U.S. Stand on Oil Money Hit by Deukmejian : Dispute Over Revenue Sharing Called Threat to Negotiations

Times Staff Writer

In a rare attack on the Reagan Administration, Gov. George Deukmejian warned Saturday that the federal government’s unwillingness to pay California a “fair” share of oil revenues could harm negotiations over future offshore oil leases.

Deukmejian, in his weekly radio address, accused federal negotiators of not making “a good-faith effort” to resolve a dispute over hundreds of millions of dollars the state says it should receive from oil and gas production in federal waters--those located three to six miles offshore.

“Until a sincere effort is made at the federal level to reach an equitable agreement on these funds, I find it difficult to see how meaningful progress can be made on negotiations regarding the future development of offshore oil,” he said.

A spokesman for Secretary of the Interior Donald P. Hodel reacted to Deukmejian’s remarks by praising the California governor’s past support of offshore drilling and calling Deukmejian’s participation in future negotiations “a key element” to their success.


“The secretary has reiterated time and again his desire to resolve this issue by negotiation instead of litigation or legislation, and he desires to continue on that road,” said David Prosperi, assistant to the interior secretary.

“It is the secretary’s desire to continue close consultation with Gov. Deukmejian.”

The Republican governor’s tougher stance marks the first time he has publicly linked the federal payments with the issue of future offshore oil drilling.

States Guaranteed a Share


A 1978 federal law entitles coastal states to a share of revenue from drilling in federal waters off their shorelines. The law, however, leaves it up to state and federal officials to decide on a formula for dividing the revenue.

State and federal governments have been unable to agree on how to split the money. About $1.3 billion has piled up in an escrow account of revenues from California oil. Federal budget officials reportedly want to use as much of it as possible to reduce the deficit.

In April, Deukmejian rejected an offer from the federal government to give the state one-sixth of the fund--about $223 million.

Meanwhile, the Reagan Administration has begun preparing its next five-year plan for offshore drilling that includes five new proposed leases off the coast of California. Two sales are proposed off Southern California’s coast, one off Central California and two off Northern California between 1986 and 1991.


Opponents of expanded offshore oil production, including both Democrats and Republicans, have called for continuation of a federal moratorium on new drilling.

Until now, Deukmejian, a key backer of offshore oil drilling, has been negotiating with the federal government to develop a plan that would exclude certain environmentally sensitive areas from the sales and ensure stricter air and water pollution safeguards.

But, on Friday he told Hodel in a letter that if the lease discussions are to succeed, “it is vital that the federal government first demonstrate its commitment to good-faith negotiation by entering into a fair settlement on the (revenue) issue.”

In his talk Saturday, Deukmejian elaborated: “We are prepared to negotiate the details of this (five-year) plan to make sure it conforms with our principles and is in the best interest of the people of California.


“However, at this stage, I question whether we can successfully negotiate the elements of this proposal until the federal government demonstrates its good faith. . . .”

As governor, Deukmejian has been a staunch supporter of President Reagan and has rarely differed with him in public.

Earlier this year, Deukmejian declined to take part in an attempt by the Democratic governors of six other coastal states to obtain a 37.5% share of the oil revenues from federal waters.

Although all seven states had initially sought to present a united front, Deukmejian refused to sign a letter to Hodel sent in April by the governors of Alaska, Alabama, Florida, Louisiana, Mississippi and Texas.


Since then, Deukmejian aides say the governor has become so dissatisfied with the federal government’s approach to the negotiations that he decided to speak out on the issue.

The governor, who modeled his weekly radio talk after the President’s, used much of Saturday’s five-minute address to criticize the Reagan Adminstration’s handling of the oil issue.

“He has been really dismayed and disappointed there has been so little progress or resolution of the problem that it really has undermined his confidence in the federal government,” said Larry Thomas, Deukmejian’s press secretary.

Thomas would not say how much money California is seeking but said it is somewhere between the 37.5% sought by the other states and the 16.7% first offered by then-Secretary of the Interior William Clark.


“I am hopeful that the federal government will offer California a fair settlement,” Deukmejian said, “so that we can proceed with our balanced program of protecting the fragile environment of our coast and protecting America and the free world from the threat of energy blackmail.”