White House Pulls Back on Offshore Oil Drilling

The Bush administration on Monday announced it will drop its legal fight with California over offshore oil leases and said it will try to buy back the leases, virtually ending the chance of new drilling off the state’s coast.

In a sharp policy reversal, the administration is no longer contesting the state’s role in controlling the expansion of offshore oil drilling.

“Our administration strongly supports environmental protection and understands the importance of this issue to the people of California,” Interior Secretary Gale A. Norton said in a statement. The administration “respects the wishes of the people of California,” Norton added. “We believe our efforts will be better spent in negotiation rather than in continued litigation with the state.”

Norton’s message was dramatically different from the one she delivered last June rejecting Gov. Gray Davis’ request that the administration extend its generosity to California and buy back California’s offshore leases as it had in Florida.

At that time, she argued the circumstances in the two states were quite different, including that “Florida opposes coastal drilling and California does not.”

The administration’s decision means that any plans for oil drilling in federal waters would have to be reviewed by the California Coastal Commission, which already has jurisdiction over drilling in state waters. Ever since the Santa Barbara oil spill in 1969, politicians in both parties in California have opposed new drilling, making approval by the commission highly unlikely.

Virtually all of California’s coast already was off limits to new leases because of moratoriums ordered by Congress and presidents dating back to George H.W. Bush.

Monday’s decision involved the fate of the only 36 leases still in contention. They are tracts off the coast of Ventura, Santa Barbara and San Luis Obispo counties that have been under lease for more than 20 years but have never been developed although they sit atop as much as 1 billion barrels of low-grade crude.

The federal government had waged a three-year legal battle with the state over those leases, losing the first two rounds in federal court. With Monday’s decision, any appeal to the U.S. Supreme Court was abandoned.

The announcement won immediate praise from Davis, who has repeatedly called on President Bush to halt the court fight and buy back the oil and gas leases as the administration did last year in Florida, where Gov. Jeb Bush, the president’s brother, was running for reelection.

“Hallelujah,” Davis said. “It doesn’t get much better than this. California’s coast is a national treasure, and people flock to it from all over. They come to it for its beaches, not its oil-slicked beaches.”

A number of environmentalists who had joined the lawsuit were skeptical of the administration’s motivations.

“All the Bush administration has done is give up on a losing court case,” said Drew Caputo, an attorney with the Natural Resources Defense Council. A more significant step, he said, would be for the administration to allow the offshore leases to expire, which state officials contend should have happened years ago. If that happened, the leasing companies would get no money.

“We would support a buyout if it’s necessary,” Caputo said. “But we are not persuaded that it’s necessary.”

The issue of California’s offshore leases has already surfaced in the upcoming presidential campaign, with Democratic presidential candidate Sen. John F. Kerry of Massachusetts attacking Bush on the issue several weeks ago.

But a White House political advisor denied that the president’s reelection campaign was a factor in Monday’s announcement. Gerald Parsky, the president’s top political operative in California, recalled that during the 2000 campaign, Bush supported a moratorium on drilling off the California coast.

“The president and his administration have strongly supported environmental protection, and they understand the importance of this issue to the people of California,” Parsky said. “That is their driving motivation, not any prospective presidential candidates.”

The 36 offshore tracts are located in federal waters at least three miles off California’s coast, stretching from Oxnard to San Luis Obispo. Although a few date to 1968, most of them were leased to companies in the early 1980s, when Norton’s mentor, James A. Watt, was Interior secretary under President Reagan.

Offshore leases of this sort are supposed to expire within five to 10 years, if oil companies do not make diligent progress to develop them. Yet the Interior Department’s Minerals Management Service has repeatedly extended them, sometimes at the behest of oil companies waiting for a surge in oil prices.

In 1999, the California Coastal Commission asserted its right to review oil company requests for lease extensions to make sure they comply with California’s federally approved coastal protection plans.

When the Minerals Management Service balked at the idea, the commission, along with Davis and environmental groups, sued the Interior Department while former President Clinton was still in office.

Two years later, a federal judge in Oakland decided in the state’s favor, ruling that the Coastal Commission has the right to review the extension of the leases and evaluate the potential impact of any drilling plans on air and water quality, marine life and scenic views.

Last year, the U.S. 9th Circuit Court of Appeals upheld that ruling. The Bush administration had until today to apply for a review by the U.S. Supreme Court.

“Two courts had made it abundantly clear that California has the right to influence its own destiny,” Davis said. “The future of California’s beaches are where they should be: in the hands of Californians.”

Interior Department officials said Monday that they hoped to end the controversy over the leases through negotiations with the oil companies.

Less than a year ago, Norton rejected Davis’ call for the federal government to buy back the leases as it had in Florida.

There, the administration pledged $115 million to buy back undeveloped oil and gas tracts off the Florida Panhandle and an additional $120 million in the Everglades.

The companies holding leases off the California coast argue that they are entitled to the $1.2 billion initially paid for the leases, plus hundreds of millions more spent to drill 38 exploratory wells and other costs.

Administration officials said Monday, however, that the current lease owners will have to settle for far less, as was the case off the Florida Panhandle, where companies asking for $400 million settled for $115 million.

Mark Pfeifle, a spokesman for the Interior department, said that if a compromise is reached, California may have to kick in some money too. He noted that California shared in some of the federal offshore leasing revenues, receiving roughly $62 million over the years, and should participate in any buyback.

Davis noted Monday that Florida did not contribute to the oil company buyout last year. “I think that California deserves the same generous treatment that Florida received.”

Aside from the 36 undeveloped leases, California has 43 active federal tracts that produce oil and gas, as well as a number of offshore wells in state waters. Most of the active tracts had been developed or received their key approvals before the Santa Barbara spill soured many Californians on offshore drilling.

The remnants of working wells can be spotted by offshore platforms that dot the coast off Huntington Beach and Long Beach and Ventura and Santa Barbara counties.

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Times staff writer Michael Finnegan contributed to this report.