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New Wave of Oil Drilling

Firms are focusing on areas off California's coast where work is allowed while pushing to end federal bans on new exploration.

April 25, 2005|Dana Calvo | Special to The Times

As Congress moves toward opening protected Alaskan wilderness to petroleum drilling, energy company activity is picking up in California's coastal waters, where new exploration has been blocked for more than two decades.

Drillers are reworking wells and considering reviving old platforms in places where exploration is allowed. They're attempting to extend the life of leases on undeveloped offshore tracts holding a combined estimated 1 billion barrels of oil and 500 billion cubic feet of natural gas that the companies have been forbidden to tap.

And, most controversial of all, the industry has been pushing quietly to lift federal bans on new oil exploration off California's coast, prompting an outcry by environmental groups.

The maneuvering comes as Congress grapples with broad energy legislation intended to increase domestic supplies of oil and natural gas. Propelled by sizzling energy prices, the Senate and House of Representatives have passed separate measures that lift the federal moratorium on drilling in part of the Arctic National Wildlife Refuge, commonly known as ANWR. The legislation deals only tangentially with offshore oil drilling, but opponents worry that near-record energy costs could create enough momentum to soften long-standing prohibitions on drilling in the waters off California and parts of the Atlantic Seaboard and Gulf of Mexico.

"We're sacrificing pristine areas with the disingenuous claim that it will relieve high gas prices tomorrow, and that's just not true," said David Newman, spokesman for the Natural Resources Defense Council, one of 10 environmental organizations that recently sued the Bush administration for recommending the extension of 36 leases of undeveloped tracts off the California coast.

Since the nation's first offshore well was drilled in 1896 from a wooden pier at Summerland, just south of Santa Barbara, the waters off the state's southern half have produced a steady stream of hydrocarbons -- and controversy.

Californians' sensitivity was heightened by the 1969 oil well blowout off Santa Barbara and resulting oil spill that fouled Southern California beaches.

About half a dozen companies are extracting oil and natural gas from state and federal waters from Huntington Beach to San Luis Obispo. In 2004, they pumped about 43 million barrels of oil and 47 billion cubic feet of natural gas, or about 16% of California's oil production and nearly 14% of its natural gas production.

With prices high and output on the decline in recent years, companies are investing in new wells or reworking old ones. Most are scrappy independents that bought the properties from big-name oil corporations when oil prices were much lower and profits from the region's thick oil were elusive.

Carpenteria-based Venoco Inc., for instance, is thinking of restarting oil production at one of its platforms off Santa Barbara County that had been "shut in," in industry vernacular, meaning its sunken columns had been filled with concrete.

The platform, named Grace, also is the proposed home of a terminal to receive liquefied natural gas. For now, Grace serves as a way station for oil from Venoco's nearby Gail platform as it is pumped through a pipeline to shore.

"The economics have changed, going from record low prices to record high prices," said Venoco spokesman Mike Edwards. "The oil and gas business is all about economics."

Another dormant platform about nine miles off Long Beach could be returned to production.

Pacific Energy Resources Ltd. is talking with Aera Energy of Bakersfield about jointly reviving Platform Eureka, which is one of three that Aera operates in the area, said Vladimir Katic, president of Long Beach-based Pacific Energy.

And in the last few months, Exxon Mobil Corp. and Arguello Inc. completed new wells off California, the companies' 14th and third, respectively, said John Romero, spokesman for the Interior Department's Minerals Management Service, which manages the nation's offshore energy resources. Drilling in West Coast waters falls somewhat short of a boom, he said, but could be characterized as "constant activity."

The more than a dozen companies that hold leases to the 36 undeveloped tracts are pushing the White House to let them drill or sell back the leases, which were granted from 1968 to the early 1980s in waters at least three miles off the coast.

California for many years has blocked new exploration in state waters, which lie within three miles of the coast, where leases have not already been granted. Drilling in new federal unleased areas is prevented by a presidential moratorium instituted in 1990 and due to expire in 2012 and a congressional moratorium that has been renewed each year since it was enacted in 1981.

Minerals Management Service Director Rejane Burton told a Senate panel Tuesday that the agency had been negotiating for three years to buy back the leases but hadn't been able to reach a price, according to Platts, an energy news service.

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