(August 31, 2008) -- In a State Capitol hearing room on early Saturday evening Aug. 30, LB Mayor Bob Foster and Assemblywoman Betty Karnette (D., LB) argued against the positions of CA Communities Against Toxics, Sierra Club CA, Communities for a Safe Environment (reps Gabrielle Weeks and Jesse Marquez) and LB Green rep Coby Skye regarding AB 2165, the management/Mayor-backed "gut and amend" measure that invites more on-shore oil drilling in the Port area Wilmington Oil Field.
Following a roughly 50 minute hearing, the Assembly Natural Resources Committee approved the bill on a 7-0 vote.
City management says the measure could bring City Hall $130 million over ten years. Environmental groups charge lack of environmental protection for residents and a lack of public input in advancing measure.
Environmental advocates say the bill undermines local control with verbiage explicitly overriding the LB City Charter and all LB laws and ordinances. City management says the measure is the first step in a process that promotes local control by giving the City a say, subject to City Council approval, in approving a negotiated contract for the new on-shore oil drilling.
LBReport.com provides below on-demand audio coverage of the full, unedited Assembly hearing.
Our audio is in the MP3 format. The files are longer than usual to accommodate the full hearing (so they'll take longer than usual to launch, even on a high speed line):
The Assembly Committee hearing capped a day of fast-breaking developments covered virtually as they happened on LBReport.com's front page (www.lbreport.com).
On Saturday morning (Aug. 30), Mayor Foster was on the Senate floor as Sen. Alan Lowenthal spoke in favor of the bill and didn't mention environmental opposition. The Senate voted to pass the bill 38-1 (Sen. Abel Maldonado, R., Central Coast areas dissenting). Senator Lowenthal requested immediate transmittal of the measure to the Assembly. (The bill is written as an "urgency" measure, seeking a 2/3 vote so it can take effect immediately).
Later that day, LBReport.com learned and reported that Senator Lowenthal was the Sac'to lawmaker responsible for conveying LB city management's desired text to the Office of Legislative Counsel to be put in legislative form for discussion and revision...and Sen. Lowenthal did so in June (roughly two months before the measure became public).
In the Assembly Natural Resources Committee, Mayor Foster testified that the bill is only the beginning of a process that will include City Council consideration and a vote after hearing public input. He said there'll also be public input at the State Lands Comm'n [consists of Lt. Gov, State Controller & Governor's Dept. of Finance rep]. Mayor Foster added that the state could drill as many wells as it wants on the state Tidelands area right now...and the bill gives LB elected officials some negotiated say over what takes place.
City Hall's Director of Government Affairs, Tom Modica, emailed this summary of management's salient points for LBReport.com:
"This bill gives the City Council added authority to enter into an oil contract that they would not have without this legislation. Further, it is important to note that any contract MUST come back to the City Council for full review and approval - this legislation is just the first step that allows us to begin the negotiations."
Mr. Modica noted that the City Council's State Legislative Agenda (general policy statements adopted by voted Council action early each year to guide management in what legislation to support and oppose) includes a provision to "Support legislation that protects and/or expands the City's authority and rights over its affairs."
And it's a permissive measure, giving the Council the opportunity to say approve or disapprove the deal, Mr. Modica added.
So...city management views AB 2165 as an increase in local control, we asked? "Yes," Mr. Modica said.
CA Communities Against Toxics' rep saw things differently. She testified that the group was "shocked" by language in bill that would override provisions of LB's City Charter and LB city ordinances. AB 2165 states in pertinent part:
"To the extent any provision of this act conflicts with...the Long Beach City Charter, or any law or ordinance of the City of Long Beach, the provisions of this act shall prevail."
Mayor Foster later said this language was included to address LB City Charter restrictions on length of contracts.
Sierra Club CA's rep voiced concern over the 1970's era EIR that currently governs the oil field; AB 2165 doesn't require a new EIR. Instead, it includes language stating that the oil operator "may use all types of enhanced oil recovery applications that are consistent with good oil field practice to increase oil recovery in the course of implementing the optimized waterflood program for the Long Beach Unit." What does "good field practice" mean, the Sierra Club rep asked rhetorically.
AB 2165 also specifies that any oil extracted "shall maintain the same environmental footprint that exists as
of July 1, 2008, including limiting any new wells to the industrialized area of the Port of Long Beach or the Port of Los
Angeles..." What does "environmental footprint" mean, the Sierra Club rep asked? Does it mean the area where the wells are located...or the area in which operations might affect people, he asked rhetorically.
Oxy and city management reps noted that the oil extraction operations would comply with current (not 1970s era) air and water quality regulations...and also argued that since there are fewer wells on the site today (about 700) than in past, increasing the number by about 200 wells isn't a significant increase from what the 1970s EIR examined.
The Sierra Club CA rep repeatedly asked, "What's the rush?" and urged the Committee to hold the bill until December or January.
The Assembly Natural Resources Committee advanced the bill to the Assembly floor for action on Sunday Aug. 31 (the last day of the 2008 regular legislative session)...although some Committee members voiced discomfort with the way the bill came forward. Some said they were voting for it as a district (local) measure based on support for it by Ass'ywoman Karnette, Sen. Lowenthal and Mayor Foster.
On August 15, city management sent a memo to the State Legislation Committee describing the then-forthcoming measure...and cc'd the memo to all Councilmembers. On August 18, Assemblywoman Karnette used the legislature's "gut and amend" technique (deleting the text of one measure, pouring new text into it that circumvents most regular Committee hearings) to advance city management's desired verbiage.
On Aug 19, city management mentioned the bill as the first item in an agendized verbal report on multiple pending bills presented to the Council's State Legislation Committee. Asked by Councilwoman Bonnie Lowenthal how much money the bill could bring in, city management said roughly $130 million over ten years...to which Councilwoman Lowenthal replied, "Wow"...and the Committee voted to "receive and file" on management's legislative report.
On August 27, reporter John Canalis first described the bill online on Press-Telegram.com, followed by LBReport.com. Environmental opposition from Communities for a Safe Environment (Gabrielle Weeks & Jesse Marquez) followed quickly...and LBReport.com reported the positions of both sides (coverage: click here.)
LBReport.com subsequently learned that in an Aug. 29 email 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...
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...
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.
City Hall Government Affairs Manager Modica has previously indicated that 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.
It 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.
