Arco Dealt Blow in Bid for Offshore Oil Field

Atlantic Richfield Co. was dealt a setback in its suit against two government agencies, seeking either permission to develop an oil field off the coast of Santa Barbara County, or $793 million in damages.

On Wednesday, Superior Court Judge Leon Savitch denied Arco’s request for judgment in its 1987 suit arguing that the State Lands Commission and Santa Barbara County illegally blocked the company’s efforts to develop the oil field in state waters two miles off Coal Oil Point near the University of California, Santa Barbara.

Savitch ruled on the part of Arco’s suit aimed at overturning the State Commission’s 2-1 vote denying permission to develop the field, based on environmental concerns.

“The court understands Arco’s anxieties and frustrations after expending enormous sums of money and time in order to find a large and profitable oil reservoir,” Savitch wrote. “But the court’s decision is that the denial by the commission is reasonable, even if the environmental impact reports say that no significant problems exist.”

The judge also said that Arco and the commission should examine other alternatives to the proposed sites.

Arco--arguing that it has already spent $200 million looking at other alternatives--vowed to appeal the ruling. “Our contention is and was during hearing that this proposal was the best feasible project,” said Arco spokesman Albert Greenstein.

Arco estimates that the Coal Oil Point field has reserves of about 100 million barrels of oil.

In denying Arco’s permit in May, 1987, lands commission members Controller Gray Davis and Lt. Gov. Leo T. McCarthy said it would be “irresponsible” to allow unrestricted development of the leases.