil production from state waters was about 14 million barrels (about 7% of the 200 million barrel state total), and an additional 18.5 million barrels were produced from federal waters.

2. The Legislature, beginning in 1921 and repeatedly since, has passed laws that exclude offshore areas of the state from oil and gas leasing. The State Lands Commission (commission) has had exclusive jurisdiction over the leasing of offshore state lands for oil and gas production since 1938.

3. According to the commission, it issued over fifty offshore oil and gas leases between 1938 and 1968. In general, lease terms provide for the leases to remain in effect so long as oil and gas production continues in paying or commercial quantities. When production ceases, a lease should be quitclaimed back to the commission.

4. In January 1969 a blowout occurred on a well drilled from one of the platforms in federal waters off of Santa Barbara which resulted in a spill of approximately 80,000 – 100,000 barrels of crude oil. This spill oiled two hundred square miles of ocean and thirty-five miles of state coastline, and killed thousands of animals. The commission has not issued any new oil and gas leases since.

5. The California Coastal Sanctuary Act of 1994 (act)(Public Resources Code (PRC) §§6240 et seq.) extended the California coastal sanctuary which removed the authority of the commission to issue new oil and gas leases for unleased tide and submerged lands underlying the Pacific Ocean with limited exceptions. Legislative findings stated that “offshore oil and gas production in certain areas of state waters poses an unacceptably high risk of damage and disruption to the marine environment of the state.” (PRC §6241)

6. Pursuant to PRC §6244, the act allows the commission to consider issuing a new oil and gas lease if the commission determines that (1) state oil and gas resources are being drained by production on adjacent federal lands, and (2) the lease is in the state’s interest.

7. To the west of Vandenberg Air Force Base (VAFB) and Points Pedernales and Arguello in Santa Barbara County, there is an oil and gas field that is under both state and federal waters – Tranquillon Ridge. Studies have shown that production from federal platform Irene is draining the hydrocarbon resources in the state’s portion of this oil and gas field. Reservoir pressure on the state side is also being reduced, which may ultimately decrease the recoverable hydrocarbon reserves from the field. The amount of economically recoverable oil in the state’s portion of the Tranquillon Ridge field is uncertain, and a recent estimate places it in the range of 40 to 150 million barrels.

8. Development of the state portion of Tranquillon Ridge was first proposed in 1999. In 2008, the Santa Barbara Board of Supervisors approved a highly controversial subsequent proposal which utilized drilling into state waters from a federal platform. However, the commission voted in January 2009 against issuing a new oil and gas lease pursuant to the exception to the act provided by PRC §6244.

9. There has also been at least one proposal made to access the state portion of the Tranquillon Ridge field by slant or extended reach drilling from onshore – specifically from VAFB.

10. Under the federal Outer Continental Shelf Lands Act (43 U.S.C. §1337(g)(2)), California is entitled to 27% of the federal royalty for production from oil and gas wells within three nautical miles of the state/federal boundary. The state may also receive additional royalties. For example, under separate agreement, the state’s royalty share in the federal well known to drain Tranquillon Ridge is 50% as it is within 500 feet of the state/federal boundary.

11. There are 43 existing active leases under the federal Outer Continental Shelf Lands Act in federal waters offshore California. There is no current federal law, ongoing federal appropriations moratoria or executive order banning new oil and gas leasing. There are no locations offshore California in the current five-year federal leasing schedule/plan, and none are proposed for the 2017 – 2022 federal leasing schedule/plan. Last year, the Governors of Oregon, California and Washington wrote a joint letter to the federal government opposing new oil and gas leasing in federal waters off the entire West Coast for the 2017 – 2022 period. In addition, the commission has repeatedly passed resolutions in recent years opposed to the resumption or expansion of federal offshore oil development and production. According to the commission, the risks associated with oil development and potential spills were too high and both could negatively affect fishing, tourism, and environmental, recreational, economic, scenic and other values.

12. In and around the Santa Barbara Channel there are a variety of protected federal and state marine areas, including the Channel Islands National Marine Sanctuary and several protected locations near the Tranquillon Ridge field. State-level marine protected areas under the Marine Life Protection Act (Fish and Game Code §§2850 et seq.) are designed to protect or conserve marine life and habitat. The Vandenberg State Marine Reserve is located to the west of VAFB. A state marine reserve is a marine protected area designation that prohibits damage or take of all marine resources (living, geologic, or cultural) including recreational and commercial take.

PROPOSED LAW

This bill would remove the exception from the act described above in Point 6. Specifically the bill would no longer allow the commission to issue a new oil and gas lease for state-owned tide and submerged lands within the coastal sanctuary if it is shown that producing well or wells drilled from federal leases is or are draining a state-owned oil and gas pool, and the commission determines that the new lease is in the best interests of the state. The bill would also make numerous uncodified legislative findings to support the removal of the act’s exception.

ARGUMENTS IN SUPPORT

According to the author, “California’s coast is extraordinarily diverse. Its natural splendor attracts over 150 million visitors annually from all around the world seeking to witness its unparalleled beauty. […] Coastal communities contributed $40 billion annually to the state’s economy and provide nearly half a million important jobs.” The author further notes the multi-billion dollar annual revenue from commercial fisheries, ocean-dependent tourism and recreational fishing.

“In 1969, Santa Barbara experienced one of the nation’s worst oil spills. […] As a result, California has taken a position to intentionally forgo any revenue from new offshore oil development due to the unacceptably high risk, and has instead focused on developing clean renewable energy.” The author characterizes PRC §6244 as a “loophole” in the act and continues “… the [act] and the Marine Life Protection Act have conflicting mandates, which allow for offshore drilling in areas that were subsequently designated to protect and conserve marine life.”

“Protecting our coastal resources, which act as a major economic engine, benefits all Californians and will help the state achieve its greenhouse gas reduction targets and the Governor’s vision of reducing petroleum use by up to 50 percent. SB 788 repeals PRC 6244 to ensure that the [act] and the Marine Life Protection Act are able to provide their intended protections.”

The Pacific Coast Federation of Fishermen’s Associations adds, “[s]ustainable seafood production and the family fishing way of life are threatened by the presence of offshore oil facilities in California’s coastal waters. Unfortunately, that destruction lasts long after removal of surface oil [in the event of an oil spill]. The National Oceanic and Atmospheric Administration recently stated that the effects of the [Deepwater Horizon] spill are likely to last ‘generations.’ PCFFA stands vigorously opposed to any infrastructure projects that could literally suck the ocean’s wealth into a few corporate coffers at the expense of marine life, productive fisheries, and our cultural heritage.”

ARGUMENTS IN OPPOSITION

Writing in opposition, the Western States Petroleum Association characterizes PRC §6244 as a “narrow exemption” to the act and further states that “if the [commission] makes a finding […] that drainage of state resources is occurring from oil and gas operations in federal waters and that the loss of valuable state resources is occurring and will continue to occur, the [commission] may enter into a lease for the development of those resources in state waters if it determines that it is in the state’s best interest. Additionally, and state tideland oil and gas lease granted by the [commission] under these federal drainage conditions must be formally approved by multiple government agencies, including 1) land use permitting by local government, and 2) coastal plan amendment by the California Coastal Commission. At each step, detailed environmental review must be conducted by the relevant agencies, which include extensive public review and comment. SB 788 would not impact the ongoing drainage of state resources from oil and gas operations in federal lands. Instead SB 788 would only prohibit the state from capturing oil and gas resources that otherwise will continue to be drained by adjacent wells outside of the state’s purview.”

COMMENTS

Technical changes to the findings. The Committee may choose to make a few technical and clarifying changes to the findings in order, primarily, to distinguish between offshore drilling and leasing [Amendment 1].

Deliberate government actions have foregone offshore oil and gas revenue. As noted above, the policy of various levels of state government over many years has been to purposefully limit or seek to limit oil and gas revenue to the state from offshore sources in both state and federal waters.

How unique is Tranquillon Ridge? This bill would bar the future development of the Tranquillon Ridge project, as most recently proposed, or the development of the same field from onshore. It remains unknown, but possible, that other oil and gas pools in state waters within the coastal sanctuary extend into federal waters and could potentially have met the PRC §6244 criteria to be considered for a new state oil and gas lease. The commission identified two possible fields a few years ago (Rocky Point and Jalama/Sudden) that do or may cross the federal-state boundary and could be reached by existing federal infrastructure. Definitive information is not available, however.

The act contains additional exceptions to the coastal sanctuary. In the event of certain presidential and gubernatorial findings and actions related to an energy shortage, and legislative action, new oil and gas leasing in state waters could occur.

An oil and gas lease for state waters from the commission is not sufficient to start drilling. Approval from several other regulators and public authorities are or likely to be required. These would include, in general, the local land use authority, local air district, the Department of Fish and Wildlife, the California Coastal Commission, and the Division of Oil, Gas and Geothermal Resources, among others. Additionally, mineral rights would have to be obtained.

Possible oil development at VAFB. US law authorizes the military to lease non-excess lands for nonfederal development if the use does not conflict with mission’s requirements and the use is beneficial to the military service leasing the property. In late 2013, a contractor for VAFB released an “Opportunity Assessment” study which evaluated the feasibility of extended reach drilling from VAFB to exploit the Tranquillon Ridge field. Although the public copy was heavily-redacted, the assessment determined that there was a potential onshore surface location at VAFB of about 25 – 30 acres where up to 30 extended reach wells could be drilled from. Certain benefits and environmental, mission and safety risks – including to the state marine reserve – were identified in the assessment.

Onshore vs. offshore development of Tranquillon Ridge. The approved 2008 Environmental Impact Report (EIR) for the offshore development of the Tranquillon Ridge field considered onshore development from the VAFB as an alternative. (While the “no project alternative” had the fewest environmental impacts, CEQA Guidelines require evaluating an alternative the meets the goals of the project (in this case oil and gas development of the Tranquillon Ridge field).) While the VAFB onshore alternative was only conceptual in nature, numerous “Class I” impacts – a significant impact that cannot be mitigated to insignificance – were identified in the EIR for both onshore and offshore development. The VAFB onshore alternative was found to be environmentally disadvantageous compared to offshore development for onshore biology, onshore water resources and cultural resources. Overall, over a dozen Class I impacts for an onshore facility were identified.

Existing offshore leases can have new drilling. Both state and federal regulators continue to approve new oil and gas well drilling permits in existing active state and federal offshore oil and gas leases.

Recent related legislation

SB 1096 (Jackson, 2014) would have removed the provision in the act allowing new state oil and gas leasing in the event federal activity was draining a state field (failed on the Assembly floor).

SUGGESTED AMENDMENTS

AMENDMENT 1

On page 2, line 28 after “new” insert “leases for”

On page 2, line 28: after “drilling” insert “in state waters”

On page 2, line 30, after “for” insert “new state leases for”

On page 2, line 36, delete “permits” and insert “leases”

On page 2, line 37, after “from” insert “any”

On page 2, line 37, after “new” insert “lease and the associated”

On page 3, line 2, before “offshore” insert “new”

On page 3, line 2, delete “drilling” and insert “development leases”

On page 3, line 10, after “a” insert “July 2014”

SUPPORT

California Coastal Protection Network

California Coastkeeper Alliance

California League of Conservation Voters

California Sea Urchin Commission

California Sportfishing League

California Trout

Center for Biological Diversity

Clean Water Action

Coast Seafoods Company

Community Environmental Council

Defenders of Wildlife

Environmental Action Committee of West Marin

Environmental Defense Center

Environmental Defense Fund

Environment California

Fishing Vessel Corregidor

Golden Gate Salmon Association

Habematolel Pomo of Upper Lake

Heal the Bay

Hog Island Oyster Company, Inc.

Humboldt Baykeeper

Kayak Zak’s

Land Trust of Santa Cruz County

The League of Women Voters of California

Mad River Alliance

Natural Resources Defense Council

Northcoast Environmental Center

Ocean Outfall Group

Pacific Coast Federation of Fishermen’s Associations

Sherwood Valley Band of Pomo Indians

Sierra Club California

Smith River Rancheria

Surfrider Foundation

Union of Concerned Scientists

The Wildlands Conservancy

2 individuals

OPPOSITION

California Independent Petroleum Association

Western States Petroleum Association

-- END --