GOVERNMENT
Controversy Bubbles Over Offshore Oil Development In California, oil companies, environmental activists, and government officials are at odds on how best to develop the state's oil resources Rudy Baum, C&EN San Francisco
When Chevron U.S.A. announced last year a major offshore oil discovery on tract 450 in California's Santa Maria Basin, the news didn't come as a surprise to the oil industry. Chevron and Phillips Petroleum, 50% partners in the tract, had bid, after all, a record of nearly $334 million in 1981 for the rights to drill for oil on the 9-square-mile parcel. Oil companies do not spend that kind of money unless they expect to find oil. That discovery and subsequent ones in the same area by a number of oil companies did, however, focus attention once again on oil development off the coast of California, particularly off the coast of Santa Barbara. Oil development off southern California's coast has been proceeding steadily for many years, but recently the pace has been picking up. Major new fields have been discovered, and projects to develop those fields have been proposed. Both the state and federal governments want to lease additional areas. The activity is controversial because it involves real and largely irrevocable decisions about how resources are used. It involves unpleasant trade-offs and the difficult task of assessing the value of intangible assets such as a scenic coastline or an endangered species. The issues are similar to those facing any largescale development project. Santa Barbara, where much of the
current activity is focused, is no stranger to oil. The stuff oozes out of natural seeps on the ocean floor and records of oil slicks on the ocean date back to the Spanish monks, who were among the first westerners to settle there. The first offshore oil well in the U.S. was drilled from a pier in Summerland in southeastern Santa Barbara County. Currently, about 75,000 barrels of crude per day are produced from wells in state and federal waters off the county's shores. The history of that development has not been entirely smooth. A disastrous oil spill from a Union Oil Co. platform in the Santa Barbara Channel in 1969 blackened Santa Barbara's beaches and many Californians' attitude to offshore oil. It was largely responsible for launching the strong—some would say virulent— environmental movement in the state. Chevron's discovery was in what is known as the Point Arguello field, which contains estimated oil reserves of 100 million to 1 billion bbl. The area was leased in OCS Lease Sale 53, the first federal lease sale in what is designated as central California, the area from Point Conception to San Francisco. The field generally is regarded as the largest discovery in the U.S. since the Alaskan North Slope strikes in the late 1960s. Chevron already has filed a development plan for tract 450 with the Minerals Management Service of the Department of Interior. Exxon has filed a development plan for the 19 tracts in its Santa Ynez Unit, located just south and east of the Point Arguello field. One study predicts that by 1993 wells off Santa Barbara County will be producing 300,000 to 400,000 bbl of crude per day. And more activity is on the horizon. Other companies will be filing
Wallace: expanded oil operations will exacerbate the air pollution problem plans for Point Arguello tracts. The California State Lands Commission will lease eight tracts between Point Conception and Point Arguello later this year, the first state lease sale since the 1969 spill. OCS Lease Sale 73, which will offer additional tracts in the Santa Maria Basin, will be held in October. Despite its current public position against leasing additional tracts off central and northern California, there is every indication that Interior would very much like to do so. That desire has prompted introduction of legislation in Congress that would impose a moratorium on such leasing. Offshore oil development involves a complex interplay among oil companies; federal, state, and local officials; environmental activist groups; and concerned citizens. Each entity May 23, 1983 C&EN
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Government
Crescent City f Del f Norte County \
Proposed offshore oil projects and lease sales affect much of California's coastline
Farallo
Section enlarged above, right
1 j j OCS lease sales, actual and proposed Boundary, lease nomination area (OCS 73) OCS lease sale 53, deferred tracts
has its personality quirks. Oil companies often seem paranoid, environmental activists often sound shrill. A curious fact that can be observed about this interplay is that, ostensibly, all the parties involved agree. They all recognize the need to develop offshore oil resources. They all 22
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What, then, is the source of the recognize the need to preserve California's spectacular coast, to maintain very real and often bitter controversy industries such as fishing and agri- that usually surrounds such develculture that can be disrupted by oil opment? The answer lies in the spedevelopment, and to protect endan- cifics of development: Which fields gered species. They all think that will be developed, how and when offshore oil can be developed in they will be developed, how the an environmentally responsible crude will be moved after it has been brought out of the ground, and fashion.
where onshore facilities to handle it will be located. Aesthetics also plays a part. Is the panorama of a rugged coastline spoiled by an oil rig squatting on the horizon? Start with Santa Barbara, the area that will be affected most significantly by the development. Even on California's coast, Santa Barbara is special. Perched on a narrow band of foothills between the Santa Ynez Mountains and the Pacific Ocean, the city is the home of about 70,000 people, the same as a decade ago. Rigorous restrictions on development have spared Santa Barbara the uncontrolled urban sprawl that afflicts most of the rest of southern California. The city is affluent, its climate is warm and sunny, its architecture has a consistent Spanish flavor. In short, the city is today what much of southern California once was and wishes it still were. The same flavor extends to much of the rest of the county, the principal industries of which are tourism, commercial fishing, and agriculture. To minimize the effects of oil development, Santa Barbara officials subscribe strongly to two state policies on offshore oil. One is that, except in rare cases, crude oil should be transported via pipeline rather than by tanker to reduce the air pollution associated with tanker loading and the risk of oil spills. The other is that onshore facilities should be consolidated to the maximum extent practicable; that is, crude from different platforms owned by different companies should be handled in the same facilities. How do these policies square with the reality of the Point Arguello field and Santa Ynez Unit? Not all that well. Chevron's current plan for tract 450 calls for one platform from which up to 48 wells could be drilled, enough to develop the entire tract. Oversized pipelines will link the platform to shore at Point Conception and from there to Gaviota, where facilities will be built to process the crude to render it suitable for further transport. The oversized pipelines will be able to transport crude from future possible platforms on other Chevron leases and leases held by other companies such as Texaco—an example of consolidation.
The problems arise at Gaviota. be connected by pipeline to Hondo According to Martin Javinsky, man- A and from there to processing faager of investment planning at cilities located at Los Flores Canyon. Chevron, the crude is heavy and Los Flores Canyon has been aphigh in sulfur and metals, making it proved by Santa Barbara for coastalvery difficult to refine. Chevron's dependent industry because it is not California refineries at El Segundo visible from the coast. A marine terand Richmond, which currently op- minal 1 mile from shore would erate primarily on Alaskan North complete the project. Exxon's faciliSlope crude, can't produce a desirable ties would not be large enough to product mix from the Point Arguello handle crude from other leases, but crude without extensive and expen- the company has said it will make sive modifications. Apart from the land in the canyon available for other cost, air pollution permits and re- projects. State and county officials and enquired offsets for such modifications would be difficult, if not impossible, vironmental groups find a number of to obtain, particularly for the El Se- flaws in the Exxon plan. The primary gundo refinery, which is located in one is that Exxon, in filing its develthe already polluted Los Angeles opment plan with Minerals Management Service, initiated a sixBasin. "That puts emphasis on the need month timetable mandated by for the flexibility that is afforded by CZMA for Coastal Commission cona tankering alternative," Javinsky sistency review; the decision, theresays. "If you have that, you can dis- fore, must be reached by July. Alperse the crude, at least temporarily though a joint federal environmental and perhaps permanently, to a vari- impact statement/state environety of refining centers. You don't mental impact report eventually will load up all the crude and the prob- be prepared for the project, it will not lems associated with it in one place." be available for use in reaching the So one option is a marine terminal, consistency decision. Another, rewhich Chevron would like built lated issue is that the Exxon plan, because of the timetable, cannot be at Gaviota. Exxon's plans for development of considered in relation to the many its Santa Ynez Unit are driven by other plans in the process of being similar considerations, but Exxon submitted. If it could be, it might be knows exactly where it wants the modified to permit consolidation crude to go: refineries on the coast of with other projects. the Gulf of Mexico and on the East In comments to the workshop, Coast of the U.S. Don Cornett, an William Wallace, a Santa Barbara Exxon environmental conservation County supervisor, urged a delay in manager, described the plan at a the consistency review to allow that workshop held in Santa Barbara information to be taken into considsponsored by the California Coastal eration. "The oil companies are Commission, which, under the fed- talking about the industrialization of eral Coastal Zone Management Act the Santa Barbara south coast," Wal(CZMA), must determine whether lace tells C&EN. "They have a prothe plan is consistent with the state's posal for virtually every canyon from coastal management plan. Santa Barbara to Gaviota." Wallace The Santa Ynez Unit consists of 19 says that besides the threat of major OCS leases owned by Exxon, Chev- oil spills and aesthetic considerron, and Shell. The tracts were "unit- ations, the air pollution associated ized"—designated as one unit for with oil operations already has had development purposes—in 1970. a significant impact on Santa Barbara, Currently, Exxon has one platform, a charge the oil industry disputes. called Hondo A, on the unit. Oil and Expanded activity, he says, will only gas from Hondo A are handled exacerbate the problem. through an offshore separation and The county has initiated a study to treatment facility, which is a ship determine the best location for a moored near the platform, and single, industry terminal, Wallace loaded from there onto tankers. says. "We are going to allow at most The plan calls for three or four one terminal, and what conditions new platforms on the unit that will we put on it will be determined by May 23, 1983 C&EN
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Government whether we have a pipeline. If there is a pipeline, one of the stipulations on the terminal will be that it cannot be used [to load tankers destined for] California refineries." Another voice at the workshop opposing an immediate consistency determination was that of Ralph T. Hicks Jr., legal associate for the Environmental Defense Center, Santa Barbara. Hicks believes the industrialization of Santa Barbara is inevitable because of oil, but he doesn't intend to let it be easy. "We have drawn our lines in terms of what we consider reasonable and what we consider to be simply for industry's convenience/' he says. "I am not at all interested in accommodating industry or in making their projects cost effective. There are environmental costs that industry neglects to account for, and if you include those, the equation changes." William Travis, deputy of the Coastal Commission, is a man in the middle of the various disputes. He disagrees with Hicks' contention that the industrialization of Santa Barbara is inevitable. "We have rather strong land-use controls in California," he says. "That is an important authority in controlling development. Also, although we are talking about major quantities of oil, the facilities immediately on shore and the workers needed for them are not that significant. We are talking about some processing facilities that can be hidden in canyons and about a pipeline and a possible marine terminal. The impacts of those can be minimized." According to Travis, one of the primary considerations in evaluating the plans that have been submitted or are about to be submitted will be consolidation. As such, he predicts that the Coastal Commission will reject Exxon's expanded offshore alternative and delay the consistency determination on the Los Flores Canyon facilities and marine terminal by ruling that the commission requires additional information to reach a decision. Consolidation, however, isn't simple, Travis says, because it is difficult to get the oil companies to work together. "The oil companies also tend to hedge their bets," he says. One company, he says, may push forward 24
May 23, 1983 C&EN
with two or three somewhat redundant projects in the hope of getting at least one approved. Offshore lease sales, which set the entire process of oil development rolling, have become at least as controversial as specific development projects. Two such sales, of quite different magnitude, will occur this year, barring lawsuits that may hold them up. Both are centers of controversies. One of those sales involves eight tracts, a total of about 40,000 acres, in state waters between Point Conception and Point Arguello. Critics of the sale, such as Michèle Perrault, vice president of the Sierra Club, maintain that the state is rushing into the sale because it fears that development of the adjacent federal leases will drain the state reservoirs. Critics also claim that the environmental impact report prepared for the lease sales, which spells out conditions that must be met for development to occur, does not adequately address a number of environmental issues. "We wanted a delay in the sale," Perrault says. "We requested a buffer zone because the area is transitional between northern and southern waters and contains some organisms that are rather special. Others are being found. We wanted the option that some tracts could be deleted from the sale." The California State Lands Commission, which administers state lease sales, she says, refused to listen. Perrault praises the state's biological study of the area, but says that the environmental impact report did not take the next step and calculate the impact of oil development on the organisms that were found in the area. She also says that although the report contains a stipulation that the environmental damages from development and possible oil spills be mitigated, it does not say how this will be done. The Sierra Club probably would have sued the Lands Commission to delay the lease sale for these and other reasons, but Santa Barbara County beat them to it. In an interview with C&EN, Claire Dedrick, executive director of the Lands Commission, was unable to address some of the points raised by Perrault because of the pending Santa Barbara lawsuit. She did,
however, take issue with several of the points Perrault and other critics raise. The state is not being rushed into the sale, she says. "This has been an orderly process that we've been at for four years." The state's projected 1983 revenue from oil leases both onshore and offshore is about $410 million, which is not insignificant for a state that is virtually broke, but the fields are old and their production is declining. "We aren't doing this to increase revenues, but to stabilize the revenue that the state has enjoyed for 35 to 40 years," Dedrick says. In an interesting observation with which environmentalists almost surely would disagree, Dedrick argues against the uniqueness of the lease area. "The sorts of marine biological surveys we have done as a part of the [environmental impact report] and as a part of the supplementary process provided more information than anyone has ever had about an offshore area," she says. "That means, of course, that species are being described that have never been described anywhere else because nobody ever looked." Dedrick also contests the idea that proposed measures designed to mitigate the environmental impacts of development are inadequate. Stipulations in the report require spending $83 million during the life of the leases, primarily for improvement in oil spill response and cleanup vessels and equipment. Then there is OCS Lease Sale 73, currently scheduled for October, and on that one James Watt's Department of Interior has managed to alienate just about everybody except the oil industry. Watt brings to offshore oil development that element of intransigence that has become his trademark. To him, essentially unrestricted oil development is, by definition, good. There are no difficult trade-offs. In his characterization of his opponents as "enemies of liberty," Watt serves notice that the issue is not development but patriotism. With the discussion pitched at that level, compromise becomes difficult. But compromise clearly is needed. The draft environmental impact statement for lease sale 73 has been blasted as seriously inadequate by groups ranging from the Sierra Club
Travis: impacts can be minimized and the National Resources Defense Council (NRDC) to the administration of California's conservative Republican governor George Deukmejian, Deukmejian was elected in 1982 on a pro-business, pro-development platform. He was critical of the Coastal Commission for unnecessarily impeding coastal development. Yet based on the recommendations of seven state agencies, Deukmejian's secretary of environ-
Dedrick: lease area is not unique
mental affairs called on Watt to delay the sale because of the serious flaws in the draft statement. As was the case with its predecessor, OCS Lease Sale 53, the current sale originally envisioned leasing tracts from Point Conception to the Oregon border. With lease sale 53, California Republicans, fearful of defeat in the 1982 Congressional elections, successfully lobbied for the deletion of four tracts off northern and central California. A successful lawsuit filed by the Coastal Commission and NRDC held up additional tracts. (That lawsuit, which claims that the Coastal Commission has the authority to make a consistency determination on lease sales, as well as on specific development plans, will be heard before the Supreme Court in 1984; so far, three different courts have ruled that Interior's Minerals Management Service must submit lease sale proposals to the Coastal Commission for consistency review.) Undeterred, the nominations area for lease sale 73 once again included the entire central and northern California coast. In October 1982, Congress scotched the idea with a rider to Interior's appropriations bill that prohibited the use of funds for leasing tracts north of Morro Bay. The draft environmental impact statement does not seem to take that prohibition into consideration because, for the most part, it treats the entire coast as if it were still under consideration for leasing. However, as best as one can tell, the lease sale will offer about 360 tracts, a total of more than 2 million acres, in the Santa Maria Basin. Of the innumerable deficiencies in the draft impact statement cited by the state and by environmental groups, one of the most revealing concerns public participation in the preparation of the document. The National Environmental Policy Act and Council on Environmental Quality regulations stipulate that the public must be included in the development of environmental impact statements. As such, a process called "scoping"—getting public input to determine the scope of a statement—is mandated. NRDC calls the scoping process for the lease sale's environmental impact
statement a "sham." The state used only slightly more polite terms. Although the sale was set in motion in 1980, the one and only scoping session was held in January 1983. More than 300 groups and individuals indicated they wanted to testify, so instead of scheduling additional sessions, the Minerals Management Service held three concurrent sessions at which testimony was restricted to six minutes. The draft statement was released one month later. "It really shows a contempt for opposing viewpoints," says Trent Orr, a lawyer with NRDC. It also makes enemies out of erstwhile, or at least potential, allies. "Chambers of Commerce and Boards of Supervisors of what are fairly conservative, rural areas are saying that this is ridiculous. Part of the reason is that they feel they have been treated shabbily in the process. Interior, by being so outrageous in its actions, is galvanizing a coalition of people that might not otherwise be on the same side of the issue," Orr says. Although Watt has said that he would request a repeat of the prohibition on funds for leasing north of Morro Bay in Interior's 1984 appropriation, Congress obviously does not trust him. Sen. Alan Cranston (D.-Calif.), Sen. Edward Kennedy (D.-Mass.), Sen. Paul Tsongas (D.Mass.), Rep. Leon Panetta (D.-Calif.) and Rep. Gerry Studds (D.-Mass.) have introduced identical legislation in the Senate and House that would ban oil leasing north of Morro Bay in California and in areas of Massachusetts until 2000. Sen. Pete Wilson (R.-Calif.) has introduced legislation applying only to California that would ban drilling north of Morro Bay until 1994. The controversies surrounding offshore oil development in California will continue because, quite simply, development and preservation in its purest sense are mutually exclusive. Compromise is unavoidable. The same conditions hold for any large-scale development project, whether it is a world-scale petrochemical facility, a nuclear power plant, or a hazardous waste disposal site. The nature of such development ensures that the compromises won't be easy to reach. D May 23, 1983 C&EN
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