California assembly drops offshore oil plan from emergency budget

California’s state assembly passed an emergency budget package on July 24 but deleted a bill which would have potentially authorized the first new oil activity off the Santa Barbara coast in 40 years.

The assembly cut the bill championed by Gov. Arnold Schwarzenegger by 30 to 43 votes after the senate approved the full package by 21 to 18 votes. Schwarzenegger and minority and majority leaders of the senate and assembly included it when they reached a tentative emergency budget agreement on July 20 for the legislature to consider.

It potentially would have provided $100 million initially and up to $2.3 billion of royalty payments from the 13-year lifespan of Plains Exploration & Production Co.’s proposed Tranquillon Ridge project. It also would have overturned the State Lands Commission decision in January to reject it, which opponents argued would have created a dangerous precedent.

“The project was not included in the final budget. The governor indicated he would sign it without the project and without a shift of gasoline taxes from cities and counties which were to be revenue sources. He probably will have to make more line item cuts to close about a $1 billion revenue gap to balance the budget,” Western States Petroleum Association President Joe Sparano said on July 28.

“We continue to have less revenues than we might. California still is importing more than 40% of the crude it uses. This would have been a good thing for California’s energy supplies, and for its revenues and jobs. It’s no longer included in the budget,” he told OGJ Washington Pulse.

In Houston, Steve Rusch, PXP’s vice president for environmental, health, safety, and government affairs, said on July 26 that the independent producer still wants to work with California leaders to make the Tranquillon Ridge project a reality.

“The T-Ridge project is a unique opportunity for California and PXP to significantly accelerate the end of oil production and drilling operations offshore, for California to receive tremendous initial value and offsets in the form of large land donations and alternative energy support, and for California to receive a several billion dollar revenue stream to help bridge the current fiscal crisis,” he indicated.

The project won support from Santa Barbara area environmental organizations as well as Schwarzenegger because it proposed drilling into state waters from an existing platform in federal waters. PXP also would have terminated its existing California offshore operations in 14 years and would have removed all related onshore processing facilities at the end of the project instead of continuing its current program for 30 or more years.

Contact Nick Snow at nicks@pennwell.com

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