Senators from Louisiana and California introduced legislation in late February to close a decades-old, billion-dollar dispute between industry and California over offshore oil leases. The California Coastal Protection and Louisiana Energy Enhancement Act also directs the Secretary of the Interior to provide oil companies holding California leases with a swap of equivalent value in the Gulf of Mexico within 30 days of the bill's passage.
US Sens. Barbara Boxer and Dianne Feinstein (D-Calif.) and John Breaux and Mary Landrieu (D-La.) said passage would cancel the 40 remaining nonproducing oil and gas leases off California and create an environmental preserve to permanently protect these areas. It would not affect the 43 federal tracts now producing oil and gas off California.
The bill also bans future drilling, but existing federal and state laws already prevent companies from doing so.
Interior officials said they are receptive to the proposal but have not yet offered an official endorsement.
"This bill is a win for every party involved," said Boxer in a written statement. "This legislation allows California to get rid of unwanted coastal drilling while also ensuring that these 40 areas will be protected for future generations.
"At the same time, the bill frees companies from a protracted legal battle by allowing them to take their business to the central and western Gulf [of Mexico]. Finally, this legislation spares the federal government from expensive litigation that the companies are already pursuing vigorously."
Over the past 2 decades, the Minerals Management Service has continued to extend the 5-year leases while the legal issues between California and the Interior Department dragged on. Nine oil companies on Jan. 9 filed a breach of contract suit against the federal government in the US Court of Federal Claims in Washington. They alleged they have so far collectively spent $1.2 billion for bonuses, rentals, and assorted legal costs associated with the disputed leases.
Two of the oil companies that filed suit are Delta Petroleum Corp., Denver, and Nuevo Energy Co., Houston. Last summer the companies said they would drop any interest in leasing off California if the government paid for the leases and other related costs. Interior officials are still negotiating with those companies and several other leaseholders over the matter.
Other oil companies with disputed leases off California that joined the lawsuit include Amber Resources Co., Devon Energy Corp., Ogle Petroleum Co., OLAC Resources LLC, Poseidon Petroleum LLC, Samedan Oil Corp., and TotalFinaElf SA. ExxonMobil Corp. and Shell Oil Co. also hold interests in disputed offshore leases off California.