Arco, Barred From Drilling in Tidelands, Seeks Millions

Arguing that it has been illegally denied the right to develop five tidelands oil leases off the Santa Barbara coast, Atlantic Richfield Co. on Thursday filed a $796-million claim against the State Lands Commission and Santa Barbara County.

The action, filed with the state Board of Control and the county Board of Supervisors, is the first step in what could prove to be a lengthy legal battle over the oil company’s attempt to build new oil platforms on state-controlled tidelands within three miles of the coast.

Both state and Santa Barbara County officials asserted that the Arco claims have no merit because government acted properly in blocking Arco’s plans for coastal oil development. And they say that both the county and the state Board of Control are likely to deny the Arco claims, forcing the company to go to court if it is to collect any damages.

Rejected in May

In May, the State Lands Commission on a 2-1 vote turned down an Arco proposal to build three massive drilling platforms in the Santa Barbara Channel because of the project’s visual impact on nearby residential areas and the potential damage from an oil spill to the University of California marine research facilities. Instead, the commission in effect declared a moratorium on all drilling in state-controlled waters until the completion of a study on the impact of all offshore drilling. There have been no new platforms on the state’s tidelands since the 1969 Santa Barbara oil spill, but new platforms are being constructed on federal leases beyond the three-mile limit.

Arco contends in its claim that the Lands Commission exceeded its authority in rejecting the company’s plans for developing the tidelands leases, some of which were issued 40 years ago.

“We consider it a condemnation of property without just compensation,” said Arco spokesman Al Greenstein.

The company also argues that the Santa Barbara County Board of Supervisors violated a commitment made to Arco in 1981 when the company agreed to recover naturally occurring gas seepage from the channel floor in a pollution reduction effort that was intended to offset new emissions caused by future drilling and processing.

Because of the Lands Commission action, Arco has been denied the value of oil reserves worth $793 million to the company, Greenstein said. In addition, the oil giant claims a loss of $54,795 a day return on investment--for a total of $2.7 million since the commission refused to let Arco go ahead with its plans.

“I am confident that the Lands Commission action in protecting our coastline from exploitation will be upheld by the courts,” said state Controller Gray Davis, who--along with Lt. Gov. Leo T. McCarthy--voted against the Arco project.

Davis also sits on the three-member Board of Control, which reviews all claims against the state. That board routinely rejects claims that raise complex legal questions so that the cases can be filed in court, said the board’s deputy director, Joseph Radding.

Similarly, Santa Barbara County supervisors are likely to reject Arco’s claim. “Our entire (county) budget is $210 million,” said Supervisor Tom Rogers.

“There is not much merit to the claim,” said Ken Nelson, Santa Barbara County counsel.

Both the county and the state Board of Control must act within 45 days or the claim is automatically denied.