Venoco Inc. on Thursday made a far-reaching proposal to the State Lands Commission that would bring an end to most of its offshore oil production more than a decade ahead of schedule.
Included in the sweeping offer are plans to shut down the iconic Platform Holly in the Santa Barbara Channel and the Ellwood Onshore Facility near Haskell’s Beach in Goleta, as well as the abandonment of the Denver-based company’s controversial Paredon project off the Carpinteria coast.
The commission already is examining a Venoco proposal to modify its lease boundary in the South Ellwood Field near Goleta.
If approved, the new territory would allow the company to extract more oil, more efficiently, from the area’s Monterey Formation thousands of feet below the sea floor.
The commission is scheduled this week to release the draft environmental impact report on that proposal, known as the South Ellwood Field Lease Line Adjustment.
As part of the proposed adjustment, Venoco would return 3,800 acres of its lease — including all of the near-shore area off Goleta — to the State of California in exchange for 3,400 new acres east of its current boundary.
Venoco is now offering to close down the field’s Platform Holly and the Ellwood facility 15 years earlier than in the original lease line adjustment request, and subsequently cede its leases back to the state.
Under the proposal, Venoco would maintain its South Ellwood leases for 40 years from the adjustment’s approval — when the company expects oil production to no longer be economical.
That acreage exchange, said Chris Peltonen, Venoco’s Southern California geoscience manager, would leave 20 million barrels of oil in the ground while opening up access to 60 million barrels in the new area.
Venoco’s more efficient extraction of that new oil, he said, would allow the company to close down and remove Platform Holly, two miles off the Gaviota coast, and the onshore facility on Hollister Avenue between Sandpiper Golf Club and Bacara Resort & Spa after 25 years.
Under its new proposal, Venoco would then “quitclaim” its leases back to the state. The proposal also commits Venoco to halting any plans to move forward with its Paredon project leases just off the coast of Carpinteria.
Extracting the new oil will not require any new infrastructure, company officials say. Six of the 30 well slots Venoco already operates in the oil field would be extended horizontally eastward in the Monterey Formation to get at the oil.
Peltonen emphasized that hydraulic fracturing, commonly known as fracking, is not part of the new proposal; the formation, he said, is already fractured enough due to natural geological processes.
Mike Wracher, Venoco’s chief operating officer, told Noozhawk that the company is hopeful that the lease line adjustment will come before the State Lands Commission early next year.
The commission can approve Venoco’s new proposal alongside its approval of the adjustment, he explained.
The lease line adjustment would provide numerous local jobs and considerable revenue for the state, company officials said, adding that the new proposal’s accelerated termination of offshore production is a nod toward California’s clean energy goals.
“We offer today’s proposal in the spirit of compromise as a way to realize the benefits of the LLA while being consistent with the direction of the state and the feedback we’ve received from the community,” Wracher said in a statement.
For many in Goleta, however, Venoco’s operations can’t end soon enough.
City Hall is eager to shut down the onshore facility, which is considered a legal nonconforming use of land zoned for recreation. Environmentally minded residents bristle at the notion of oil operations in their backyard with the May 2015 Refugio oil pipeline leak still a fresh memory.
“We appreciate the initial effort to put an end to the onshore facility,” City Councilman Tony Vallejo told Noozhawk. “I think we all agree it has to go. I’m not completely happy with the initial offer; I think we have to reduce that timeline that they’re referring to.
“It’s a good start, but it’s, hopefully, something we can negotiate — especially when it comes to timing,” he added. “Twenty-five years is just too long.”
For environmental groups, the project in its entirety is unacceptable.
“We don’t think this project should be allowed at all,” said Linda Krop, chief counsel for the Santa Barbara-based Environmental Defense Center. “It’s an area that’s supposed to be protected.
“These facilities are very old, we just had a major oil spill, we just want this infrastructure to go away,” she told Noozhawk. “They’ve had 50 years of production from the platform and the Ellwood Onshore Facility, and we don’t want to see another 25 or 40 more years.”
Krop said the EDC and the organizations it represents “strongly oppose this project in any form because it will allow drilling in the (California Coastal Sanctuary) and would pose unacceptable risks and impacts to this very sensitive coastal environment.”
In the long run, the only practical way for Venoco to get its new oil to market as gasoline will be via a pipeline, company officials said.
Repairing the Plains All-American Pipeline line that was shut down after the Refugio spill, or replacing it with a new one, would — optimistically — take two years, Wracher told Noozhawk.
Peltonen said he was confident the issue would be resolved by the time new oil production is ready to start.
Venoco, which sued Plains earlier this year for lost profits, recently exited a restructuring process after filing for bankruptcy in March.
The reorganization relieved Venoco, already suffering from low gas prices, of $1 billion of debt. It is now almost entirely owned by Apollo Investment Corp., which decided to leave the company’s management intact.
With the release of the original lease line adjustment draft EIR, the public will have 60 days to comment before the proposal returns to the State Lands Commission.
— Noozhawk staff writer Sam Goldman can be reached at sgoldman@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.
