BILL ANALYSIS Ó
SB 788
Page 1
Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 788
(McGuire) - As Amended June 2, 2015
-----------------------------------------------------------------
|Policy |Natural Resources |Vote:|7 - 2 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: NoReimbursable: 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
SB 788
Page 2
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
SB 788
Page 3
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AB 2444 also repealed an existing provision of law that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
SB 788
Page 4
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.
SB 788
Page 5
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
SB 788
Page 6