Impasse Over Offshore Drilling

A consortium of oil companies, which has been pressing the Bush administration to buy back offshore oil leases, has submitted plans to drill nine exploratory wells and begin new oil production off the California coast.

The drilling plans submitted under court order to the Minerals Management Service represent the latest move by the oil companies embroiled in a lawsuit with the federal government over long-stalled plans to drill in federal waters.

The companies want to be allowed to tap into the estimated 1 billion barrels of oil in the Santa Barbara Channel or be repaid for their $1.25-billion investment in 36 leased tracts in federal waters off the coast of Ventura, Santa Barbara and San Luis Obispo counties.

Settlement talks have broken down and lawyers for the Department of the Interior and oil companies have been exchanging increasingly testy court filings blaming each other for the impasse.

U.S. District Judge Claudia Wilken has ordered both sides to meet May 26 and 27 with a mediator to try to settle the lawsuit that alleges breech of contract because of improper delays and other federal regulatory actions.

The case is boiling down to a fight over money, with the oil companies asserting that they should be paid at least $1 billion to give up their interests in the leases. Most of the plaintiffs acquired the leases after several major oil companies abandoned the area.

Yet offers from federal negotiators are considered so low by the oil companies that they have concluded in court papers that “the government is not prepared at this time to engage in good-faith discussions.”

Edward Bruce, the oil companies’ lead attorney, declined to elaborate.

The Interior Department’s Minerals Management Service issued a statement Tuesday saying it was committed to finding “a workable solution as soon as possible.”

“We strongly support environmental protection and understand the importance of this issue to the people of California,” the statement said.

Under a moratorium imposed by Congress and presidential order, no new offshore oil leasing is allowed off the coast of California. A total of 43 offshore tracts are now in production, the work visible from shore. The current dispute is over 36 nearby tracts, which have been leased but have no platforms on them.

Minerals Management Service officials said they have received the latest drilling plans along with the oil companies’ proposals to extend the offshore leases.

The officials are conducting an initial review to determine how much time the agency will need to do its full assessment of the drilling plans under the National Environmental Policy Act and the federal Coastal Zone Management Act.

The 36 offshore tracts, which were leased between 1968 and 1982, were supposed to expire after five years. But the leases have been extended repeatedly and can be extended again, provided that oil companies make good-faith efforts to push toward offshore oil and gas production.

In the filings submitted last week, the companies proposed drilling exploratory wells to delineate the best places for production on the clusters of offshore tracts. Arguello Inc. of Goleta is proposing to use existing offshore oil platforms, called Harvest and Hermosa, near Lompoc to do slant-drilling through the seafloor and begin oil production by 2007.

Before the federal government extends any leases, it must first submit these plans to the California Coastal Commission to determine if they comply with state laws to protect the coastline and coastal waters. This step was ordered by Judge Wilken in a decision affirmed by the 9th Circuit Court of Appeals.

Wilken also ruled that state officials and two groups that intervened in the case -- the Environmental Defense Center of Santa Barbara and the Natural Resources Defense Council -- can sit in during the two-day mediation between oil companies and the Interior Department.

Crawford Tuttle, a deputy secretary of the California Resources Agency, said the administration of Gov. Arnold Schwarzenegger “will urge the federal government to purchase or otherwise permanently retire the remaining offshore oil leases, as it was done in Florida.”

But some state officials are raising questions about a $235-million deal involving oil leases off the coast of Florida that the Bush administration brokered with oil companies in 2002, at a time when the president’s brother, Florida Gov. Jeb Bush, was engaged in a reelection campaign.

Peter Douglas, executive director of the California Coastal Commission, said he was startled to learn that the deal did not result in a permanent ban on offshore oil and gas drilling off Florida’s coast -- as is being sought in California.

Instead, the federal government bought back nine of 11 offshore tracts, but reserved the rights of one company to reapply to drill after 2012 on two of the most promising tracts off the Florida Panhandle.

“I think it was a huge scam,” Douglas said.