California Could Expand Oil Drilling Under Budget Agreement
SAN FRANCISCO -(Dow Jones)- California could allow new oil drilling under a
tentative agreement the state's governor and lawmakers reached to plug the
state's $26.3 billion budget hole.
In a rare agreement with environmental groups, oil producer Plains Exploration
& Production Co. (PXP) has proposed promptly expanding oil drilling off the
coast of Santa Barbara, then shutting down four oil platforms and two onshore
processing facilities in Santa Barbara by 2022. The company also agreed to
donate 4,000 acres of land for public use. The company would slant-drill into
the state's seafloor from a platform it operates in federal waters.
Environmental and community groups in Santa Barbara have hailed the project,
called Tranquillon Ridge, as a major milestone in their efforts to shut down the
oil rigs off Santa Barbara's coast. Current law allows offshore drilling
operations that were in place prior to a 1981 moratorium on new offshore
drilling to continue indefinitely.
Gov. Arnold Schwarzenegger has championed the project as a new source of
desperately needed cash to fill the state's budget gap. The state would collect
an up-front payment of $100 million from Plains, followed by and as much as $2.3
billion in royalties over the 13 years of the project.
California's budget difficulties could be a boon for Plains Exploration. In
addition to the company's potential opportunity to expand oil drilling in
California, where officials have expressed near-unanimous opposition to expanded
drilling on the Outer Continental Shelf, Schwarzenegger scuttled a proposal by
Democrats to increase fees on oil production in the state.
The Tranquillon Ridge project is one of the few bright spots in California's
budget agreement, reached late Monday by Schwarzenegger and legislative leaders.
Reports of the agreement indicate that it would scale back many state services,
particularly to the elderly and the poor, and include less pay for government
workers, among other cuts. The state Senate and Assembly could vote on the bill
as early as this week.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@
dowjones.com
(END) Dow Jones Newswires
07-21-091324ET
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