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Oil company spending lavishly to get around Carpinteria law

Venoco Inc., which wants to begin round-the-clock drilling in the area, is pouring money into a ballot initiative that would exempt it from the city's industrial development and environmental rules.

February 21, 2010|Michael Hiltzik

Carpinteria is a lovely little city on the Pacific just south of Santa Barbara, boasting such features as a city-owned coastal preserve and one of the four remaining seal rookeries in Southern California.

Just about the last place you'd expect to become the target of a hostile corporate takeover.

The corporation is Venoco Inc., an independent oil company with revenue of more than half a billion dollars a year, which currently owns an oil storage facility in Carpinteria. One would get weary painting big oil companies as soulless monsters, if Venoco didn't make it so easy.

This Denver-based firm is spending lavishly to pass a ballot initiative specifically exempting itself from the city's industrial development and environmental rules.

That's because it's afraid that Carpinteria's elected officials, left to their own devices, might not greenlight its proposal to operate a 10-story oil derrick round the clock on its property next to a 225-home residential neighborhood and on the edge of the ecologically sensitive coastal bluffs.

If the Carpinteria Oil and Gas Development Initiative passes in June, however, city officials will have no say in the matter.

City requirements that all industrial developments go through public planning and land-use review? Venoco will be exempt.

Regulations aimed at reducing the effects of industrial spotlights, noise, traffic, and vibration on local residents? They won't apply to Venoco's 24-hour-a-day drilling.

What if the project threatens to drive down real estate values? Tough. Venoco won't have to take that into consideration.

Rules prohibiting noise, vibration or other industrial byproducts that could bother the seals during their mating and birthing rituals or drive them off the beach? The initiative exempts "the exploration, development, production, gathering and transmission of oil and natural gas from onshore and offshore oil fields from an existing oil and natural gas facility using extended reach drilling," i.e., Venoco.

What if Venoco decides down the line to change or increase its activities on the parcel? As long as it can show that failing to make the change would "substantially frustrate" its oil and gas drilling program, the city has to agree -- and those changes won't be subject to voter approval.

So here we are on the cusp of a new California trend: businesses that don't care to bother with legitimate government regulatory procedures scampering directly to the voters. All it takes is money.

Venoco has reported spending more than $155,000 on the initiative up to the end of 2009, but a company spokesman told me last week that more money has been spent since then. And the election is still three months away.

That may not sound like a lot for a California election, but keep in mind this is a municipal ballot in a city where candidates for office typically spend somewhere in the mid four figures. Donna Jordan, a former Carpinteria mayor who chairs the initiative opposition campaign, says her last two runs for office cost her $3,500 each.

"We're a poor, grass-roots group," she told me. "We won't be able to raise anything like Venoco."

Carpinteria has already spent more than $300,000 fighting the initiative in court. A state court judge ruled that most of the initiative appeared valid, but the city has appealed, arguing that by mandating not only general planning principles but a specific development plan, the initiative goes beyond the legal limits of ballot measures -- not only crosses the line, the city says, but "obliterates the line entirely." (The City Council also voted last week to formally oppose the measure.)

Venoco says the project might produce $200 million in royalties to be distributed to the city and Santa Barbara County over a couple of decades, but it's conceivable that the real sum could be zero. It depends on whether or how much oil is recovered, and how any resulting royalties are divided up. The city says that any money it gets may have to be spent mitigating the effects of the drilling, anyway.

Venoco, which was founded in 1992 by a former Unocal executive named Timothy Marquez, claims to be one of the largest oil and gas development companies in California. It operates several offshore rigs in the Santa Barbara Channel. Since he and his family owned more than 61% of its stock at the time of its 2009 proxy statement, it's fair to say that Timothy Marquez is Venoco.

Marquez didn't reply directly to several messages I left him. I was thinking of asking him to join in a forum with two other CEOs whose companies are spending millions of dollars to pass self-interested California ballot measures, George Joseph of Mercury Insurance and Peter Darbee of Pacific Gas & Electric Co. The tentative title: "Let

Your Money Do the Talking."

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