Truly Greasing the State Budget

Posted: Jul 21, 2009 12:00 AM

Sacramento is so desperate to erase the state budget's $26.3 billion shortfall that Gov. Arnold Schwarzenegger and the Democratic Legislature seem poised to end decades of prohibition so that they can tap new revenue from a widely occurring natural resource -- one dear to many Californians and known for its unmistakable aroma. That's right, Sacramento is considering a budget that would raise as much as $1.8 billion in royalties over 14 years by allowing new offshore oil drilling off the coast of Santa Barbara. As of my deadline, the outcome is uncertain.

The Governator points out that the Tranquillon Ridge project would not open up new oil leases or require new offshore platforms. Instead, the project would allow Plains Exploration & Production Co. to slant-drill from existing federal offshore oil platforms into state waters. Because the Houston oil company has promised to dismantle all four of its platforms at the end of 14 years and protect thousands of acres of Santa Barbara-area land, environmental groups supported the project.

Because enviros were onboard with the idea, Schwarzenegger -- a long-time opponent of offshore oil drilling who "remains opposed to new oil drilling," according to spokesman Aaron McLear -- was able to support the project.

After the State Lands Commission killed the project in a January vote, Schwarzenegger inserted the project in his May budget revise. Assemblyman Pedro Nava, D-Santa Barbara, isn't happy. As far as Nava is concerned, oil company promises to dismantle the platforms and protect land are "fiction." In a press release, Nava claimed that Schwarzenegger "is using the budget as an excuse to force the first new offshore oil drilling lease in California waters since the 1969 oil spill."

I wish Nava were right about Schwarzenegger looking for an excuse to drill offshore. With state revenues drying up and Sacramento looking to siphon $4 billion from cities, counties and special districts, a smart Republican governor should be looking for excuses to tap the very commodity that keeps California moving.

As energy investor Gregor Macdonald recently blogged, "The mother lode of untapped capital remains in California's offshore reserves of oil and gas. Speaking very generally, if California were able to quadruple offshore daily oil and gas production ... -- starting in 2012 -- that would represent gross oil sales of nearly $15 billion a year."

Bargain for royalties of 20 percent or more, and you fund a lot of teachers and parks. Assemblyman Chuck DeVore, R-Irvine, had been pushing for legislation to approve slant-drilling before this year's budget battle.

"I can see rigs from my district," DeVore noted -- and the hotels by the beach are booked. What is more, local oil means good jobs for Californians, less opportunity for transportation spills and fewer American dollars sent to oil-rich countries with competing national interests.

When the tax revenues were flowing, it was easy to oppose offshore oil drilling -- because, as Oregon Gov. Ted Kulongoski put it at a federal hearing on offshore drilling, supporting drillings "sends the wrong message." But saying no to offshore oil drilling while driving is a message in itself. And Californians need to have a realistic policy -- to go along with the real needs of Californians.