California Could Expand Oil Drilling Under Budget Agreement
July 21 2009 - 1:39PM
Dow Jones News
California could allow new oil drilling under a tentative
agreement the state's governor and lawmakers reached to plug the
state's $26.3 billion budget hole.
In a rare agreement with environmental groups, oil producer
Plains Exploration & Production Co. (PXP) has proposed promptly
expanding oil drilling off the coast of Santa Barbara, then
shutting down four oil platforms and two onshore processing
facilities in Santa Barbara by 2022. The company also agreed to
donate 4,000 acres of land for public use. The company would
slant-drill into the state's seafloor from a platform it operates
in federal waters.
Environmental and community groups in Santa Barbara have hailed
the project, called Tranquillon Ridge, as a major milestone in
their efforts to shut down the oil rigs off Santa Barbara's coast.
Current law allows offshore drilling operations that were in place
prior to a 1981 moratorium on new offshore drilling to continue
indefinitely.
Gov. Arnold Schwarzenegger has championed the project as a new
source of desperately needed cash to fill the state's budget gap.
The state would collect an up-front payment of $100 million from
Plains, followed by and as much as $2.3 billion in royalties over
the 13 years of the project.
California's budget difficulties could be a boon for Plains
Exploration. In addition to the company's potential opportunity to
expand oil drilling in California, where officials have expressed
near-unanimous opposition to expanded drilling on the Outer
Continental Shelf, Schwarzenegger scuttled a proposal by Democrats
to increase fees on oil production in the state.
The Tranquillon Ridge project is one of the few bright spots in
California's budget agreement, reached late Monday by
Schwarzenegger and legislative leaders. Reports of the agreement
indicate that it would scale back many state services, particularly
to the elderly and the poor, and include less pay for government
workers, among other cuts. The state Senate and Assembly could vote
on the bill as early as this week.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468;
cassandra.sweet@dowjones.com