Arco Sues Agencies to Get Oil Drilling OK or $793 Million

Atlantic Richfield filed suit Thursday to force two government agencies to permit the development of its Coal Oil Point offshore oil project or pay the oil giant $793 million in damages.

The suit in Los Angeles County Superior Court, which was expected, claims the State Lands Commission and Santa Barbara County illegally blocked the oil company’s effort to develop longstanding leases on state lands just off the Santa Barbara coast.

It is the latest maneuver in what shapes up as a long legal battle over Arco’s attempt to erect new oil platforms on the state-controlled tidelands.

If ultimately approved, the Arco project would result in the first new oil platforms in state-controlled waters since the huge Santa Barbara oil spill in 1969.

Breached Agreements, Suit Says

Citing environmental concerns, the State Lands Commission voted 2-1 in May to block Arco.

The oil firm’s administrative claim for damages was denied in July, and Arco has now made good on its threat to go to court to collect.

The lawsuit contends that Arco should either be allowed to develop its leases or be compensated for the value of unrecovered oil and gas.

The suit says the State Lands Commission breached its lease agreements with Arco and exceeded its authority in moving to block development on tidelands leases that date back as far as 40 years.

It accuses the commission and the county of acting in bad faith because they approved exploratory drilling in 1980 and let Arco proceed with certain preliminary ocean floor installations related to the project.

But Controller Gray Davis and Lt. Gov. Leo T. McCarthy, the commission members who voted to block Arco, contend that it would be “irresponsible” to allow unrestricted development of all existing leases. They endorsed a study of the effects of additional platforms.