BACKGROUND

In 1992, ocean-dependent oil and gas activities were estimated to have contributed $850 million to the State's economy, employing approximately 25,600 people (California Research Bureau, 1993). The State has had to balance economic benefits against the adverse impacts to coastal views, the health of marine resources, and air quality. Concerns regarding the cumulative impacts of offshore oil and gas development, combined with a number of major marine oil spills throughout the world in recent years, have led to a permanent moratorium in California on offshore oil and gas leasing in State waters and a deferral of leasing in federal waters. However, development on existing State and federal leases is not affected and may still occur within offshore areas leased prior to the moratorium taking effect.

The 1969 blowout and oil spill from Unocal's platform A in the Santa Barbara Channel received international attention and was a major catalyst in the development of modern environmental law in the United States. The spill influenced the passage of major State and federal legislation, such as the National Environmental Policy Act (NEPA), Clean Water Act, California Environmental Quality Act (CEQA), California Coastal Initiative in 1972 (Proposition 20), and California Coastal Act of 1976. Pursuant to these and other statutes, development permits for onshore or offshore oil and gas facilities cannot be issued without provisions to protect terrestrial, marine, visual, recreational, and air resources.

ISSUE ANALYSIS

Impacts of Future Leasing Found Unacceptable

New leasing for oil and gas development off the California coast in State Tidelands and the federal Outer Continental Shelf (OCS) have been determined by the State of California to result in unacceptable impacts to coastal and ocean resources. Some of these impacts include:

• visual impacts of the offshore platforms on coastal communities;

• navigation risks from the increased number of platforms, exploratory rigs, and support vessel activity;

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

• drill muds and cuttings dumping, and the impact of this dumping on the water column and bottom communities in the vicinity of the drilling platform;

• air quality impacts from exploration, production, and transportation activities;

• oil spills from a variety of oil exploration, production, or transportation operations and the lack of effective methods for cleaning up those spills;

• ecosystem degradation caused by additional oil and gas development impacting marine protected areas in both State and federal waters, including sanctuaries, seashores, reserves, preserves, refuges, underwater parks, and areas of special biological significance; and

• cumulative impacts on air quality, commercial fisheries, scenic quality, marine resources, vessel traffic safety, and land resources from existing, approved, proposed, or projected developments.

As a result, prohibitions have been put in place to eliminate future leasing of oil and gas tracts in both State and federal waters. The latest restrictions in State waters were imposed through legislation enacted in 1994 and leasing deferrals in federal waters resulting from a presidential Executive Order to the Department of Interior's Minerals Management Service. Governor Wilson, the legislature, many State and federal agencies, and local citizen activist groups helped persuade the federal government to defer all future oil and gas leasing in the OCS off the California coast until the year 2000. Additionally, the largest proposed boundary for the Monterey Bay National Marine Sanctuary was supported and later adopted. This Sanctuary, which is the largest of its kind in the United States, provides permanent protection from oil and gas leasing and development activities within approximately 5,312 square miles of the OCS off the Central California coast.

Leasing State Tidelands

The State Lands Commission is responsible for leasing State Tidelands for oil and gas development. Although new offshore development in State waters reached a near stand-still following the 1969 Santa Barbara oil spill, currently there are approximately 95,000 acres of State submerged lands under lease for oil and gas development (approximately 82,000 acres within the Santa Barbara Channel region).

The State Lands Commission is currently prohibited from leasing State-owned tidelands for oil and gas extraction from the Mexican border north to the Oregon border pursuant to AB 2444 (Chapter 970, Stats.1994). This legislation replaces a previously complex mix of legislative prohibitions and administrative actions that eliminated new leasing by the State Lands Commission. These prohibitions were permanent for some areas, expired in 1995 and 2003 in other areas, and were administrative rather than statutory in others. AB 2444 provides a clear State position by creating a single State oil and gas leasing sanctuary. As a result of this bill, no further leasing will occur unless the legislature acts to eliminate or modify this prohibition, or leasing is initiated in response to a national energy crisis, as provided for in the bill.

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

The Department of the Interior's Mineral Management Service is the federal agency charged with leasing waters in the OCS (beyond three nautical miles from shore). After long legal battles and subsequent amendments to the Outer Continental Shelf Lands Act and the Coastal Zone Management Act, it was determined that the California Coastal Commission (Coastal Commission) has the authority to review these federal government lease sales for consistency with the California Coastal Management Program, as well as consistency review authority over plans to explore and produce oil and gas resources.

In June of 1990, at the urging of Governor Wilson, the Coastal Commission, and other concerned parties, President Bush deferred leasing off the coast of Northern, Central, and most of Southern California until the year 2000. In accordance with this policy position, the final Five Year Oil and Gas Leasing Program (1992-1997) developed by the Department of the Interior includes no lease sales off the coastlines of California, Oregon, or Washington. These deferrals were, in part, a response to comments from the State of California regarding the cumulative impacts of existing development. The State has repeatedly informed the Department of the Interior that the size of past lease offerings were too large, the locations were often too close to environmentally sensitive areas, the pace of the offerings were too rapid to adequately assess the impacts, and the lease sales were inappropriate in the absence of a comprehensive national energy strategy. The State has urged the federal government to develop a total energy plan which would consider energy conservation and renewable energy sources, in addition to the plans to develop offshore oil and gas resources.

Perspective On California Offshore Oil Reserves

The oil reserves located offshore the California coast are small relative to production in the rest of the State, nation, or world. Proven oil and gas reserves within California State Tidelands has been estimated at 291,291,000 barrels of oil. Currently there are 92 active leases on the Outer Continental Shelf, encompassing 465,126 acres. Proven reserves within the federal OCS have been estimated at 726,316,000 barrels. (Division of Oil and Gas, 1993). The reserves located in California State tidelands represent roughly 1.2 percent of the U.S. total reserves, while reserves in federal waters offshore California represent approximately 3.1 percent.

Although these reserves would contribute to the national energy supply, they are relatively insignificant when compared to other sources. Reserves for onshore production in California are substantially higher and add up to nearly 3.4 billion barrels or 14.6 percent of U.S. reserves. In contrast, the total U.S. reserves are approximately 23 billion barrels, representing only 2.3 percent of world reserves. Proven oil reserves in the middle east are substantially higher, totalling approximately 662 billion barrels or 66.5 percent of world reserves. Total world oil reserves are estimated at approximately one trillion barrels of oil. (National Energy Information Center, 1994).

California has instituted a number of energy conservation measures to reduce energy consumption, demonstrating that population and economic growth are not inextricably linked to increases in energy consumption. California has the sixth largest economy in the world, and is the largest and fastest growing state in the nation (an increase of 8 million people, or 33% growth, between 1975 and 1991). Yet, as a result of its energy policies and programs, California uses one-third less energy per

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

Cumulative impacts from existing oil and gas development, or from future development, in State and federal waters on existing leased tracts has never been thoroughly understood or evaluated. Cumulative impact analysis is complicated because it entails evaluating existing, approved, proposed, and projected developments and how these developments would cumulatively impact a variety of resources. Questions include the potential impacts of development scenarios on other industries, such as California's tourism industry, which contributed $9.9 billion to the State's economy in 1992, or the commercial fishing and mariculture industry, which contributed 17,000 jobs and $554 billion in 1992 (California Research Bureau, 1993). Cumulative impacts analysis also requires a thorough inventory and comprehensive evaluation of air quality degradation, drilling muds toxicity, vessel traffic hazards, oil spill probability, visual quality disruption, and impacts to local communities (particularly in the north coast) where onshore support facilities (processing, pipelines, marine terminals, oil spill response centers) would potentially have to be developed.

As a first step toward addressing the cumulative impacts of offshore oil development, the Minerals Management Service Pacific OCS Region has initiated a cooperative study with State and local governments and the oil and gas industry to evaluate the onshore impacts and development constraints for various levels of offshore oil and gas development. This evaluation, titled the "California Offshore Oil and Gas Energy Resources Study" (COOGER), is focusing on development from currently leased oil and gas tracts off the coastlines of San Luis Obispo, Santa Barbara, and Ventura counties, and is intended to provide a common base of information for future decisions regarding oil and gas activities. This process represents an important cooperative effort to identify some of the onshore cumulative impacts of OCS oil and gas developments on coastal communities. However, no comprehensive cumulative impact studies are planned at the present time to address the full range of impacts to both onshore and offshore resources.

Oil Transportation

All oil produced offshore California is required to be transported to market destinations using the least environmentally damaging methods that can feasibly be provided. Risk analysis and environmental research data conducted over the past 20 years demonstrates that onshore pipeline transportation will result in substantially reduced oil spill and air quality impacts as compared to marine tankering. Major oil spills occurring from ocean-going tankers over the past 30 years, and the risk of similar spills in the future, have been a key factors in public concern over this issue.

In the early 1980's, the Coastal Commission concurred with the federal consistency certifications to permit the construction and operation of three oil and gas production platforms in the OCS offshore Santa Barbara County (known as the Point Arguello Field). The concurrence issued by the Coastal Commission was based on commitments that produced oil would be transported to Los Angeles refineries by pipeline. The local coastal program for the County of Santa Barbara also required the use of pipelines to market destinations. From 1989 to 1991, Point Arguello producers pursued a

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

In 1992, the Secretary for Resources helped facilitate discussions regarding the transportation of oil from Point Arguello Field. The Secretary convened a series of meetings between the producers at Point Arguello, the Coastal Commission, Santa Barbara County, and the local environmental community, to develop an acceptable proposal. These discussions led to the Coastal Commission's January 1993 decision to grant a permit to the Point Arguello producers to temporarily use marine tankers for transporting oil from Point Arguello Field to Los Angeles area refineries. This permit prohibits tankering of Point Arguello oil from any other marine terminal and requires specific milestones in the permitting, construction, and eventual operation of a pipeline from Point Arguello to the Los Angeles area. Failure to meet these milestones can result in cessation of tankering. The permit also requires that, by January 1, 1996, all Point Arguello oil must be transported by land pipeline.

The permit required the Point Arguello producers to submit by February 1, 1994 a fully executed agreement with a company proposing to construct a pipeline that has obtained all necessary discretionary government approvals. Unfortunately, the Point Arguello producers were unable to fulfill this condition and all tankering of this crude oil has been suspended until an agreement is signed and all construction permits obtained. The Point Arguello producers are currently pursuing the Pacific Pipeline proposal for a pipeline to the Southern California Area, which has not yet been permitted. Alternately, the Cajon pipeline has received all its permits for construction and could be used to transport the oil to the producers refinery destinations. However, the Point Arguello producers have determined that they would prefer to withhold transportation of their oil rather than pursue this option.

Oil Spill Prevention and Clean-up

The State has developed a major oil spill prevention and response program pursuant to Senate Bill 2040 (Chapter 1248, Stats.1990). Senate Bill 2040 established the Office of Oil Spill Prevention and Response (OSPR) and required the State of California to develop a comprehensive program to assure that the "best achievable" programs are available to prevent oil spills and to respond to those that do occur. Some OSPR programs and achievements include:

• receipt and ongoing review of oil spill contingency plans from oil and gas facility operators,

• completion of a marine oil spill contingency plan for the State of California,

• development of statewide marine resource information on a computer-based geographic information system,

• implementation of statewide oil spill prevention and response education programs,

• construction and operation of oiled wildlife rehabilitation facilities,

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

• placement of field biologists and enforcement personnel in strategic locations along the entire California coast to assure rapid response to oil spills by trained personnel,

• ongoing activities of the industry/government harbor safety committees to develop navigation safety plans for submittal to the Administrator of the OSPR, and

• ongoing Coastal Protection Review required by SB 2040 to ensure the best achievable oil spill prevention and response measures are being provided by the oil and gas industry.

The OSPR has responded to small oil spills in the marine environment on a regular basis since the organization was established. Fortunately, few large marine oil spills have occurred during this period, although a substantial one did occur at McGrath Lake in December of 1993. Located in Ventura County, this spill was cleaned up through a joint effort of the spiller (through Clean Seas and various oil spill cleanup contractors), federal, State, and local agencies, as well as representatives from non-profit wildlife rehabilitation facilities. Although spill response planning, training, and field exercises provide important preparations, the most important lessons are usually learned during the response to actual oil spills. The response to the McGrath Lake spill was no exception. This incident identified the need to evaluate the following issues:

• inspection procedures to determine the structural integrity and safe operation of the complicated petroleum pipeline system in California;

• spill notification procedures to assure that timely and effective notification procedures are in place if a spill occurs; and

• the ability of the State to rapidly establish an agency response structure that addresses the command, control, and communications necessary to direct effective spill cleanup operations.

After the McGrath Lake oil spill, the Secretary for Resources directed the OSPR's Administrator to prepare an analysis of these issues. The draft report titled, "An Investigation of Pipeline Regulatory Jurisdiction in the State of California" has been submitted to the Secretary for review. Agencies within the State Interagency Oil Spill Committee have submitted their comments on the report to the Administrator and Secretary to provide additional input regarding the State's oil spill prevention and response capability. The Secretary will determine what legislative or administrative actions should be pursued to improve California's spill response structure.

SB 2040 requires the State to develop oil spill prevention regulations for oil production platforms, pipelines, marine oil transfer terminals, and refineries (roughly 400 in California). These regulations also require procedures for monitoring and inspecting facilities to ensure compliance. The State Lands Commission was given responsibility for approximately 70 marine oil transfer facilities and the OSPR was given the responsibility for all remaining facilities, including vessels that enter the waters of the State. Efforts have been made in the past, and continue, to consolidate oil spill prevention and facility monitoring and inspection processes.

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

Platform Design Life

Many offshore oil and gas platforms in State waters are approaching the end of their design life and will have to be retro-fitted, removed or replaced by new production facilities or alternative recovery techniques. Chevron is currently working with government agencies to develop a plan for abandoning four platforms in State waters near Carpinteria, California, and several other abandonment projects are imminent.

While the regulatory procedures and preferred technical processes for carrying out abandonment activities are generally clear, they are relatively complex and difficult to modify in order to undertake alternatives to complete abandonment. This tends to limit full consideration of all alternatives, which could include total removal of facilities, leaving portions of the facilities in place, or using portions of the facilities elsewhere to create artificial reefs. Decisions regarding these alternatives require a thorough analysis of the potential impacts to marine resources and associated user, cost, and liability issues.

Extended Reach Drilling From Shore

As a result of new developments in drilling technology, oil and gas production wells can now be drilled laterally up to four miles from the point of entry to the area to be produced. This technology will allow oil and gas reserves located within currently leased State tidelands to be developed from shore, assuming the reserves are located at sufficient depths. The advantages of this technology include the potential elimination of offshore production platforms, subsea pipelines, and associated marine terminal facilities. Drilling wells from shore also reduces the risk of oil or other hazardous material spills into the marine environment, as land-based technologies can incorporate large containment dikes and other measures not available at offshore operations. Disadvantages of this technology include potentially adverse air quality impacts, reduced visibility along the shoreline, noise, and potential conflicts with adjoining land users.

A project in Santa Barbara County has been proposed to recover oil within State Tidelands using extended reach drilling technology. Known as the "Clearview Project," the proposal entails developing and operating approximately 60 upland wells to reach all areas of the South Ellwood offshore oil field. A new oil pipeline would be constructed from the project site to the City of Carpinteria, while the existing Platform Holly, the Ellwood Marine Terminal, and all associated offshore pipelines would be removed. Moving this production facility to an onshore location will eliminate major offshore impacts to marine resources, although it cannot avoid all potential impacts.

FINDINGS AND RECOMMENDATIONS

Finding

Future oil and gas leasing off the California coast would likely cause unacceptable adverse impacts to offshore resources and coastal communities while providing little contribution to national energy production. A number of factors lead to this conclusion, including visual impacts, navigation risks,

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

drill muds and cuttings disposal practices, air quality impacts, oil spill risks, ecosystem degradation, and uncertain cumulative impacts from existing, approved, proposed, or projected developments.

Recommendation E-1.

Retain the prohibition on new oil and gas leasing in State Tidelands, and continue to oppose leasing activities on the federal Outer Continental Shelf offshore California. This is, and should remain, the policy of the State of California unless new technologies or other methods are developed to reduce to acceptable levels the risks associated with offshore drilling.

The cumulative impacts of offshore oil and gas operations for existing or future development in State Tidelands and the Outer Continental Shelf are poorly understood. New leasing is currently not allowed in State or federal waters offshore California, yet new developments can still be proposed on existing State or federal leases. A substantial number of undeveloped leases exist along the California coast, such as the federal waters within the northern Santa Maria Basin offshore San Luis Obispo and Santa Barbara counties.

Recommendation E-2.

Study and evaluate the cumulative impacts of oil and gas production in State Tidelands and the Outer Continental Shelf. The oil and gas industry, State of California and Department of the Interior's Minerals Management Service have not produced sufficient information regarding the cumulative impacts of offshore oil and gas development. Currently, the Minerals Management Service's Pacific Outer Continental Shelf Region is conducting a cooperative federal/state/local government study to evaluate methods for reducing the onshore impacts in San Luis Obispo, Santa Barbara, and Ventura counties from further development on currently leased Outer Continental Shelf tracts. If successful, this type of cooperative approach could be used to study and understand other types of cumulative impacts from offshore oil and gas developments.

The State of California has determined that transportation of crude oil to refinery centers by pipeline substantially reduces the potential adverse impacts of oil transportation. The California Coastal Act declares that, "transportation studies have concluded that pipeline transport of oil is generally both economically feasible and environmentally preferable to other forms of crude oil transport." [PRC 30265(b)] This amendment to the Coastal Act was made in 1984, with supporting studies dating back as far as the early 1970s. The State should continue to facilitate discussions between the oil and gas industry, local government, and the public regarding proposals to construct pipelines for transporting oil.

Finding

The State of California has developed a substantial capacity to help prevent oil spills and respond to those that do occur, but each major spill response can be used to identify methods for improving

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)

Many offshore oil and gas platforms are reaching the end of their design life and decisions must be made regarding the most appropriate methods to rehabilitate, use, or dispose of these facilities. The current policies and regulatory procedures regarding offshore platforms that have reached the end of their design life reflect a goal of restoring production sites to pre-project conditions. This policy fails to consider other abandonment alternatives, such as creating artificial reefs. The abandonment of each offshore production system involves independent regulatory processes and case-by-case decisions on what to do with the production platform, buoy systems, subsea pipeline systems, and any associated marine terminals or onshore facilities.

Recommendation E-3.

Develop an approach to determine whether offshore oil and gas platforms that have completed their design life should be retrofitted, removed, or partially left in place. Retrofitting platforms could extend their drilling life and increase the amount of oil and gas resources which may be recovered without any new facility development. Removal of outdated facilities could reduce navigation hazards, eliminate visual impacts, and eliminate future spills from residual oil deposits which may remain within subsea pipeline systems. Leaving facilities partially in place could reduce the costs of abandonment and/or allow conversion of platforms to potential reef habitat.

The use of extended reach drilling technology can allow the production of offshore reserves from onshore locations. This technology can reduce many, though not all, adverse impacts historically encountered with oil and gas development from offshore locations. Extended reach drilling can take the place of offshore oil and gas platforms which have substantial impacts on the marine environment. However, onshore drilling operations can have direct impacts on local communities and onshore resources, depending on their location and operational procedures. This technology would be most appropriate if sited with existing industrial developments.

California's Ocean Resources:  An Agenda for the Future					       Chapter 5E:  Oil and Gas
The Resources Agency of California						 		    July  1995  (Draft)