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Historic Overview of the Energy Division
The Second Decade (1992-2001)
Historic Setting
Whereas the Energy division's first decade was characterized by
projections of unprecedented volumes of offshore oil and gas production,
its second decade reflected just the opposite. An oversupply of
oil in the market that commenced in late 1985 has kept oil prices
considerably lower. The initially projected price of $50/barrel
for offshore oil never materialized, and prices mostly remained
below $18/barrel throughout the 1990s. Several other events also
characterized the division's second decade, through the year 2001.
- California took several actions that ultimately led to
a moratorium on any new leasing of oil and gas leases in the State
Tidelands. A patchwork of legislative and administrative leasing
moratoria evolved in the 1980s and early 1990s to prohibit new
oil and gas leasing in most of California's offshore waters. The
Coastal Sanctuary Act of 1994 (authored by State Senator Jack
O'Connell) consolidated and expanded these moratoria. The 1994
Act designates all unleased state tidelands as a coastal sanctuary
and prohibits leasing of such tidelands for extraction of oil
and gas except under specifically defined circumstances (California
Public Resources Code § 6240 et. seq.). Moreover, any existing
oil and gas lease that expires or is otherwise terminated is automatically
incorporated into the Coastal Sanctuary.
- The federal government also implemented moratoria on
new oil and gas leasing in specified areas of the Outer Continental
Shelf, including all federal waters offshore California. These
moratoria took effect through a 1990 executive order issued by
former President Bush (subsequently extended through mid-2012
by former President Clinton), and restrictions placed by Congress
on the U.S. Department of the Interior's annual budget. No leasing
of federal waters offshore California has occurred since 1984,
and the extended oversupply of oil on the market led a number
of oil companies to relinquish existing, low-value, OCS oil and
gas leases.
- A mixture of factors, including depletion of mature oil
fields, led to the abandonment of several oil and gas facilities,
including seven platforms in the State Tidelands, five marine
terminals, and several onshore facilities.
- The changing economics of oil production led several
major oil companies, including Chevron, Unocal, ARCO, and Mobil
to sell their California offshore oil and gas projects to smaller
independent companies, in favor of investments overseas. These
transactions ushered in a second generation of owners and operators,
some of which also introduced new types of ownership such as limited
liability partnerships.
- The prolonged decline in oil prices also led several
companies to implement cost-reducing measures. Some companies
decided to delay exploration and production of offshore leases
indefinitely until such time that the price of oil stabilized
at a higher price. Other companies sought measures to reduce the
costs of production, such as technological advances in extended-reach
drilling to develop additional fields from existing platforms
rather than construct new platforms.
- The potential for additional federal oil and gas leasing
after 2001, and development of many existing, but not yet developed
federal leasing in the interim continued to fuel State and local
concerns about the cumulative adverse impacts of oil and gas development
offshore California. Such concerns were particularly pronounced
in the tri-county region of Ventura, Santa Barbara, and San Luis
Obispo, where federal leasing and development activities had predominantly
focused by this time. Previously environmental reviews prepared
for federal offshore leasing programs and specific lease sales
did not address the cumulative effects. Yet such analysis would
address whether or not more phasing of leasing, exploration, and
development on the Outer Continental Shelf was warranted. Ultimately,
the prolonged depression of oil prices helped to usher in a period
of phased development. Lessees of undeveloped leases continually
sought extensions of the terms of leases, thereby delaying development.
Energy Division Functions
The division's five core functions remained intact during its second
decade; however, the level of effort devoted to each function shifted
considerably, as described below. The division's overall workload
also diminished considerably, as illustrated in the following depiction
of its budget trends.
Permit Processing
In 1995, oil production in and offshore Santa Barbara County reached
an all time high of 68.8 million barrels, most of which came from
offshore projects approved in the 1980s. However, processing of
permit applications for new oil and gas projects had slowed considerably
by the 1990s, due largely to the continued low prices of oil and
gas. All newly proposed oil and gas projects during this period
focused on employing new advances in directional drilling techniques
to avoid the high costs of constructing and installing new offshore
platforms. The Energy Division received two separate applications
in the mid-1990s to develop offshore reserves in State Tidelands
from onshore drill-sites. The County approved the Molino Gas project
in 1996, permitting development of offshore natural gas reserves
in the State Tidelands from an onshore drill-site at Gaviota. The
Molino Gas project was the only new project approved during this
period. The Energy Division also commenced processing of an application
for Mobil Oil's Clearview project to develop the South Elwood field
from onshore drill sites; however, the University of California,
Santa Barbara (landowner of the onshore drill sites) denied Mobil's
use of the sites for oil and gas development. In 2000, the Energy
Division received three separate permit applications to develop
the Tranquillon Ridge project, Rocky Point project, and the Venoco
Full-Field Development project, all of which propose to use directional
drilling techniques from existing offshore platforms.
Throughout most of the 1990s, the primary focus in permitting had
shifted to processing applications for modifying or expanding existing
facilities and changing owner or operator of oil and gas facilities,
as illustrated in the table on the following page. Permitting activities
also began to focus on the abandonment oil and gas facilities after
ceasing operations. Such permits focus on mitigating environmental
impacts during removal of facilities, impacts of different alternatives
for remedying contaminated soils and water, and restoring the site.
Major Facility Modifications
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- Re-configuration of the Point Arguello project.
As the volume of offshore oil and gas production from
the Point Arguello project decreased, the operator sought
and obtained permits to shift oil and gas processing from
its large Gaviota processing facility to a smaller stabilizing
process located on its offshore platforms. This proposal,
which followed a previous modification to re-inject produced
natural gas back into the Point Arguello field, resulted
from significantly lower oil prices than originally envisioned
when the project was first designed. Subsequently, the operator
sought and obtained permits to transport processed natural
gas to its Gaviota site to fuel its electrical co-generation
turbines. That power is used to operate the onshore facility
with the excess being sold to the local utility.
- Lowering and relocation of the All American Pipeline’s
crossing at Gaviota Creek. The pipeline became exposed
during flooding in 1998, leaving it vulnerable to damage
from debris. The exposure also impacted the stability of
stream banks.
- Las Flores Canyon Synergy project. Following
sale of POPCO’s gas processing facility in Las Flores Canyon
to ExxonMobil, the latter proposed to integrate POPCO’s
existing processes and equipment with its adjacent oil and
stripping gas facilities.
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Major Facility Expansions
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- Lompoc Gas Processing Facility. After retiring
its Battles gas plant east of Santa Maria, Unocal (and subsequently
Torch Operating Company) sought and obtained permits to
construct and operate a gas processing facility next to
its oil processing facility near Lompoc.
- POPCO Gas Processing Facility. As the volume
of gas production increased from the Santa Ynez Unit, POPCO
proposed to increase its processing capacity from 30 to
60 million cubic feet of gas daily and, subsequently, from
60 to 75 million cubic feet.
- Santa Maria Asphalt Refinery. Conoco applied for
permits of several upgrades it made to its refinery without
obtaining permits. The application sought to bring the refinery
into conformance with the County zoning code.
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Changes in Owner or Operator
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Decommissioning Facilities & Cleaning-Up
Sites Onshore
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- Owner & operator – Ellwood processing facility,
marine terminal, and inter-connecting pipeline
- Owner & operator –Point Pedernales project
- Owner & operator – Santa Maria Asphalt Refinery
- Owner – Unocap & Sisquoc crude oil pipelines
- Lessee – Gaviota Oil Terminal
- Owner – Molino Gas project
- Owner – Santa Maria Asphalt Refinery
- Owner & operator – Pt. Arguello project
- Owner & operator – Molino Gas project
- Owner & operator – All American Pipeline
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- Phillips’ Tajiguas gas processing site
- ARCO’s Dos Pueblos oil/gas production/processing
site
- Shell Western’s Canada de la Huerta gas processing
site & remediation of PCB-contaminated soils
- Phillips’ Tajiguas flowlines
- Unocal’s Battles gas processing site
- Conoco Santa Maria Asphalt Refinery remediation of lead-contaminated
soils
- ARCO’s Dos Pueblos shipping line
- ARCO’s Bishop tank farm flowlines
- Santa Barbara Shores remediation of contaminated soil
- Monarch Point Reserve remediation of contaminated soil
- Texaco’s Gaviota oil and gas processing site
- Texaco’s Hollister Ranch flowlines
- Saba Petroleum’s El Capitan oil field
- Chevron’s & AERA’s Gaviota flowlines
- Shell’s Arroyo Hondo Canyon flowlines
- Unocal’s Government Point production/processing
site
- Unocal’s Cojo Bay marine terminal
- Unocal’s Guadalupe Dunes oil field
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Plugging Wells
& Decommissioning Facilities Offshore
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- Subsea Well Plugging & Abandonment & Flowline
Removal Program in state waters in the Santa Barbara Channel
- Exxon’s Oil Storage & Treatment Facility
- Chevron’s Platforms Hope, Heidi, Hilda, & Hazel
in state waters offshore Summerland & Carpinteria
- Gaviota Terminal Company’s marine terminal
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Periodically, Energy Division staff also took on other specialized
permit-processing assignments that did not pertain to offshore oil
and gas development, including:
- Processing permit applications for a proposed underground
fiber-optic telecommunications cable through the County's coastal
zone (exclusively funded through permitting fees)
- Inter-agency processing of clean-up at the Casmalia
Hazardous Waste Facility (funded through a special tax on the
facility)
- Processing many permit applications to install cell-sites
throughout the County (exclusively funded through permitting fees)
These outside assignments permitted the division to maintain sufficient-level
of technical staff on-board as demand for permitting activities
related to offshore oil and gas development ebbed and flowed.
Permit Compliance
The focus of permit compliance shifted by 1993, following the construction
of the major oil and gas projects, to a mixture of operating conditions,
along with construction-related conditions attributable to facility
modifications, facility decommissioning, and remediation of contaminated
sites. Several B-2 Reviews to evaluate the effectiveness of permit
conditions occurred during this decade, with reports to the Planning
Commission and, in some cases, modification to permit conditions
to clarify requirements and to promote safety, environmental protection,
and compliance.
Additionally, a few incidents, exemplified by the events in the
table below, also helped to steer the efforts in compliance in specific
directions for some projects. In some cases, safety-related incidents
led to more frequent and comprehensive safety audits of facilities,
which, in turn, led to requirements to make specific corrective
actions (e.g., Venoco's Ellwood operations and Chevron's Gaviota
operations). These incidents also led to modifications of the County's
Safety Inspection and Maintenance Quality Assurance Program that
provided a model program and established an annual schedule of safety
audits.
Other efforts in the context of permit compliance focused on restoration
of areas damaged by the previous construction of infrastructure
to support offshore oil and gas development (e.g., Exxon Surfgrass
restoration, Gaviota Terminal Company kelp restoration, and All
American Pipeline Oak restoration). The division also assessed the
future need for the Gaviota oil and gas processing facility in accordance
with the R-1 permit condition, after the facility's gas production
terminated in 1998.
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Overland Oil Pipeline vs. Marine Tanker
- II
The issue of transporting crude oil via pipeline versus marine
tanker remained at large until 1997, while both Chevron and
Exxon temporarily shipped offshore crude oil via marine tankers.
Chevron made a total of 17 tanker trips to Los Angeles based
refineries between August 1993 and January 1994. Exxon shipped
its crude oil via pipeline to its Bay Area refinery at Benecia,
only to load onto marine tankers for shipment to refiners
in the Los Angeles Basin, in violation of its permit with
Santa Barbara County. Between August and December 1991, an
average of two-to-three tankers per month made this trip.
The issue went to court where Exxon prevailed. Exxon later
chose to ship its Santa Ynez oil entirely by pipeline.
In late 1990, the Pacific Pipeline, with a carrying capacity
of 130,000 barrels per day, came online. It connected the
All American Pipeline system, that transported offshore crude
oil from Santa Barbara County to Kern County, with the Los
Angeles Basin refineries. Coupled with new requirements under
the federal Oil Pollution Act of 1990, operators began to
decommission marine terminals in favor of pipeline transportation.
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Major Accidents or Safety-Related Incidents
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In the late-1980s and early-1990s,
members of the public reported sightings of diluent in
beach sands and surf offshore the Nipomo-Guadalupe Dunes
complex, where Unocal operated several onshore oil and
gas wells. The diluent consisted of a mixture of kerosene
and diesel that the oil producer used to dilute or thin
its heavy, highly viscous crude oil so it would flow better
during transportation via pipeline. It contained low levels
of toxic compounds, including benzene, toluene, ethyl
benzene, and xylene. Further investigation found that
diluent had been leaking from tanks and pipelines for
several years, and had led to serious contamination of
the groundwater. According to the environmental review
for site clean-up, diluent discovered at the water table
in the dune sand aquifer had accumulated in plumes at
more than 80 different locations throughout the oil field.
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In late 1996, test results revealed
a significant amount of internal corrosion in the 20-inch
crude oil pipeline operated by Torch to transport oil
emulsion from Platform Irene to its Lompoc processing
facility. Both the number and severity of pipeline anomalies
raised concerns that pipeline failure might occur if the
operator did not take appropriate corrective actions.
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In 1997, a tank at the Gaviota
oil and gas processing facility released natural gas containing
hydrogen sulfide that impacted members of the public and
required closure of Highway 101. This release, in conjunction
with other incidents at the facility, led to extensive
investigations by the District Attorney, County Counsel,
Fire Department, Energy Division, and Chevron. Increased
safety precautions resulted from this investigation, aimed
at preventing future releases and improving emergency
response if a release does occur in the future.
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In 1997, the offshore pipeline
between Torch's Platform Irene and shore ruptured, spilling
anywhere from 163 to 1,242+ barrels of oil into the ocean.
The resulting oil slick came ashore at several locations
along the County's environmentally sensitive coast. The
resulting damage to natural resources activated an assessment
of such damage for purposes of determining just compensation
pursuant to federal law. It also resulted in litigation
between the County (plaintiff) and Torch Oil Company (defendant)
over non-compliance with permit provisions. Torch ultimately
settled the case out of court, paying $1 million to the
County in penalties.
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In 1998, an electrical short,
which was caused by human error, triggered an automatic
shutdown Venoco's onshore processing facility; however,
Platform Holly was not notified and continued to send
natural gas contaminated with hydrogen sulfide to the
processing facility. Pipeline pressures spiked too quickly,
leading to the venting of this toxic gas into the atmosphere
from both onshore and offshore locations. The onshore
facility was evacuated, but the operator did not notify
emergency-response authorities. This accident led the
Air Pollution Control District to issue abatement order
on Venoco's Ellwood and Platform Holly operations. It
also resulted in an extensive risk analysis and safety
audit of the operation and a substantial list of safety-related
upgrades to the facilities and operating procedures.
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In 1998, a heavy flow of water
in the Gaviota Creek eroded the creek at the location
of the All American Pipeline crossing. The pipeline originally
was buried approximately 10 feet below the creek bed.
Erosion that resulted from the heavy flow of water due
to March storms exposed the upper portion of the pipeline,
subjecting it to potential damage. The pipeline operator
obtained emergency permits to fix the situation temporarily
and, subsequently, obtained permits to relocate the pipeline
and protect it from further erosion.
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Mitigation Programs
The Energy Division developed additional mitigation programs to
assist in implementing many conditions placed on permits for major
oil and gas projects approved in the 1980s. These additional programs
included:
- The County approved a NGL Transportation Program in
1993. Natural gas liquids are byproducts of oil and gas development;
they include propane, butane, and heavier gas liquids, which are
classified as hazardous materials due to their flammable properties.
The influx of offshore oil and gas development meant a substantial
increase in transportation of these hazardous products via highways
and roads not necessarily equipped to handle that volume of hazardous
shipments (once estimated to reach as high as 100 truck trips
daily). The County joined with neighboring counties, the California
Highway Patrol, the NGL carriers, and the oil industry to assess
the risk of such transportation. The resulting program specifies
use of the safest mode of transportation - pipeline - for transporting
natural gas liquids to the maximum extent technically feasible.
The program also defines several measures to reduce the risk of
shipping propane by highway because the vapor pressure of propane
is typically too high to ship it via pipeline.
- The Minerals Management Service and the Energy Division
conducted the Shoreline Inventory primarily to provide data on
baseline biological resources so that environmental damage can
be fully assessed in the event of an offshore oil spill. Such
information is necessary to fulfill permit obligations that require
restoration of any areas damaged by oil spills to pre-spill conditions.
Biannual sampling at nine intertidal sites provide continual updates
to the inventory. A GIS-version of the database is currently under
preparation.
- The Energy Division also revised the Oak Mitigation
Plan considerably after attempts to replace oaks removed during
construction of the All American Pipeline had failed. The revisions
focused on innovative measures to increase survival of the newly
planted trees.
The Energy Division also continued to administer previously established
mitigation programs, such as the Coastal Resources Enhancement Fund
(CREF), Fisheries Enhancement Fund (FEF), and Local Fishermen's
Contingency Fund. Between 1988 and 2000, the County funded 179 projects
from CREF, enhancing coastal resources with a total of $12.7 million;
it also funded 26 projects from FEF, enhancing fisheries with a
total of $650 thousand.
Policy and Rulemaking
Between 1992 and 2001, the Energy Division drafted new policies,
rules, and planning tools for consideration by County decision-makers,
while also supporting the County's positions on various offshore
oil and gas issues at the state and federal levels of government.
- The County added a Safety Element Supplement to its
Comprehensive Plan in 2000 to address the treatment of hazardous
facilities and pipelines in land-use decisions. This supplement
contains guidance to reduce significant risk to public safety.
The County also adopted Public Safety Thresholds to guide its
assessment of risk to public safety during environmental review
of projects. Both the supplement and thresholds apply to most
oil and gas facilities that support offshore development.
- The County updated its Comprehensive Plan in 1996,
adding a new Energy Element that provided guidance for increasing
the efficient use of energy and conserving energy, largely by
promoting energy-efficient design and technology in new development.
In subsequent years, the Energy Division used a series of grants
from the Urban Consortium's Energy Task Force to implement key
provisions of the Energy Element. Among other things, the addition
of the Innovative Building Review Program has had a very positive
influence on increasing the energy efficiency of new development
subject to building permits.
- The County worked with its State Legislators to obtain
passage of Assembly Bill 1431 in 1996, which allocates a portion
of California's share of federal offshore oil and gas revenues
to counties that are impacted by offshore oil and gas development.
During the next five years, Santa Barbara County received nearly
$6.4 million through the Coastal Resources Grant Program, which
the bill established. The program provided needed revenues to
the County to address significant issues with offshore oil and
gas development through policy-making, rulemaking, and special
studies.
- In 2000 and 2001, the County opposed proposed legislation
that would establish a program for decommissioning offshore platforms
in which the subsea jackets would be left in place. This proposed
Rigs-to-Reefs program (as it was commonly called) was very controversial
because preliminary investigations by marine scientists found
no scientific evidence that the program provided any benefits
to the environment, and could have adverse effects. Governor Davis
ultimately vetoed the legislation.
- The County continued to oppose new leasing in federal
waters offshore Santa Barbara County for oil and gas development
as the U.S. Department of the Interior prepared new five-year
leasing programs. In its comments on the draft 2002-2007 Five-Year
Leasing Program, the County cited five principal reasons to support
the Interior Department's initial decision not to conduct further
leasing offshore California based on previous experience.
- The Energy Division finalized its North County Siting
Study in October of 2000, which assesses different scenarios for
onshore processing should existing undeveloped leases in the offshore
federal waters of the Santa Maria Basin (off the County's west
coast) be developed in the future. It concludes that a combination
of using existing processing sites on the south coast and choosing
a new site in the northern area of the County appears to be environmentally
preferable to other feasible scenarios. The study received a national
award from the Association of Environmental Professionals.
- The Planning Commission formally initiated preparation
of policy and rulemaking to affect substantially more timely abandonment
of oil and gas facilities following termination of operations.
The initiation is based on 40 recommendations presented in the
Energy Division's report, Abandonment of Oil and Gas Fields Offshore
Santa Barbara County and Related Infrastructure. As documented
in the report, the local historic record of timely and proper
abandonment reflects very mixed results, ranging from excellent
to very poor.
- The Planning Commission recommended a new ordinance
to provide a consistent process for approving the transfer of
discretionary and ministerial land-use permits when a change in
owner, operator, or guarantor occurs. The ordinance applies to
oil refineries and oil and gas facilities that support offshore
development and are situated within the unincorporated area of
the County. The Board of Supervisors is scheduled to consider
adoption of the ordinance in early 2002.
- The County initiated an economic analysis of Venoco's
Ellwood oil and gas processing and transportation facilities to
determine an appropriate period of amortization - a process that
allows for the eventual termination of a legal non-conforming
use after the owner has realized a fair return on its-investment.
The facilities are situated on the last remaining south-coast
sites not designated for consolidated oil and gas processing and
transportation. They were rezoned to non-industrial uses in 1991.
This issue is now primarily the responsibility of the new City
of Goleta to address.
Inter-Agency Coordination
The Energy Division participated in a series of MMS/Tri-County
Forums that the Minerals Management Service commenced during the
1990s to coordinate and improve inter-jurisdictional regulation
of oil and gas development offshore California's central coast.
Prior to this time, relations between different agencies were often
competitive and somewhat strained. The forums included staff from
Ventura, Santa Barbara, and San Luis Obispo counties, California
Coastal Commission, California State Lands Commission, California
Department of Fish & Game, California Department of Conservation,
and the Minerals Management Service. The meetings focused on sharing
of information among the key agencies involved in regulating offshore
oil and gas development, providing opportunities for the staff of
the various agencies to become more acquainted with one another,
and providing opportunities to share grievances, identify issues,
and work toward their resolution. Several results are attributable
to the MMS/Tri-County Forum, including initiation of the following
joint efforts:
- Early conceptual endorsement of the oil industry's
proposed Drilling Rig Cooperative Program for exploratory drilling
in the future.
- Development of the Pacific OCS Region Process for Protecting
Hard Substrate Communities, to address methods of eliminating
or reducing impacts to significant deep-water habitats as a result
of exploratory drilling.
- Development of the Pacific OCS Region New Review Process
for Approved Exploration Plans, to address the interagency coordination
on renewing outdated Exploration Plans.
- Development of the High Energy Seismic Survey Review
Process (HESS) and Interim Operational Guidelines for Marine Surveys
Offshore Southern California, which provides a coordinated interagency
process for reviewing permit applications to conduct high energy
seismic surveys and addressing potential impacts on marine resources.
- Preparation of report, titled the California Offshore
Oil and Gas Energy Resources (COOGER), documenting the capacity
and constraints of existing onshore infrastructure required to
support offshore oil and gas development, and assessing the demand
for new onshore infrastructure generated by potential development
of existing but undeveloped offshore oil and gas leases in the
future.
- Formation of the Interagency Decommissioning Working
Group to address issues of decommissioning offshore platforms
and pipelines after these facilities have permanently ceased operations.
Besides the MMS/Tri-County Forum, the Energy Division reviewed
and advised the State Lands Commission on several decommissioning
projects offshore Santa Barbara County, including removal of six
offshore platforms and permanent abandonment of several subsea wells.
The division has also reviewed and commented on several proposed
regulations at the state and federal levels of government related
to offshore oil and gas development, five-year leasing programs,
renewals of exploratory plans, general permits for discharging platform
waste materials into the ocean, and oil spill response planning.
Property Tax Appeals
The Energy Division also assists the County's Tax Assessor, to
the extent allowed by the law, when onshore facilities that support
offshore oil and gas development are the subject of property tax
appeals. Oil companies have filed approximately 52 appeals between
1993 and 2001; major offshore operators with onshore support facilities
filed the majority of these appeals. Several factors led to these
appeals, the most influential being the prolonged period of low
oil prices and, as a result, the desire by oil producers to derive
a better return on their investments.
The appeals have the effect of reducing County services until the
appeal is resolved. In 1998 for example, property taxes from onshore
processing, storage, and transportation facilities that support
offshore development represented just under $13 million, or 4.6%
of total property tax receipts to the County for that year. The
County typically impounds these revenues when an appeal is pending.
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