BILL ANALYSIS �
SB 1096
Page 1
Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1096 (Jackson) - As Amended: July 3, 2014
Policy Committee: Natural
ResourcesVote:6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
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.
FISCAL EFFECT
Potential forgone offshore oil revenues (GF) estimated to range
between $95 million and $345 million per year for 30 to 35 years
if SLC otherwise 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
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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AB 2444 also repealed an existing provision of law that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 11 total fields, with an estimated 600
million barrels of oil, that cross the state-federal boundary
line. Of those 11, only 5 have existing federal
infrastructure. Of those five, only one has confirmed drainage
(Tranquillion Ridge from Platform Irene) and two with 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 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 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
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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.
The sponsors of this bill, Environment Defense Center,
supported this project.
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.
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 recent local
news reports, the U.S. Air Force is more seriously considering
allowing the base to be used for the drilling project. For
these reasons, Sunset Exploration opposes this bill.
6)Support and Opposition. This bill is supported by a broad
coalition of environmental and coastal protection
organizations who argue this bill closes the final loophole
allowing new offshore drilling leases. 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.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081