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Historic Overview of the Energy Division
The Third Decade - Looking Forward (2002 - 2011)
Historic Setting
Several factors will influence the future of offshore oil and gas
development over the next decade. Above all else, will oil prices
eventually stabilize at a high enough level and for a long enough
period of time to stimulate investment in developing existing leases?
Second, new legislation, rulemaking, and results of pending litigation
seeking interpretations of existing laws and rules, will likely
have a considerable influence on offshore oil and gas. State of
California v. Secretary of the Interior Norton may further delineate
California's legal authority under the Coastal Zone Management Act
to ensure consistency with its coastal protection policies, particularly
regarding continual extensions in the life of undeveloped leases.
Another recent petition filed against the U.S. Department of the
Interior by lessees may also shed more light on the use of lease
suspensions to delay expirations of leases during periods of low
oil prices. Most recently, U.S. Senator Boxer of California and
Senator Landrieu of Louisiana have introduced the California Coastal
Protection and Louisiana Energy Enhancement Act for consideration
during the 2002 Congressional session. If enacted this bill would
cancel the remaining 36 undeveloped oil and gas leases in federal
waters offshore Santa Barbara County, compensating lessees with
credit to acquire leases in the Gulf of Mexico. As such, oil and
gas development offshore Santa Barbara County would be limited to
current operations and, potentially, development of fields in state
waters such as Tranquillon Ridge and South Elwood.
Third, the characteristics of oil underlying existing undeveloped
leases offshore Santa Barbara County is likely to influence the
shape of oil and gas development over the next decade. Some, but
not all, of the undeveloped offshore oil is known to be ultra-heavy,
which poses significant technical, economic, and political challenges
to potential producers. Among other things, such characteristics
might render development of some reserves unprofitable, given the
prevalence of heavy oil produced from onshore fields. Such characteristics
may also render the processed oil incompatible for shipment via
pipeline to refining centers, instead requiring an unprecedented
volume of rail or truck trips.
Additionally, the following trends will help to shape oil and gas
development offshore Santa Barbara County. In the context of new
leasing activities:
- The Coastal Sanctuary Act of 1994 will continue to restrict
any consideration of new leasing (or expansion in existing lease
boundaries) in State Tidelands offshore Santa Barbara County to
a very few exceptions. Those exceptions are limited to circumstances
where a field underlying a currently leased tract extends beyond
the lease boundary.
- The federal government's moratoria on new oil and gas
leasing in specified areas of the Outer Continental Shelf, including
all federal waters offshore California extends through mid-2012,
and California has strongly expressed opposition to any new federal
leasing in offshore waters.
- The supply of oil from Alaska's currently producing fields
to west coast refiners is expected to decline slightly between
1999 and 2020; however projected production from other fields
such as the National Petroleum Reserve in Alaska is projected
to compensate for the decrease. Oil producers have continued to
seek more opportunities to tap suspected additional Alaska North
Slope oil resources as well as oil and gas resources in other
areas of the state, such as opening the Alaskan National Wildlife
Refuge. Meanwhile, interest in opening new areas offshore California
has waned considerably since the 1966-1990 period.
In the context of existing producing and non-producing leases:
- Extended-reach drilling technology continues to break
records, and can now reach as far as 4 miles, depending on depth
of the field and geologic conditions. Such technological breakthroughs
mean that more fields can be developed with substantially fewer
drill-sites and at considerably lower cost overall. In most cases,
offshore lessees will seek to maximize their use of existing infrastructure
to develop the remaining untapped oil and gas fields underlying
existing offshore leases. The County will likely field more proposals
to develop untapped fields with continually improving extended-reach
drilling technology from existing offshore platforms and, perhaps,
onshore drill-sites.
- Conversely, fields that require considerable new infrastructure
to develop, including new offshore platforms and onshore processing
and transportation facilities, may not prove to be economically
recoverable unless oil prices stabilize at a significantly higher
price than experience over the last 15 years. In this case, we
might expect some more offshore leases to expire.
- Owners and operators of offshore and onshore oil and
gas facilities will likely continue to change as they did during
the previous decade, but possibly at a slower pace. Much depends
on how attractive of an investment oil and gas offshore Santa
Barbara County appears, which, in turn, is highly dependent on
the future price of oil and gas. Should low oil prices continue,
new investment may dwindle and the financial health of current
producers may become a heightened concern, including ability to
decommission projects that have been economically displaced.
- Some offshore platforms in the eastern sector of the
Santa Barbara Channel will be ready for decommissioning, and their
removal will affect the coastal panorama. Issues about the disposition
of these platforms once decommissioned - that is, whether they
are sunk offshore or salvaged onshore will likely remain a highly
contested issue.
Energy Division Functions
The division's six core functions are expected to remain intact
during its third decade; although the level of effort devoted to
each function may again shift as described below.
Permit Processing
By the year 2000, processing of permit applications for new oil
and gas projects had increased again, albeit at an unsteady rate.
Relying on new technological advances in extended-reach drilling,
three offshore producers seek to develop oil and gas from untapped
fields from existing platforms.
- In early 2000, Nuevo Energy submitted an application
to fully develop the Tranquillon Ridge field.
- In late 2000, Whiting Petroleum submitted an application
to develop the Rocky Point field via extended-reach drilling from
Platform Hermosa - originally installed to produce the Point Arguello
field.
- In late 2001, Venoco submitted a revised application
to expand its current production of the South Elwood field. The
proposed project entails several major changes in its current
operations. It also entails several governmental jurisdictions,
including the new City of Goleta where Venoco's current oil and
gas processing facilities are located, the County of Santa Barbara,
the California State Lands Commission, and the California Coastal
Commission.
Other potential for new development via extended-reach drilling
also exists, and may be proposed in the next decade, depending on
the status of undeveloped federal leases in light of proposed legislation
and pending litigation.
Processing applications to modify facilities, whether to increase
throughput or to update the facilities to operate more economically,
will likely continue as a routine component of the division. ExxonMobil's
Synergy Project, for instance, entails modifications to increase
the efficiency of oil and gas processing in Las Flores Canyon facilities.
ConocoPhillips is seeking permits to increase the permitted volume of oil
transported in its pipelines. Also, several requests to transfer
permits due to a change of owner or operator are pending. The trend
of frequent changes in owner and operator may continue into the
future, particularly given the unstable nature of oil prices in
the foreseeable future.
Permitting activities entailing the decommissioning of oil and
gas facilities and remediation of contaminated sites will also likely
remain a focus of the Energy Division. Unocal is preparing to abandon
its Government Point and Cojo Bay oil facilities. Arguello, Inc.
has announced plans to partially decommission its Gaviota oil and
gas processing facility. In a few cases, remediation of contaminated
soils and water at sites where facilities were decommissioned during
the previous decade has carried over into the next decade.
Permit Compliance
The considerable attention devoted to issues of safety during the
last few years will likely remain a high priority for permit compliance
in the coming decade. The recent introduction of a model Safety,
Inspection, Maintenance and Quality Assurance Program (SIMQAP) has
resulted in annual safety audits, which result in a list of corrective
actions. These audits are intended to reduce the number of incidents
that occurred during the previous 10 years.
Additional B-2 Reviews to evaluate the ongoing effectiveness of
permit conditions are expected to be prepared as well during this
forthcoming decade, beginning with ExxonMobil's facilities in Las
Flores Canyon. These reviews will help focus companies and Energy
Division staff on those permit requirements that have yet to be
completed or fully carried forth. A certain amount of discontinuity
occurs when a change in owner or operator of a facility occurs.
Occasionally, a new operator finds a somewhat overwhelming challenge
to come into compliance with permit requirements, particularily
if the previous owner was not diligent on compliance matters. Recent
experience has shown a need to focus more resources on compliance
to address this discontinuity and reduce it when future changes
in owner or operator occur.
Mitigation Programs
The division will continue to administer active mitigation programs
and adjust them to respond to new oil and gas projects.
- The Mineral Management Service, the Energy Division,
and the University of California at Santa Barbara are continuing
work on the Shoreline Inventory, collecting data to establish
a baseline of biological resources so that environmental damage
can be fully assessed in the event of an offshore oil spill. The
team also is working on a system to consolidate and manage data
collected during monitoring.
- Conclusions of the current research undertaken under
the Oak Mitigation Plan will likely reveal improved approaches
to mitigating the loss of oak trees during construction of projects.
Typical mitigation requires replacement of trees lost during construction.
Much of the research is focusing on ways to protect seedlings
that are planted as replacements until they are fully established.
The Energy Division will also continue to administer previously
established mitigation programs, such as the Coastal Resources Enhancement
Fund (CREF), Fisheries Enhancement Fund (FEF), and Local Fishermen's
Contingency Fund.
Policy & Rulemaking
In the first two-to-three years, policy and rulemaking activities
will continue to focus on the changing nature of the oil industry,
abandonment of oil and gas facilities, and the potential for additional
offshore oil and gas reserves to be tapped.
- 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 2002.
- In 2002, County decision-makers will consider policies
and rules that set forth requirements to ensure and guide the
timely and proper abandonment of oil and gas facilities once they
permanently cease operations. This policy project focuses on offshore
oil and gas fields, related onshore infrastructure and industrial
facilities, and oil refineries. The local historic record of timely
and proper abandonment reflects very mixed results, ranging from
excellent to very poor.
- In 2002, County decision-makers will consider oil spill
thresholds, designed to determine the significance of impacts
to the environment, pursuant to the California Environmental Quality
Act, in the event of an offshore or onshore oil spill.
- In 2002, County decision-makers will consider rezoning
the former Battles Gas Plant site to a use more compatible with
the surrounding rural area in which it is located. This rezone
follows the permanent termination and removal of the Battles Gas
Plant, which operated between 1937 and 1995.
- In 2002 or 2003, County decision-makers will consider
amendments to the Oil Transportation Policies that reflect significant
changes in the transportation system in favor of pipeline. Among
other things, this effort will assess any potential technical
constraints to shipping ultra-heavy oil via pipeline to refining
centers outside the County.
- In 2003, County decision-makers will consider a new ordinance
to specify the amount and type of Financial Assurances required
of oil and gas operators to cover potential damages to natural
resources and remediation of the environment following oil spills
or decommissioning of facilities.
- The division will also examine its South Coast Consolidation
Policies, which are now 15 years old, and recommend any revisions
that might be merited to address the changing context of offshore
oil and gas development.
- The division will also prepare a special study that
examines the west-coast oil market. It also will consider the
range of effects that future offshore oil development might have
on marginal onshore oil fields and producers. Many onshore wells
have been shut-in for several years, as a result of low oil prices
and an oversupply of oil in the west-coast market during the 1990s,
while new offshore oil projects were approved for development.
The study will address whether or not this same trend would characterize
future oil development proposals.
Interagency Coordination
The Interagency Decommissioning Working Group will continue its
work to address issues of decommissioning offshore platforms and
pipelines after these facilities have permanently ceased operations.
The Energy Division will also join an effort undertaken by the Minerals
Management Service and United States Geologic Service to inventory
natural oil seeps offshore the County, as well as residual oil deposits
along the coast that originated from natural oil seeps. Finally,
the Energy Division will work with other state and local agencies
to update environmental protections for future exploratory activities
on offshore federal leases.
Please visit the rest of this web-site to learn more about the Energy
Division's current functions and projects
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