Following up on a pledge he made in October, when Orange County was dealing with the environmental and economic damage inflicted by a 25,000-gallon oil spill off the coast of Huntington Beach, state Sen. Dave Min formally introduced a bill Wednesday to end oil drilling in California waters by the end of next year.
Senate Bill 953 wouldn’t touch a major source of energy; drilling in state-controlled water accounts for a tiny fraction of the nation’s oil needs. But it could serve as a litmus test of sorts for other environmental and climate policies, as passage would require some short-term sacrifices for taxpayers, and conflict with oil companies and their union workers, in exchange for long-term strides toward renewable energy and a cleaner coastal environment.
Specifically, Min said, the push to end offshore drilling in California waters probably would require taxpayers to pay two small oil companies tens of millions to hundreds of millions of dollars to walk away from their existing contracts. There also would be a slight dip in the state’s energy production, and the loss of dozens, if not hundreds, of high-paying jobs.
That’s why GOP leaders such as Assemblywoman Laurie Davies, whose 73rd District includes southern Orange County’s coast, said she doesn’t support a complete offshore oil ban.
But Min and supporters of his bill argue that taxpayers already pay even bigger bills when coastal economies are disrupted and massive cleanups are required every time a pipeline bursts, a phenomenon that is expected to become more frequent due to the age of offshore oil infrastructure. Also, as production wanes, oil operators are filing bankruptcy and abandoning their platforms, leaving taxpayers to pay for plugging and dismantling those wells.
“I’m an environmentalist,” Min said, calling climate change “the top issue of our lifetime.” But, he added, “you don’t have to agree with me (about the climate change) to recognize that offshore oil drilling off California doesn’t make sense.”
Most oil drilling off California shores is in federal waters, which typically begins about three nautical miles off the coast. There are 23 platforms in federal waters off California, including the one connected to the pipeline that burst off Huntington Beach on Oct. 1.
But there are three active platforms in state-controlled waters, all offshore from Orange County. Platforms Eva and Emmy are off Huntington Beach, and platform Esther is off Seal Beach. Eva and Esther are operated by DCOR, a small Oxnard-based oil company, while Emmy is operated by California Resources Company, based in Santa Clarita.
Combined, Min said, taking those three platforms offline would drain U.S. oil production by “a fraction of a fraction of a percent.”
California hasn’t allowed new offshore oil leases in state waters since 1969, after an oil rig off the coast of Santa Barbara leaked 3 million gallons of crude into the ocean, an event that now ranks as the third biggest oil spill in U.S. history. But leases issued before 1969 remain in use until they’re revoked or a well is pumped dry. And California has continued to issue permits to extend the decades-old rigs, allowing companies to upgrade or even drill new wells as long as they connect to existing pipelines.
Under Min’s bill, the state would terminate all existing leases in state waters by Dec. 31, 2023. Companies still would be required to pay for decomissioning and restoring surrounding tidelands, per current leases.
But the bill also would give the State Lands Commission authority to negotiate “voluntary relinquishment of a lease,” meaning the state would pay the companies to walk away from their contracts before the end of 2023.
How much that would cost taxpayers remains an open — and potentially expensive — question.
Under the termination plan, Min said California essentially would be using eminent domain to take back the territory now leased to the oil companies. That process would require taxpayers to pay fair market value to the property owner or lessee.
Min said representatives from California Resources Corporation suggested they’re open to talking about his proposal, and that their profits from their platform run between $10 million and $15 million a year. A company spokesman said Wednesday that California Resources does not “publicly report net profits for the one offshore platform, but the operation is profitable and early termination would require compensation.”
Min said he has not yet been able to meet with representatives of DCOR, and the Oxnard company didn’t respond to a Register request for comment. But Min said he assumes that company’s operations are similarly profitable.
Since leases are valid until wells run dry, and oil production from the local wells is in decline, Min’s formula estimates that operations at the three wells would be viable for about 20 years and that profits would diminish during that period. Using that formula, he estimates compensated profits for the life of each platform would be $50 million to $100 million.
But oil companies also are on the hook for decommissioning costs, which Min said California Resources Corporation officials estimated would be $20 to $30 million. So subtract those costs from profits, and you get a ballpark estimate of $60 to $240 million to buy out the three contracts.
For context, the state so far has estimated its costs to clean up from the October oil spill in Huntington Beach at $3 million, with no federal estimates yet available. And Min notes that doesn’t include the economic impact of closing beaches for more than a week and halting fishing along the 45-mile coast for nearly two months.
With California looking at a significant budget surplus in the year ahead, Min is hopeful that Gov. Gavin Newsom will dedicate funds to help buy out the oil leases.
Min also said he is reaching out to unions that might be affected by his bill. He wants to talk about a possible transition to new jobs that would require similar skills and have similar pay scales, such as working on offshore wind projects.
But Davies’ office said any outright ban of oil drilling would simply eliminate “high-quality union worker jobs.” Davies’ office also said Min’s bill does not address what’s suspected to be the direct cause of the Oct. 1 spill, which investigators believe was caused by a ship anchor that struck the pipeline months before it burst.
So Davies introduced Assembly Bill 1611, which would beef up notification requirements for ship owners and operators that hit offshore pipelines, making it more likely that oil companies could check for damage before a spill occurs.
While a ship anchor may have damaged the pipeline, Min’s team pointed out the October spill was much worse due to a suspected hours-long delay in the oil company shutting off the supply. That’s why, no matter what precautions are in place, Min said, “where there is drilling, there is going to be spilling.”
Both Huntington Beach and Laguna Beach have passed city resolutions supporting an offshore drilling ban, and animal rights and environmental groups on Wednesday applauded news of Min’s bill.
“It’s time to get this dirty, dangerous and utterly reckless industry out of our coastal waters,” said Miyoko Sakashita, a director at the Center for Biological Diversity.
Min’s bill is expected to head first to the state Senate Natural Resources and Water Committee before it would go the full legislature for votes.
