State Sues to Block Offshore Oil Leases

Gov. Gray Davis announced Tuesday that California has filed a lawsuit against the federal government to block extensions for offshore oil leases that could eventually be used to dramatically expand production off the Central Coast. The lawsuit demands that the state be allowed to scrutinize the 36 disputed oil tracts prior to any federal actions.

The rift between the Democratic governor, an ardent foe of offshore drilling, and his Democratic counterparts in the Clinton administration underscores a profound difference over the appropriate role for California when it comes to the rights of oil companies to drill in adjacent federal waters.

The announcement comes four days after Interior Secretary Bruce Babbitt unveiled a plan that allows oil companies to begin moving forward with exploration plans on three dozen leases in virgin waters. Under the proposal, oil companies will spend the next 19 to 45 months developing drilling plans, without actually extracting oil for sale, while undertaking an environmental study that would later be submitted to California agencies for review.

Davis, in a telephone news conference, said that approach represents an incorrect interpretation of the Coastal Zone Management Act of 1972, the federal law that defines the appropriate roles for the state and federal government regarding offshore oil and other coastal matters. Davis, echoing the position of the California Coastal Commission, said the state should be permitted to review whether the undeveloped leases, some of which are 31 years old, are still valid before any plans for expanded drilling proceed.

“The state of California has the right to participate at the front end of the process, not just at the tail end,” Davis said. “California is entitled to be the engine, not the caboose.

“The Feds essentially froze us out and that’s why we’re suing.”

Although state and federal moratoriums prohibit new offshore oil leases in California, those bans do not apply to the undeveloped leases, which were issued between 1968 and 1984. Oil companies paid more than $1 billion in fees to retain the option to drill in those tracts, strung in clusters from Port Hueneme to San Luis Obispo. The untapped oil leases contain about 1 billion gallons of crude oil, more than has been pumped from the state’s offshore oil fields in the past century.

“If California had been consulted, we would have insisted that many, if not all of these leases, should be allowed to expire immediately because there is no way they can be developed in an environmentally sound way,” said state Resources Secretary Mary Nichols. “The leases were not subjected to a proper environmental review and they predate the nation’s landmark environmental laws.”

Polls show that most Californians oppose new oil production along the California coast, and the opposition is most intense along the Central Coast, where citizens and lawmakers have been battling the oil industry since an oil rig blowout led to a major spill along Santa Barbara in 1969. Environmentalists say expanded production must be halted to prevent future accidents.

“We’re thrilled the state has stepped forward. Development of these leases could have broad impact on the environment if there’s a spill,” said Linda Krop, senior attorney for the Santa Barbara-based Environmental Defense Center. “The lawsuit sends a strong message to the federal government that they should work more closely with the state.”

“I don’t see any leeway that would allow for more offshore oil drilling,” said Rep. Lois Capps (D-Santa Barbara). “A lot of things have changed since these leases were issued. Marine sanctuaries and the state Coastal Commission weren’t even in place then. Circumstances have changed and the mind set of most of citizens has evolved and is opposed to offshore oil.”

The state attorney general’s office filed the lawsuit, which names the U.S. Minerals Management Service and the Department of Interior as defendants, in U.S. District Court in Oakland on Tuesday.

Although officials at the Interior Department had not yet seen the lawsuit, an official in Washington said the agency is in full compliance with the coastal zone act and that California will be given the opportunity to review all drilling plans after they have been prepared.

“What this is all about is who pays, because these are legal and valid leases and breaking these leases will lead to a lawsuit and possibly financial losses,” said the official, who asked not to be named.

Frank Holmes, spokesman for the Western States Petroleum Assn., said the oil companies would fight to recover the more than $1.3 billion they have spent to pay for the leases and exploratory drilling.

“These are valid contracts between the federal government and the individual owners,” Holmes said. “We feel that any environmental assessment will show they can be developed in a safe manner.”

The disputed oil leases have been kept alive since 1993 by federal officials to allow time for the leaseholders and the government to study the size of the crude reserves and onshore facilities needed to extract the oil. Most of the crude is a low-grade petroleum, probably useful mainly to make asphalt, according to industry officials.

Babbitt voided four of 40 leases at the conclusion of a 90-day review in August, although oil companies have since appealed that decision. Oil companies petitioned the federal government to allow them to proceed and prepare exploration and development plans on the remaining leases. On Friday Babbitt agreed to that request, but required that a comprehensive environmental impact study be completed before any expanded drilling can occur.