Summary

The Offshore drilling industry was created on the coast of California in 1896 and started as an unregulated, messy and lucrative business. As the industry grew, it took a toll on the aquatic environment causing the government to make laws regulating the area and technology’s the companies were allowed to use. Coastal devastation due to oil spills directly influenced the birth of the Environmental Protection Agency and Acts that further regulated the process and technology in which oil was extracted. Offshore drilling peaked and slowly declined due fear of reproductions cause by spills and shifting efforts to more lacerative lands. Although most Californians oppose offshore drilling, the potential revenue fueled from oil has sparked a political battle on the subject. The Trump administration is currently trying to open and encourage company’s to lease Government land off the coast of California in an effort to boost the country’s economic system. But the real question is, is the cost worth the benefit?

The History

Rise of the Industry

Offshore drilling in California began in Summerfield Santa Barbra in 1896. Due to the unregulated nature of this new business venture, the wells were drilled from minimally supported piers that stretched hundreds of feet out to sea. The oil was pumped using the same pipes and equipment used on land; it was not as efficiently used in an aquatic environment leading to constant leaks during the extraction. At the time oil was worth $1.18 a barrel, today estimated at $50.82, but because the men built these structures using these medieval techniques, storms and fires caused by natural events led to the abandonment of these wells. When abandoned, these piers took a toll on the environment, with rotting wood and consistent leaking of the oil from wells. This led to the first laws regulating oil and its contamination to water. In 1915 the California State Mining Bureau in San Francisco, It asked for “Some means of regulating the drilling of wells so that the operations of concern would not damage the property of a neighbor by the infiltration of water.” (1) They also go on to state “There was also a general realization of the fact that operations should if possible be so systematized as to win for the ground the greatest amount of oil at the least expense; underground water if uncontrolled would, of course, defeat such a purpose.” (1) How they planned on regulating was the start of Inspections, which is still mandatory when drilling offshore to this day. Although offshore drilling in California seemed to faze away starting in 1902 it was truly only the beginning of what was going to be a major industry. From the Early 30s to the late 40s the company’s that moved from California to the Gulf of Mexico began to experiment with techniques that would make the business more lucrative and efficient. In 1947 Dean McGee of Kerr-McGee Industries took an economic risk by pouring money into Offshore Rig technology that was feasible, economical, and environmentally sound. With the new technology, offshore rigs started popping up all over the Gulf Coast but it wasn’t until the 1960s that the industry began to take off in California again. Oilrigs were built off the coast from Santa Barbra to Long Beach by a Company called THUMS; which was made up of Texaco (now Chevron), Humble (now ExxonMobil), Union (now Chevron), Mobil (now ExxonMobil), and Shell Oil. They spent Millions of dollars in this production and it coincided with the monumental leap of the trade becoming a billion dollar industry in California and the economic growth of the Los Angles region. Alone today the four man-made islands built to extract oil from under Long Beach that “Include about 1000 active wells producing 46,000 barrels of oil and 9 million cubic feet of natural gas every day.”(2) They are still looked at as a modern marvel due to the extensive detail and amount of work put into the building of these structures. Although the seeping of oil into the ocean is natural threw fissures on the ocean floor above wells. The industry caused major environmental devastation when a pipe broke, well collapsed or a blowout happened to cause a public outcry for further regulation.

The public outcry for environmental Reform

As the oil industry continued to grow with offshore drilling the oil in the ocean waters began to increase, little at first but soon the public began to notice that small spills were causing larger amounts of oil than naturally seen to wash up onshore. Although Environmentalist were worried nothing was really done until 1969 ” when Union Oil’s platform (A) suffered a blowout six miles off the coast. The result was more than 3.2 Million gallons of crude oil were released into the Santa Barbra Channel and on surrounding shorelines.”(1) The blowout wreaked havoc on the local habitat killing fish, marine mammals, and specifically, nearly 3700 seabirds were found washed up on shore. The oil had been found in all areas from Pismo Beach to Mexico. This disaster sparked a need to reform the laws in which drilling was to be conducted and no state offshore land has been leased to an oil company since. “A class-action lawsuit awarded nearly $6.5 million to owners of beachfront homes, apartments, hotels, and motels. Commercial and recreational boat owners and nautical suppliers were awarded $1.3 million for property damage and loss of revenue. Commercial fishers lost access to some fisheries temporarily. Union Oil also settled a lawsuit filed by the State of California, County of Santa Barbara, and the towns of Santa Barbara and Carpentaria in the amount of $9.5 million for loss of property.”(3) Along with Union Oils Repercussions, legal action was taken due to public outcry for better regulation starting with the Department of Interior creating new guidelines on better surveying and the proper technology before drilling. This event led to the end of the “Wild West” of drilling offshore in California and other big business that were destroying the environment.

Environmental Agency’s and Acts

In the following years after the Santa Barbra Oil Blowout of 1969, the government had to listen to the public outcry for a change in big business and the way it’s affecting the Environment. First, the Department of the Interior put regulations on offshore drilling and created stricter guidelines and acceptable technology before any drilling can occur, it took about Five years after the 1969 incident before a new platform was approved. Two years later after multiple failed attempts to create an ultimate entity to protect the environment, the Environmental Protection Agency (EPA) was established by the Nixon administration to, (book Pg 982)”Consolidate environmental regulation under one room”. Before the EPA it was hard to completely keep business in check, now a “mammoth structure of federal and state regulation,” (book pg 983) has the right to punish those who disobey the law with civil to criminal penalties, including Imprisonment. The agency was formed with the intent to create a massive regulation system with subcategories specific to our nations natural resources. In 1972, Congress passed the Clean Water Act (CWA) with the intent of making, “All navigable water suitable for swimming and fishing by 1983 and to eliminate the discharge of pollutants into navigable water by 1985.” (Book pg 989) The statutes that directly affected the oil industry; under the enforcement of the EPA, the WCA intended to solve these issues by Eliminating point sources, which are pipes or leaks that directly flow into all navigable water and made it illegal unless you had a permit. Pollution limits, The EPA set limits, by industry, on the amount of each type of pollution any point source can discharge and the technology that must be used to treat it. The standards are based on best available technology (BAT) that each industry can use to reduce pollution. Furthermore, standards become obsolete quickly as technology changes.”(Book pg 990). Due to escalated technological advancements in the late 1900s and (BAT), the remaining Oil Company’s in California became more efficient, Peaking in the late 70s and early 80s in quantity produced. In the years following the industry steadily decreases, oilrigs closed down off the coast of California shifting their effort and money into a new, less regulated, and lucrative areas like Texas, The Gulf Coast, and The Middle East. Today the EPA has established a division specify for the purpose of regulating these rigs called the Division of Oil, Gas and Geothermal Resources. With this regulation and the technological advancements in place pollution from these rigs are minimal and the coast has recovered from the once careless industry

Current Offshore Industry

Rigs and Economics

According to the California State Lands Commission, “There are 19 offshore oil and gas agreements in California waters, which are what remain of the more than 60 originally issued.” There are only 4 remaining oilrigs in state waters off the coast of Santa Barbra, Huntington Beach, an artificial island in Long Beach Harbor, and 23 off in federal waters leaving only 27 active wells. The rigs contribute only about 10% of all oil extracted in California’s Multibillion-dollar industry that generates more than 26.4 billion in local and state taxes along with 28.5 billion in sales tax. Its also contributes to the 1.7 million jobs with an estimated 111 billion in labor income 10% does not seem like much but it comes out to just above 7 million dollars in taxes, 170,000 in jobs and 11 million in labor. The stats show that there is potential in the offshore industry being that only 27 rigs are producing that amount of tax and labor revenue which has some people scratching there head on why isn’t the government and business pursuing this venture. (5)

Politics

In 2015 a pipeline near the coast in Santa Barbra which was directly linked to the oil rig Holly broke spilling over 100,000 gallons and an estimated 21,000 of that flowed into the ocean in one of the most environmentally diverse regions in California. The event killed a large population of plants and animals, the public was reminded of the 1969 event and looked to the leaders of our nation for further action against the industry. At the time Brock Obama was the president of the United States of America, During Obama’s two terms as President, he consistently looked for ways to help improve our environment and was extremely interested in clean energy. Even though Obama is an environmental advocate his hands were tied in the 2015 incident and did not have the power to ban offshore drilling from California. He took plans to Congress many times but was shut down due to the lack of opposition of offshore drilling in California, Even though a poll done in January 2018 by the Non-Partisan Public Policy Institute of California says, “69 percent of Californians oppose new offshore oil drilling, while 25 percent support it.”(7) Niel Lawrence, Alaska Director for the Natural Resources Defense Council thinks it because “the Pacific has been the victim of its own blessed state.” He goes on to say that “It’s been decades since anyone was foolish enough to propose new drilling off the Pacific Coast. And as a result, there hasn’t been this long history of public mobilization around saving the place.”(8) Obama was able to get away with one ban of Offshore Drilling in the Atlantic and Arctic regions by using the Outer Continental Shelf Act of 1953 which can bar areas of offshore drilling by making it a national monument. The Act came as a huge disappointment to up and coming president Donald Trump because “Section 12(a) does not include language that allows future presidents to undo the withdrawal of offshore areas from future leasing.”(6). This directly effected Trumps plan to open up and encourage Company’s to drill off all coasts with oil wells in an effort to boost the country’s economy. Trump looks to find a loophole, which he does in April of 2017, he signed two executive orders one to review all large national monuments and a second a few days later to review all marine sanctuaries created in the last 10 years. Trump claims that the restrictions that are in place are, “Job Killers” stunting the nation’s growth, which can be viewed as a threat to national security. Trump states “This executive order starts the process of opening offshore areas to job-creating, energy exploration,” Trump said in remarks before the signing. “It reverses the previous administration’s Arctic leasing ban and directs Secretary Zinke to allow responsible development of offshore areas that will bring revenue to our treasury and jobs to our workers.”(9) Now with the threat of new leasing of offshore land to oil companies and a predicted lack of regulation, “California State Assembly passed SB 834, a measure that prohibits the State Lands Commission from allowing any new wharfs, piers, pipelines and other facilities in state waters from the shoreline out to three miles offshore that could be used to expand oil production.”(7) California politicians are listening to the people and are acting, one it one of them, State senator Hanna Beth Jackson, says “The Trump Administration’s proposal to dramatically expand offshore oil drilling is dangerous, reckless, and a direct threat to our coastal community.” another Politician in the fight D-Santa Barbara, the bill’s sponsor says, “California must stand firm in our opposition to this expansion, which could devastate our marine ecology, public health, and coastal economy.” At this point, we can see that the offshore drilling industry is currently at a standstill due to a political battle between the federal government representing economic growth and state legislators representing the majority of Californians and its environment.

The Cost-Benefit Trade-Off

This semester in the class Legal Environment of Business, While Learning Environmental Law, one topic of interest that can help distinguish the right path to be taken with offshore drilling would be The Cost-Benefit Trade-Off. The best way to describe The Cost-Benefit Trade-Off is as it says in the book, “who will pay? Who will pay for the past damage inflicted before anyone understood the harm that pollutants cause? Who will pay for current changes necessary to prevent damage now and in the future? Environmental issues like offshore drilling its hard to dictate the weight of cost to benefit with so many factors. With offshore drilling, on one side you have potential growth in the economy and the possibility of environmental devastation versus a loss of potential economic revenue and a perfect natural habitat. What we learned in class to help make a viable decision like offshore drilling is an externality, “when people do not bear the full cost of there decisions” Because “people who pay the cost do not always receive the benefit.” What that means is best described in the book as so, ” If a company dumps toxic wastes into a stream, its shareholders benefit by avoiding the expense of safe disposal. Those who fish or drink the waters pay the real cost without receiving the expense of safe disposal.” So we can relate this to Offshore drilling by first looking at the loss of economic revenue by shutting it down. The Oil Industry is a trillion dollar industry considering its international with thousands of derricks all over the state alone, with only at most 10% of is production coming from offshore drilling, without these wells how will it affect it? On the other side, we have the effects of a potential oil spill, we can use 1969 as an example. Thousands of dead sea animals and birds washed up on shore, an ecosystem that provides Jobs for the multimillion-dollar fishing industry destroyed, property owned by beach house owners destroyed, and one beautiful scenic California coastline that local business uses for tourism destroyed. Yes, Union Oil did “pay” for their actions but did they pay in full? The people affected received around 17.3 million dollars of the Billion-dollar company yet the people and animals affected lost everything. When you look at the big picture of offshore drilling in California, the oil industry pays nickels and dimes to make a very small profit at the cost of ruining something there’s one of, our earth. So is it ethically and morally right to peruse this industry? No. Is it a smart and lucrative business? Yes. As long as the oil industry is around it will always win. The battle between the two, oil companies and environmentalist, will most likely continue till there’s no oil left on this earth or there’s no reason for the environmentalist to fight because our coastal ecosystem is already destroyed.

References

(1) ftp://ftp.consrv.ca.gov/pub/oil/laws/laws_1915.pdf

(2) https://aoghs.org/technology/thums-california-hidden-oil-islands/

(3) http://www.pophistorydig.com/topics/santa-barbara-oil-spill/

(4) http://www.slc.ca.gov/Info/Oil_Gas.html

(5) https://oilprice.com/Energy/Crude-Oil/How-Big-Is-Californias-Oil-And-Gas-Industry.html

(6)https://www.politico.com/story/2016/12/obama-bans-offshore-drilling-in-parts-of-arctic-and-atlantic-232864

(7) https://www.mercurynews.com/2018/08/28/california-passes-bill-to-block-trumps-offshore-oil-drilling-plans/

(8) https://www.scpr.org/news/2016/12/21/67452/why-obama-s-offshore-oil-drilling-ban-didn-t-exten/

(9) http://www.climatecentral.org/news/trump-review-obama-offshore-drilling-21405

Book

Other Resources

https://response.restoration.noaa.gov/about/media/oil-spills-seeps-and-early-days-drilling-oil-along-californias-coast.html

ChartsBin statistics collector team 2014, Historical Crude Oil prices, 1861 to Present, ChartsBin.com, viewed 5th December, 2018,

ftp://ftp.consrv.ca.gov/pub/oil/history/History_of_Calif.pdf

https://www.latimes.com/local/lanow/la-me-ln-santa-barbara-oil-spill-1969-20150520-htmlstory.html

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