Calif Expanded Drilling Plan Delayed But Not Dead
July 27 2009 - 8:51PM
Dow Jones News
A proposal by Plains Exploration & Production Co. (PXP) to
expand drilling off California's coast, then shut down the rigs
after several years, appear down, but not out, after a recent
setback.
The plan, approved by several environmental groups that aim to
shut down all drilling off the coast of Santa Barbara, was strongly
supported by Gov. Arnold Schwarzenegger as a source of new revenue
for the cash-strapped state. The drilling plan was part of an
agreement that state legislative leaders reached last week to fill
California's $26 billion budget gap. The state Senate passed the
drilling measure, but the Assembly defeated it 28-43 late
Friday.
Plains said that although it was disappointed by the Assembly
vote, it would continue pursuing the project.
"PXP's principle focus will be to continue pushing for the
project based on its merits to the state of California and address
any misconceptions that groups may have regarding the project,"
Plains spokesman Scott Winters wrote in an email. "The more people
are given a chance to evaluate the project on the basis of facts
we've found that we are able to win support for the project and
innovative approach we've taken."
Plains shares closed 8.6% lower Monday, at $29.39 apiece.
The Environmental Defense Center, one of several local
environmental groups that reached the drilling agreement with
Plains, is working to move the project forward, said Linda Krop, an
attorney for the group.
"There were a lot of misrepresentations in Sacramento last
week," Krop said, referring to statements from some lawmakers and
other environmental groups that were not party to the PXP
agreement. In particular, she said the agreement with Plains is
enforceable by the state and also through the company's agreement
with the Trust for Public Lands.
Under the agreement with the environmental groups, Plains would
promptly expand oil drilling off the coast of Santa Barbara, then
shut down four oil platforms and two onshore processing facilities
by 2024. The company also would donate $1.5 million to Santa
Barbara County for new low-carbon bus technology and 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.
The project initially ran into trouble in January when the state
Lands Commission rejected it, saying it was unclear whether the
agreement was enforceable and whether the federal government, which
has authority over Plains' offshore rigs in federal waters, would
sign off on it. The proposal that was part of the budget agreement
would have bypassed the Lands Commission in the approval process
for the project, a political end-run that left a bad taste in the
mouths of officials, including U.S. Rep. Lois Capps, D-Calif., who
supported the project. Capps also didn't think it was appropriate
to speed the proposal through merely as a budget stopgap
measure.
"Despite her support for the original agreement, Congresswoman
Capps does not agree with this proposal to allow drilling off the
coast of Santa Barbara in order to fill the State's budget gap and
has expressed her concerns about this proposal to the Governor,"
Capps spokeswoman Emily Kryder said.
Assembly Speaker Karen Bass, who tentatively agreed to the
proposal as part of the overall budget agreement, said in a
statement that there would be another opportunity for the Assembly
to vote on the proposal later in August, after a three-week recess.
Bass, herself, didn't vote on the measure Friday. Her office didn't
immediately reply to a request for comment.
Oil produced off the coast of Santa Barbara is generally
considered "heavy" crude, or crude with higher sulfur content. The
crude that Plains currently produces off California's central coast
is processed at a refinery owned by ConocoPhillips (COP) in Santa
Maria, Calif., then shipped north to the San Francisco Bay Area,
where it is refined into fuels.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468;
cassandra.sweet@dowjones.com