Ocean Tracts May Be Saved From Drilling

U.S. senators from California and Louisiana introduced a bill Thursday offering billions of dollars in incentives to oil companies if they swap their drilling claims in California waters for those in the Gulf of Mexico.

The legislation, co-sponsored by Democratic Sens. Barbara Boxer and Dianne Feinstein of California and Mary Landrieu and John Breaux of Louisiana, would help more than a dozen oil companies recoup huge investments in offshore oil leases from Oxnard to San Luis Obispo.

The bill also would turn the 40 tracts--most of them covering nine square miles--into ecological preserves that would be forever off limits to oil and gas drilling.

“We are going to swap the tracts that our people feel should never be drilled off our beautiful coast for tracts off Louisiana where they want to drill,” Boxer said. “If it works right, we will all be celebrating.”

The deal proposed by the four senators received a warm, if cautious, reception from the Bush administration, which has been criticized for policies that favor oil companies and other industries over environmental protections.

“We are willing to consider any proposal that will resolve the issues regarding these offshore leases,” said Mark Pfeifle, spokesman for Interior Secretary Gale Norton.

Some environmentalists privately complained that the bill represents a bailout for big oil.

Others, however, relished the idea of ending a fight over offshore drilling that began in the early 1980s when former Interior Secretary James A. Watt opened nearly all federal waters to oil development.

“If this flies, it would be a historic outcome; it would be the end of the offshore drilling threat to federal waters off California,” said Richard Charter, a marine conservation advocate with Environmental Defense.

“Is that worth some money? Yes, I think it is.”

Industry officials said the deal could be worth $2.8 billion or more to oil companies that hold offshore oil leases in federal waters along the Ventura, Santa Barbara and San Luis Obispo county coastlines.

The payments would come in the form of credits the companies could use when they bid on tracts in the central and western Gulf of Mexico. The companies could also use the credits to offset royalty payments they would otherwise have to make to the government.

Nuevo Energy Co. of Houston, which has a financial interest in nearly two-thirds of the undeveloped leases, has been promoting the idea of swapping oil leases for years in Washington, D.C.

Nuevo and other oil companies are frustrated that they collectively have sunk as much as $2 billion into lease payments, exploratory wells and other costs and reaped not a drop of the 1 billion barrels of oil estimated to lie below the ocean floor.

“It’s been going on for two decades,” said Jim Bray, a Nuevo Energy spokesman. “Our senior executive’s message was: ‘Let’s allow the leases to go forward or reimburse us for our investments so we can move on.’ ”

The bill “will solve a difficult problem associated with oil production off the coast of California,” said Sen. Landrieu. “This will mean more jobs for Louisianans and a more vibrant oil and gas industry in my state.”

The oil companies would have to relinquish their rights to develop the California leases and drop related lawsuits.

Last month, they filed a breach of contract suit against the federal government for the delays and ever-changing rules that have thwarted their ability to produce oil from these tracts.

Company representatives said they were unsure that all of their peers would agree to such terms. Besides Nuevo, Shell Oil and Exxon Mobil Corp. have financial stakes in the leases. Other companies include Delta Petroleum Corp., Ogle Petroleum, OLAC Resources, Poseidon Petroleum, Samedan Oil Corp., and Amber Resources.

The legislation does not address an additional 43 federal tracts that are producing oil and gas. These production areas--sometimes adjacent to undeveloped tracts--can be spotted by the offshore oil platforms that dot the coast of Ventura and Santa Barbara counties.

The rest of California’s waters are generally off limits to new oil drilling because of federal and state moratoriums.

In a related development Thursday, Boxer, Feinstein and 30 other California Democratic members of Congress filed legal arguments to support the state’s right to review any new oil development to ensure that it doesn’t harm the environment.

A decision last year by a federal judge prohibits oil production from undeveloped offshore tracts until the California Coastal Commission can assess its effects on water quality, marine life, air quality and scenic vistas.

Given the potential for environmental problems, such a review could doom the chances of exploiting oil reserves beneath many of these tracts.

Last month, the Bush administration appealed the decision to the U.S. 9th Circuit Court of Appeals.

Rep. Lois Capps (D-Santa Barbara), and other lawmakers said the bill introduced Thursday would not influence the lawsuit. They see the suit as setting an important precedent for state’s rights.

“We cannot risk another oil spill off our coast,” said Capps, who represents the coastline once coated with oil from the 1969 blowout of an oil platform. “This is all about local control.”