Two Democratic senators announced a bill Thursday to trade offshore drilling leases from California to Louisiana and move oil companies out of local coastal waters.
California Sen. Barbara Boxer and Louisiana Sen. Mary Landrieu authored the California Coastal Protection and Louisiana Energy Enhancement Act, which would cancel 36 undeveloped offshore oil and gas leases and create a permanent environmental preserve off the California coast instead. The companies holding the leases would be provided with a “swap of equivalent value” in the Gulf of Mexico within 30 days of the bill’s passage.
“This is a major win-win for both sides and this will stop the fighting — for a while,” Boxer said.
The bill will be introduced as part of a broad energy policy bill the Senate will look at in March, but Boxer said she knew “of no opposition in the Senate.”
“Senator Boxer is committed to seeing the bill through on any vehicle. If it does not pass as part of the energy bill, it may become an appropriations bill,” her spokesperson said.
State Rep. Lois Capps (D-Santa Barbara), whose district is most affected by the bill, said it is both a preventative and resolving measure for the problems caused by offshore oil drilling. Capps will sponsor a similar bill in the House.
“We cannot risk another oil spill off the coast … it’s about protecting our environment; it’s about protecting our economy,” she said. “You need legislation to set up the ecological preserve and you need legislation to prevent any litigation.”
A Question of Local Control
The 36 leases are being disputed in federal court by both the oil companies and by the state of California. The oil companies have filed a lawsuit against the federal government claiming “a breach of contract” because of a moratorium that stopped offshore development of previously leased tracts.
Capps, along with 30 of California’s 32 Democratic representatives, filed a brief yesterday to the U.S. Court of Appeals, which is currently reviewing litigation between the state of California and the Dept. of the Interior. The state filed a lawsuit over its right to reexamine some of the leases granted decades ago by the federal government. The Bush administration argued that if the state is allowed to reexamine the leases, they will threaten the leaseholders’ property rights.
The brief filed Thursday states that extension of the leases, exploration and development of offshore drilling affects the coastal zone and the state should have the right to approve federal activity off the coast.
“The moratorium said no more leasing, not no more drilling. You lease it and after you lease it you are entitled to drill it,” Dept. of Interior spokesperson Diane Lawhan said. “There has never been a requirement to grant a second look. This amicus brief is about local control and California’s right to be at the table when the federal government is making decisions that affect its coastline.”
Relocating the Rigs
The swap is expected to cost the government from $1 billion to $2.8 billion, but the payments will be made to oil companies in the form of credits which can be used to bid for new leases in the central and western Gulf of Mexico, Boxer said.
For oil companies to obtain credits for investments made in the undeveloped leases, the companies would be required to agree to close all lawsuits.
“I think that we can’t count on the court. It may be the litigation to solve the [oil drilling disputes], it may be that it won’t,” Boxer’s spokesperson said.
The credits will only be granted if all of the leasees agree. However, Capps said she believes the companies will want to go to Louisiana.
“The incentive is that they know full well they are not welcome off the pristine coast. It is not the proper climate for them here,” she said. “Companies will want to go where the oil is. It may be cheaper for them there. I would disagree with some of my colleagues and say that they have a huge competitive advantage because they don’t have to dig into their own pockets to make a bid on these tracks, they can just use the credit.”
Nuevo Energy Company, a Houston-based oil and gas company, is the largest independent producer of oil and gas in California and is also a leaseholder off the California coast. The company reported a fourth-quarter loss of $89.1 million for 2001, which was partly attributed to the high cost and low production off and onshore California. The company does not presently hold leases in the Gulf of Mexico.
Jim Bray, a spokesperson for leaseholder Nuevo Energy of Houston, said although he has not seen the legislation, he hopes the bill will allow the company to gain from their investments.
“We are pleased the government is working towards recognizing the obligation to the leases,” he said. “We have to continually actively pursue and watch the bill as it proceeds.”
California Coastal Commission member Pedro Nava said oil drilling is harmful to the environment, no matter where it is.
“Under any scenario the Bush administration has to recognize the devastation to the environment and economic consequences that are caused by the industry,” he said.