State Senate Committee Considers Bill to Shutdown Offshore Drilling
The Senate Appropriations Committee is considering SB 559, recently amended legislation that would shut down the three remaining offshore oil platforms in operation in California state waters. The bill passed out of the Senate Committee on Natural Resources and Water on January 9 and was sent to the Senate Appropriations Committee, where it was placed in that committee’s “suspense” file for later consideration. The bill would cost the state approximately $100 million per year in royalties plus unknown legal costs associated with terminating the oil leases. A prior version of the legislation stalled in the appropriations committee.
SB 559 would require the State Lands Commission (SLC) to seek negotiations with the lessees of the three leases with the goal of reaching an agreement for the voluntary relinquishment of the leases and termination of all associated oil and gas production. If the SLC is unable to reach an agreement with the lessees for the voluntary relinquishments of the leases on or before December 31, 2026, the commission would terminate the leases and provide the lessees with “fair compensation,” as defined in the bill. The bill would also require the lessees to plug and abandon all oil and gas wells; decommission pipelines, offshore platforms, and attendant production facilities; and restore the tidelands and submerged lands.
State Senator Dave Min introduced SB 559 in February 2023 and reportedly held the bill while the SLC studied the potential costs of shutting down and decommissioning the platforms. Min introduced a similar version of the bill, SB 953, in 2022. That bill passed out of the state Senate Committee on Natural Resources and Water in April 2022 but failed to advance out of the Senate Appropriations Committee.
Oil Operations in State Waters
California’s three remaining offshore oil platforms produce oil off the coast of Orange County. The Eva, Emmy, and Ester were constructed between 1963 and 1985. Wells from platforms Eva and Emmy, along with onshore wells, produce oil from the offshore portion of the Huntington Beach oil field. Wells on Esther and on Island Chafee produce oil from the Belmont Offshore field.
There are eleven active leases in state waters that produce oil or are used to produce oil and gas. Seven of these leases are for the Huntington Beach oilfield, two are for the Belmont Offshore, and two are for the offshore West Montalvo oil field in Ventura County.
The SLC issued more than 50 offshore oil and gas leases between 1938 and 1968. In 1994, the California Coastal Sanctuary Act revoked the authority of the commission to issue new oil and gas leases for unleased tide and submerged lands, with limited exceptions. Existing leases continued to be active.
Leases generally remain in effect so long as oil and gas production continues in paying or commercial quantities. When a lease is terminated or quitclaimed back to the state, the areas returned become part of the coastal sanctuary and cannot be released for oil and gas production, with limited exceptions.
Offshore oil production in state waters has been in decline since the mid-1980s, when it reached a high of 40 million barrels a year. Production is now less than 10 million barrels a year, with approximately 6.9 million barrels produced in 2019 and approximately 5.9 million barrels produced in 2022.
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