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Friday, April 11, 2008

Oil firm, foes strike major deal on Santa Barbara Coast; to donate 3900 acres of land for preservation if they can tap offshore oil from existing platform

Oil company
Rich Reid
EYESORE: A gas processing plant owned by PXP, shown at center above U.S. Highway 101 on the scenic Gaviota coast, would be shut down by 2017 and given to a public land trust under the deal.
Texas-based company would halt production off Santa Barbara decades early so it can drill this year while prices are high. Pristine land would be protected.
By Kenneth R. Weiss, Los Angeles Times Staff Writer
April 11, 2008
Offshore oil deal
Offshore oil deal

April 11, 2008

A Houston oil company has agreed to shut down its offshore oil production off Santa Barbara County decades early in exchange for approval this year to drill into untapped undersea reserves and cash in on the nation's record oil prices.

To sweeten the deal, Plains Exploration & Production Co. -- known as PXP -- also has agreed to donate about 200 acres of oceanview property along the sparsely populated Gaviota coast and an additional 3,700 acres in Santa Barbara's premier wine-growing region for public parkland. It would withdraw a proposed housing development on that land and pay millions to fund projects that offset carbon dioxide emissions, such as low-emission public buses.

The unprecedented deal, announced Thursday by PXP and its fiercest environmental opponents, was designed to make a long-stalled drilling proposal more palatable to county and state officials in an area where a 1969 oil spill helped launch the modern environmental movement in California.

"It's hard for me to imagine that they won't approve this," said Linda Krop, chief counsel of the Santa Barbara-based Environmental Defense Center. Negotiations among these adversaries, she said, resulted in more concessions from PXP than any state or local agency could ever muster.

Steve Rusch, a PXP vice president, said the company was willing to make concessions because it wanted to do more than simply neutralize offshore oil's traditional opponents -- it wanted to enlist their support. Since the 1980s, most offshore oil development in California has been met with fierce opposition, including protracted litigation, congressional moratoriums and bureaucratic delays.

So beginning later this month, Krop and her clients will support PXP in its petition to use "slant drilling" from one of its four offshore platforms to tap into an undersea oil field, the Tranquillon Ridge, that could yield as much as 200 million barrels of oil and 50 billion cubic feet of natural gas.

It will be the first time in 39 years that one group, Get Oil Out, or GOO, has supported oil drilling. The group was formed by Santa Barbara County residents horrified by the gooey crude that coated their beaches after the 1969 offshore platform blowout.

Abe Powell, president of GOO, said it took "blood, sweat and tears" for his board members to abandon their historic role.

"Once we realized that we had put together a good deal for the community, we got it together," he said.

PXP wants to drill 22 wells using slant-drilling technology from platform Irene, which is 4.7 miles from shore, outside the three-mile limit of state waters. These wells would burrow on average 3,000 to 5,000 feet into the seafloor and reach as far as five miles from the platform to tap the reserves beneath submerged state lands.

Existing pipelines from platform Irene would transport the oil to processing facilities onshore, greatly reducing the risk of problems.

The agreement must win approval from county officials, the State Lands Commission, the California Coastal Commission and the federal Minerals Management Service, part of the Department of the Interior. It's a deal Rusch hopes will fall quickly into place so the company can begin sinking wells before the end of the year.

"There's an urgency to get on it as fast as possible," Rusch said, noting the surge in oil imports and the agreed-upon 14-year deadline for abandoning PXP's operations. In the highly speculative oil business, he said, PXP could drain this field in eight years or leave the oil in place. Right now, he said, it's hard to tell. "We hope to get as much as we can out of it."

Light, sweet crude for May delivery fell 45 cents to $110.42 in electronic trading Thursday on the New York Mercantile Exchange.

That's about four times the price of crude when Santa Barbara County rejected a similar drilling proposal from Nuevo Energy Co. in 2002. Environmental groups opposed the project, arguing that it would extend the life of offshore oil platforms in the Santa Barbara Channel, which are rarely disassembled.

Nuevo, like many oil companies, grew frustrated with its inability to develop offshore energy and sold platform Irene, its onshore oil processing facilities and its offshore lease to PXP in 2004. PXP had already acquired three other platforms off Point Arguello from Chevron and Texaco in 1999.

When Rusch learned that the objections to slant drilling focused on extending the life of offshore platforms, he approached Krop with the idea of setting a deadline to pull out. The sides spent months hammering out the details, including how to make such an agreement enforceable.

Under the terms, PXP would shut down its three platforms off Point Arguello by 2017, as well as its Gaviota gas processing plant. Five years later, platform Irene would also be closed, and removal would begin.

PXP has forged a separate agreement with the Trust for Public Land, a nonprofit land conservancy, that would help convert the donated acreage into parkland. The trust has spent the last dozen years trying to preserve sections of the Gaviota coast, a 40-mile stretch of pristine beaches, dramatic bluffs and terraced grasslands that marks the end of hundreds of miles of virtually uninterrupted sprawl extending from San Diego.

Under the agreement, PXP in the next two years would give the trust two large parcels, or about 148 acres, near Gaviota State Park.

It also would transfer to the trust about 1,000 acres north of Lompoc in La Purisima Hills and withdraw a proposal to develop a 1,100-home subdivision there.

After wrapping up oil production off Point Arguello in 2017, PXP would begin to restore an additional 56 acres on the Gaviota coast now used as a gas processing plant, and eventually turn that over to the trust.

It would also hand over 2,727 acres surrounding its oil production facilities near Lompoc after closing them in 2022.

All told, the donated land would total 3,931 acres.

The industrial facilities, which can be seen on the drive up scenic U.S. 101 just before the highway veers inland, have long been an eyesore in an otherwise unobstructed coastal view, said Steve Dunn, president of the Citizens Planning Assn. of Santa Barbara.

"The Gaviota facility was built in the early 20th century," he said. "Now we have an end date and plan to return it to a natural state. The Lompoc facility has been a thorn in our side and we look forward to that facility's end date. These are really big deals for us."

Debra Geiler, the trust's Southern California director, said the total value of the donated land could range from $50 million to more than $100 million.

More important, she said, the parcels are strategically located in a patchwork of private properties between public beaches and parks.

"This is one of the West's most threatened landscapes," Geiler said. "It's a particularly important landscape because of the nature of the geography," a place where the coastline shifts direction to east-west and warm and cold ocean currents collide, helping create a climate that supports an unusual diversity of wildlife.

Rep. Lois Capps, a Democrat who represents Santa Barbara in Congress, praised the "unique partnership" that has taken steps toward "ending a significant amount of oil and gas drilling along the Central Coast."

Lt. Gov. John Garamendi, a member of the State Land Commission, called it "a very complex and far-reaching agreement that would end oil drilling off the north Santa Barbara coast."

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