BILL ANALYSIS �
SB 1096
Page 1
Date of Hearing: June 26, 2014
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 1096 (Jackson) - As Amended: June 16, 2014
SENATE VOTE : Not relevant
SUBJECT : Coastal sanctuary: State Lands Commission: oil and
gas leases
SUMMARY : Eliminates the exception in the California Coastal
Sanctuary Act of 1994 (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:
a) 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.)
b) Establishes the California Coastal Sanctuary
(Sanctuary), which includes all state waters subject to
tidal influence west of the Carquinez Bridge, except as to
oil or gas leases in effect on January 1, 1995, unless the
lease is deeded or otherwise reverts to the state after
that date.
c) Generally prohibits a state agency or state officer from
entering into any new lease for the extraction of oil or
gas from the Sanctuary.
d) 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 interests of the state.
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2)Pursuant to the federal Outer Continental Shelf Lands Act (OCS
Lands Act):
a) 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.
b) 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 which is
consistent with the maintenance of competition and other
national needs.
c) Requires the Department of the Interior (Interior) to
prepare and 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 : Unknown
COMMENTS :
1)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 into the full protection of the CCSA.
2)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
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where oil and gas leasing was 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 (PRC Sec. 6244). 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 (PRC Sec. 6872.5).
3)The Commission and Offshore Oil . Since 1938, the Commission
generally has had exclusive jurisdiction over the leasing of
oil and gas from offshore state lands. Between 1938 and 1968,
over fifty 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 was 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 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 Outer Continental Shelf (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.
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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. The Commission formally
imposed a moratorium in 1988 and 1989. 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 staff has been pro-active in
obtaining quitclaims of existing offshore oil and gas leases
from oil companies back to the state.
4)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
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
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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 had 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 had lifted the presidential
moratorium on federal offshore leases and Congress had refused
to re-enact its own moratorium. On January 16, 2009, the
Department of Interior (Interior) announced plans to conduct
lease sales in different parts of the country, including three
off of the California coast. The Commission was concerned of
"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."
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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
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
recent local news reports, 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.
6)2017-2022 OCS Oil and Gas Leasing Program . As mentioned
above, in 2009, the Interior announced plans to conduct OCS
lease sales off the California coast. Ultimately, the
Interior withdrew these plans from its 2012-2017 Five Year OCS
Oil and Gas Leasing Program (Five Year Program), providing the
following rationale:
Areas off the Pacific coast are not included in this
Proposed Program, which, consistent with [the OCS Land
Act], 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. The Proposed Program
specifically seeks to accommodate the recommendations
of governors of coastal states and of state and local
agencies. The exclusion of the Pacific Coast is
consistent with state interests, as framed in an
agreement that the governors of California,
Washington, and Oregon signed in 2006, which expressed
their opposition to oil and gas development off their
coasts. Western states have continued to voice these
concerns, including in formal comments on the [2009
Draft Proposed Program].
On June 16, 2014, the Interior took the initial steps to
develop the 2017-2022 Five Year Program by publishing the
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"Request for Information and Comments on the Preparation of
the
2017-2022 [Five Year Program]" in the Federal Register. It is
too early to determine whether any lease sales off the coast
of California will be included in the 2017-2022 Five Year
Program, but this bill, like the 2006 West Coast Governors'
Agreement on Ocean Health, could send a significant message
that California continues to oppose new offshore drilling.
REGISTERED SUPPORT / OPPOSITION :
Support
Environmental Defense Center (sponsor)
Asian Pacific Environmental Network
AZUL
California Coastkeeper Alliance
California Coastal Protection Network
California League of Conservation Voters
California State Grange
Salud Carbajal, First District Supervisor, County of Santa
Barbara
Carpinteria Valley Association
Center for Biological Diversity
Center for Race, Poverty and the Environment
Community Environmental Council
Citizens for Responsible Oil & Gas
Clean Water Action
Earthworks
Environment California
Environmental Working Group
Food and Water Watch
Get Oil Out!
Heal the Ocean
Cathy Murillo, Mayor Pro-Tem, City of Santa Barbara
Natural Resources Defense Council
Ocean Conservancy
San Diego 350.Org
Santa Barbara Audubon Society
Sierra Club California
Surfrider Foundation
WILDCOAST
350 Santa Barbara
One Individual
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Opposition
California Chamber of Commerce
California Independent Petroleum Association
California Manufacturers & Technology Association
Coalition of Labor, Agriculture and Business
Concerned Taxpayers, I.N.C.
Santa Barbara County Taxpayers Association
Santa Barbara County Technology and Industry Association
Sunset Exploration
Western States Petroleum Association
Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092