California Proposes Offshore Lease Exchange

Sen. Barbara Boxer is proposing legislation that would halt new drilling offshore California. She proposes to swap undeveloped California tracts for similar blocks in the Gulf of Mexico. The 40 undeveloped tracts offshore California would then be established as an ecological preserve.

In return, the oil companies holding the leases would be offered credits, estimated at anywhere from $1 billion to $2.8 billion, for bids on lease tracts in the central and western Gulf already slated for development.

"We're going to swap it so that the oil companies can drill where people want them to drill," Boxer stated. "This is a major win-win. If it all works well we're all going to be celebrating. So far the indications are extremely positive."

Boxer's legislation, entitled the California Coastal Protection and Louisiana Energy Enhancement Act, is aimed at resolving the struggle between the federal government and California over a total of 40 offshore California oil and gas tracts that the Bush administration has proposed opening up for new development. The U.S. Department of Interior said it would study the proposal. "The administration is committed to working with local and state officials, and we are willing to study proposals which might resolve the issues regarding California's offshore leases," said department spokesman Mark Pfeifle.

New offshore oil drilling off California has been halted since 1989 - although oil production continues at existing state and federal tracts. California, saying its right to review the environmental impact of the proposed new exploration had been ignored, sued to stop the new development and won a court order blocking new drilling pending full review. That order is currently under appeal before the 9th Circuit in San Francisco.

Boxer said the swap plan, developed with Louisiana Democratic Sen. Mary Landrieu, had received a positive reaction from the oil companies holding the California leases, which include Aera, the combined California exploration and production operations of Exxon Mobil Corp. and Shell Oil Co., a unit of Royal Dutch/Shell Group; Conoco Inc., Nuevo Energy Co. and Samedan Oil Corp., a subsidiary of Noble Affiliates Inc.

"I believe this plan will succeed, and if it does the ongoing battle over our coastline may well be over," Boxer said. Nuevo Energy, which has been in contact with other energy companies regarding Boxer's plan, said it had not yet see the final legislation and would have no immediate comment.