(August 30, 2008, early afternoon) -- With Mayor Bob Foster present on the state Senate floor, Senator Alan Lowenthal (D., LB-Paramount) advanced a City Hall-sponsored "gut and amend" measure (last minute, avoids normal Committee hearings) that would encourage additional on-shore oil drilling in the Wilmington Oil Field and potentially bring the City and the state millions of dollars in revenue.

On the Senate floor, Sen. Lowenthal spoke in favor of the bill and didn't mention local environmental opposition that has arisen to the measure (details below).

The Senate vote was 38-1. On passage, Senator Lowenthal requested (and obtained) immediate transmittal of the measure to the Assembly...where it could be heard in an Assembly Committee and advanced to the Assembly floor in the coming hours.

Mayor Foster's presence became known when Senator Lowenthal acknowledged his presence and introduced him publicly

The bill is written as an "urgency" measure so it can take effect immediately. The bill now goes to the Assembly where it's expected to pass later today or tomorrow (Sunday). The legislature's deadline for passing most bills is August 31.

The measure passed the Senate at 11:04 a.m. LBReport.com flashed news of its passage on our front page at 11:06 a.m. with this story following at 11:25 a.m.

In his Senate floor statement, Sen. Lowenthal described the bill's financial benefits and didn't mention any environmental opposition. Sen. Tom McClintock (R. Thousand Oaks) noted that legislation could bring Sacramento a fifth of a billion dollars...and spoke about the potential for off-shore oil drilling. Senator Lowenthal noted that the legislation only involved on-shore oil drilling.

No Senator spoke in opposition. Senator Jenny Oropeza was among those voting in support.

As previously reported by LBReport.com, city management says the bill could bring roughly $130 million to City Hall, $150 million to the Port, and $200 million to the state over ten years and has offered other points in its support (detailed below).

In an email dated Aug. 29 and addressed to Senator Lowenthal and Assemblywoman Karnette, Tom Politeo [a long time member of the Sierra Club's Harbor Vision Task Force, writing in his individual capacity] wrote in pertinent part:

I'm writing to you to oppose AB 2165 from moving forward at this time. We need time to afford an opportunity to be sure that environmental issues concerning the extraction of oil are heeded, for both current and past extraction. The urgency nature of this gut-and-replace bill and last-minute press coverage has not afforded any time for public debate...

...[Any additional oil drilling done in California should be done as part of a vigorous public discussion as to what our energy priorities and policy are.

I favor (as examples):

• the expansion of green and renewable energy sources,
• the use of efficiency measures, such as more fuel efficient cars, installation of heat pumps, and building insulation retrofits,
• urban infill -- permitting more people to live close to traditional job centers, like in Long Beach, and cutting down on excessively long suburban commutes
• improving urban schools to remove one of the primary causes of urban flight and decay
• reduction in the use of all hydrocarbon fuels, including fossil fuels.

I do not categorically oppose onshore oil drilling -- but want to see it preformed under the highest environmental standards with all work, including subcontract work, carried out by union labor with livable wages and benefits. Of course, I prefer we drill for as little oil as possible, consistent with greening our economy and reducing oil's harmful effects, including toxic air pollution, ground and water contamination and climate change.

As you know, the Wilmington Oil Field, which Occidental acquired from THUMS not long ago, has a sad legacy: sections of Long Beach and Wilmington have abandoned and uncapped oil wells, there are contaminated brownfields, and destroyed wetlands -- all associated with the work done by THUMS.

It is appropriate that any additional drilling from these fields pay for the cleanup of the past ills, as a precondition of drilling expansion. Occidental should pay for this cleanup, since the damage was caused by the operations it bought. This is clear matter of corporate responsibility that we should all embrace.

It is also important that additional drilling pay into a trust fund for the subsequent cleanup of the operations established by Occidental, if for any reason Occidental becomes unable to pay for the cleanup as it closes down operations. As we cleanup one mess, we should not create another and then encumber future generates to clean that up...

Over your career in both the Senate and Assembly, you have been good at encouraging public discussion in a number of forums and in the Long Beach Democratic Club. You have helped uphold democratic procedures while in office.

I hope that in the final days of your work in the state office, you will yet again show your commitment to these principals. SB 2165 is a gut-and-replace bill, from just eleven days ago...

I doubt that most of your constituency in Long Beach and San Pedro has had a chance to see the news coverage about the bill or to hear about it -- let alone to discuss it among themselves. Certainly, almost no one is aware of the environmental questions, because there hasn't been an opportunity to report on these issues in the media or for the public to discuss them.

It may seem to some that the primary urgency in passing this bill is to get it through the legislature while no one is looking -- and to circumvent democratic process and citizen oversight in a political power play to favor Occidental and dress it up with a modest amount of public revenue. Just how much money might Occidental be expected to make from these fields in comparison to the public royalty?

Therefore, in accordance with your own record, I ask you hold this bill until there has been an opportunity for adequate public discussion -- including at least one public form or hearing on the bill to be held in Long Beach before a final version of the bill is drafted. The issues here are that important.

And, under no circumstances, should there by any language in the bill that shortcuts CEQA or the Long Beach City Charter.

As previously reported by LBReport.com, an August 15 memo from City Manager Pat West to members of the City Council's State Legislation Committee (chair O'Donnell, vice chair B. Lowenthal, member Reyes Uranga) indicates that city staff worked with Oxy [parent company of Tidelands Oil Production Co.] "and members of our state delegation [preumably Karnette and Lowenthal] to craft legislation" that would create financial incentives to explore and develop parts of the Wilmington Oil Field with resulting revenue for the City and the State.

The "gut and amend" text was launched on August 18...and city management first mentioned it publicly during a August 19 meeting of the City Council's State Legislation Committee. On August 20, Mayor Bob Foster wrote a letter in support "on behalf of the City" -- without any public discussion of the measure -- to State Senators Alan Lowenthal, Jenny Oropeza and Ed Vincent, and Assemblymembers Warren Furutani and Mervyn Dymally.

On Aug. 22, the measure sailed through the Senate's Natural Resources & Water Committee (7-0) and was amended a second time on August 26. The story first broke online on Press-Telegram.com via reporter John Canalis.

On August 27, Gabrielle Weeks and Jesse Marques of the Coalition for a Safe Environment issued a release raising several issues about the measure (detailed below).

As previously noted by LBReport.com, the "gut and amend" procedure lets Sacramento lawmakers delete language in one bill, add entirely new language...and bypass normally required Committee hearings. (In this case, a bill on mouthguards for school sports was gutted and amended with the oil drilling verbiage.) The legislature's deadline for passing bills is at the end of August.

In an email to LBReport.com, City Hall's Government Affairs Manager Tom Modica indicates management believes AB 2165 could enable revenue in the following ranges (cumulative over ten years):

• State = $200 million
• Port = $150 million
• City = $130 million

"The [figures] vary based on a complex model that takes into account different assumptions such as the price of oil, number of wells, timing of exploration, etc...It's important to note that these revenues will not be realized immediately - it could take several years for significant revenues to be identified, but this is an important long term investment in the Wilmington field," Mr. Modica said.

City management offers these points in support of the measure:

Background

The City is the sponsor of AB 2165 (Karnette) in conjunction with Occidental Petroleum Corporation (Oxy)

This bill allows the State of California to enter into an agreement with Oxy and the City to allow additional investment at Oxy's own financial risk in the West Wilmington oil field.

Wilmington oil field has been in continuous operations since the 1930's and encompasses much of area under the Port of Long Beach.

Issue to be Addressed

Significant investment in the oil field is needed to maintain and possibly increase oil production.

Under the existing contractors' agreement the State would bear more than 95% of the additional costs out of the revenues otherwise payable to the State.

The State is unwilling to bear this additional economic risk because

There is a significant risk that the additional production will be insufficient to compensate for the additional costs and

Important State water, education and general programs that depend upon oil revenue should not bear the risk of any reduction in revenues resulting from the costs of increased investment into the oil field.

Financial Benefits to Long Beach and the State

Under this bill, the State would receive approximately $200 million over the next ten years

The Port of Long Beach would receive approximately $150; however, State legislation is not needed for the Port to enter into an agreement with Oxy.

The City would receive approximately $130 million over 10 years, which would flow to both the Tidelands Fund and the General Fund.

The City's revenues would be in the form of the following:

• Percent of the State's net profit, which stays in the Tidelands fund
• Uplands working interest, which the City can transfer to the General Fund
• Oil Production Tax and Prop H production tax (per barrel produced)
• Overhead, permit and administration fees
• Utility User Taxes
• Share of property and sales taxes

These revenues would not be realized for several years, as it will take time to determine the amount of oil that can be realized.

Environmental Protections

AB 2165 would not allow for offshore drilling nor would it increase the environmental footprint of the Wilmington Field.

All drilling would occur in industrialized areas of the Port, where drilling currently exists.

How the Agreement Works

Oxy will commit to a minimum development spending level of $30 million directed towards the State's equity share -- at Oxy's sole financial risk

Oxy will preserve the State and City's current profit related to existing production.

Oxy, the State and the City will share profit related to incremental production.

Oxy will insulate the State from all economic risk related to development activities. All negative incremental net profit will be absorbed by Oxy.

AB 2165 allows for the State Lands Commission to enter into negotiations and does not specify revenue amounts for each party.

Past Success

This is proposed agreement is similar to the 1992 agreement between then Arco, State, and the City concerning the Long Beach Unit.

Actual benefit to the State from 1992 agreement: over $500 Million.

Actual benefit to the City from 1992 agreement: over $100 million

In fact, $29.5 million of the $30.5 million the City received in Tidelands Oil Profit in FY 08 came from the 1992 ARCO Agreement -- without this agreement the City's Tidelands Oil Profits this year would be only $1 million.

In an emailed statement late Thursday (Aug. 27), Ms. Weeks and Mr. Marquez wrote on behalf of Coalition for a Safe Environment:

AB 2165 would allow the City of Long Beach and the State Lands Commission to enter into an agreement for new oil, gas and other hydrocarbons exploration and oil well drilling in coastal tidelands and submerged lands in the City of Long Beach and the City of Los Angeles' Wilmington Oil Field. Unfortunately, Richard Cameron of the POLB had no information to disclose regarding how near these sites would be to the community or to sea life.

Worse yet, there are no safety or environmental protections in the Bill, only the ability for the State Lands Commission to review the plans for "responsiveness to environmental and safety concerns."

"It is not appropriate for my State or my City to try to drill their way out of debt" said Gabrielle Weeks, coordinator of the Long Beach Greens and Boardmember of the Coalition For A Safe Environment. "This project is not economically or environmentally sustainable."

AB 2165 could allow oil drilling companies to bypass current California Environmental Quality Act (CEQA) EIR requirements by allowing them to extend old grandfathered contracts for exploration and drilling. These old contracts do not require the mitigation of air, water, land, biological habitat impacts or public health impacts.

The City of Long Beach held no public meetings or public hearings to announce this bill and their intent to enter into new oil, gas, and other hydrocarbons exploration and oil well drilling in coastal tidelands and submerged lands and provided no public comment period. In addition, this Bill was amended during the last week of the Legislative session, in the midst of the Democratic National Convention, when many elected officials are out of town and the public's attention is elsewhere.

The City of Long Beach has entered into past contract terms and conditions that have allowed protected California coastal tidelands to be contaminated with toxic and hazardous oil, gas, hydrocarbons and chemicals that, as of today, have never been cleaned up and remediated.

The City of Long Beach currently has hundreds of abandoned oil wells that have never been capped off and hundreds of storage tanks, pumps, valves, pipelines, and electrical equipment that have never been removed. They are a major public health problem, public safety hazard, toxic chemical emissions source and contribute to blight in the city.

The City of Long Beach has conducted no public health survey or established a public health baseline of the impacts from its current oil drilling operations or from the hundreds of abandoned oil well sites which emit unknown quantities of toxic gases into the community. The community is concerned about the public health impacts of these existing toxic emissions.

The profits they are claiming they will make for the city and state is not even enough to clean up the existing contaminated lands and public health problems. Now they will create new additional toxic sites.

"The most impacted victims will continue to be the Environmental Justice neighborhoods, low income and poverty stricken communities in West Long Beach and the bordering community of Wilmington in the City of Los Angeles" says Jesse N. Marquez of the Coalition For A Safe Environment "They will see no benefits from the revenue raised, but bear all the burden of the project."

Specifically, the bill authorizes the State Lands Commission "to negotiate and execute on behalf of the State of California a contract with the City of Long Beach and its tidelands oil operating contractor, that provides financial incentives for the contractor to explore for and develop additional oil reserves beneath the tidelands and submerged lands, whether unitized or nonunitized, covered by the Long Beach Harbor Tidelands Parcel and Parcel "A" Oil Contract and beneath the uplands parcels in the Fault Block II Unit, the Fault Block III Unit, the Fault Block IV Unit, and the Fault Block V Ranger Zone Unit in the Wilmington oil field."

It says the contract "shall provide for the preservation of the current method for sharing among the contractor, the State of California, and the City of Long Beach of revenues from the sale of production under the Long Beach Harbor Tidelands Parcel and Parcel "A" Oil Contract with regard to all current oil reserves."

The bill continues:

The contract shall provide a means responsive to the market price of crude oil for determining the additional oil reserves and a method for sharing the revenues from the development of these additional oil reserves among the State of California, the City of Long Beach, and the contractor that will provide both an economic incentive to the contractor to pursue the development of these additional oil reserves and a fair and equitable return to the State of California and the City of Long Beach. The contract shall require the contractor to spend an amount to be negotiated for geologic and engineering evaluation and development in any oil and gas zones beneath the tide and submerged lands covered by the Long Beach Harbor Tidelands Parcel and Parcel "A" Oil Contract...

The measure provides, "Any revenue payable to the City of Long Beach solely from the sale of production of additional oil reserves under the contract...shall be paid to the City of Long Beach before the distribution of "remaining oil revenue" [under prior legislation]. This additional revenue, when received by the City of Long Beach, shall be used for the purposes and in the manner set forth in [in prior legislation]."

The bill carries an "urgency clause," so the measure can take effect on passage. It states in pertinent part:

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to implement as soon as possible the exploration for and development of additional oil reserves that should produce more oil, prevent waste of oil and gas resources, and bring additional money to the State Treasury, it is necessary that this act take effect immediately.

To read the text of AB 2165 as most recently amended on August 26, click here.

Assemblywoman Karnette is term-limited and now in her final weeks in the state legislature. LB Councilwoman Bonnie Lowenthal (Dem) and former Palos Verdes Peninsula Unified School Boardmember Gabriella Holt (Repub) are vying to succeed her in November. Karnette, a Wrigley area resident, has indicated that she intends to run for State Superintendent of Public Instruction in 2010.

Developing.