Los Angeles Times article

Oil company spending lavishly to get around Carpinteria law

Michael Hiltzik

February 21, 2010

Carpinteria is a lovely little city on the Pacific just south of Santa Barbara, boasting such features as a city-owned coastal preserve and one of the four remaining seal rookeries in Southern California.

Just about the last place you'd expect to become the target of a hostile corporate takeover.

The corporation is Venoco Inc., an independent oil company with revenue of more than half a billion dollars a year, which currently owns an oil storage facility in Carpinteria. One would get weary painting big oil companies as soulless monsters, if Venoco didn't make it so easy.

This Denver-based firm is spending lavishly to pass a ballot initiative specifically exempting itself from the city's industrial development and environmental rules.

That's because it's afraid that Carpinteria's elected officials, left to their own devices, might not greenlight its proposal to operate a 10-story oil derrick round the clock on its property next to a 225-home residential neighborhood and on the edge of the ecologically sensitive coastal bluffs.

If the Carpinteria Oil and Gas Development Initiative passes in June, however, city officials will have no say in the matter.

City requirements that all industrial developments go through public planning and land-use review? Venoco will be exempt.

Regulations aimed at reducing the effects of industrial spotlights, noise, traffic, and vibration on local residents? They won't apply to Venoco's 24-hour-a-day drilling.

What if the project threatens to drive down real estate values? Tough. Venoco won't have to take that into consideration.

Rules prohibiting noise, vibration or other industrial byproducts that could bother the seals during their mating and birthing rituals or drive them off the beach? The initiative exempts "the exploration, development, production, gathering and transmission of oil and natural gas from onshore and offshore oil fields from an existing oil and natural gas facility using extended reach drilling," i.e., Venoco.

What if Venoco decides down the line to change or increase its activities on the parcel? As long as it can show that failing to make the change would "substantially frustrate" its oil and gas drilling program, the city has to agree -- and those changes won't be subject to voter approval.

So here we are on the cusp of a new California trend: businesses that don't care to bother with legitimate government regulatory procedures scampering directly to the voters. All it takes is money.

Venoco has reported spending more than $155,000 on the initiative up to the end of 2009, but a company spokesman told me last week that more money has been spent since then. And the election is still three months away.

That may not sound like a lot for a California election, but keep in mind this is a municipal ballot in a city where candidates for office typically spend somewhere in the mid four figures. Donna Jordan, a former Carpinteria mayor who chairs the initiative opposition campaign, says her last two runs for office cost her $3,500 each.

"We're a poor, grass-roots group," she told me. "We won't be able to raise anything like Venoco."

Donna Jordan and Ted Rhodes stand near the site where Venoco Inc. want to erect an oil-drilling rig in Carpinteria.

Carpinteria has already spent more than $300,000 fighting the initiative in court. A state court judge ruled that most of the initiative appeared valid, but the city has appealed, arguing that by mandating not only general planning principles but a specific development plan, the initiative goes beyond the legal limits of ballot measures -- not only crosses the line, the city says, but "obliterates the line entirely." (The City Council also voted last week to formally oppose the measure.)

Venoco says the project might produce $200 million in royalties to be distributed to the city and Santa Barbara County over a couple of decades, but it's conceivable that the real sum could be zero. It depends on whether or how much oil is recovered, and how any resulting royalties are divided up. The city says that any money it gets may have to be spent mitigating the effects of the drilling, anyway.

Venoco, which was founded in 1992 by a former Unocal executive named Timothy Marquez, claims to be one of the largest oil and gas development companies in California. It operates several offshore rigs in the Santa Barbara Channel. Since he and his family owned more than 61% of its stock at the time of its 2009 proxy statement, it's fair to say that Timothy Marquez is Venoco.

Marquez didn't reply directly to several messages I left him. I was thinking of asking him to join in a forum with two other CEOs whose companies are spending millions of dollars to pass self-interested California ballot measures, George Joseph of Mercury Insurance and Peter Darbee of Pacific Gas & Electric Co. The tentative title: "Let

Your Money Do the Talking."

Venoco filed its application with the city to install the oil derrick next to its storage tanks in 2005. The idea was to drill under the ocean from onshore, rather than set up a rig in the water. Under the existing municipal code, such a project would be illegal.

For the next four years the city and the company negotiated. The city held extensive hearings and launched an environmental review. Early last year, after the review identified 11 "significant and unavoidable impacts" from the proposal, Venoco abruptly withdrew its application, halting the environmental review, and hired a firm to send paid signature gatherers into the city. The initiative was duly certified for the June ballot as Measure J.

As City Atty. Peter Brown observes, Measure J is a step backward from the proposal Venoco had brought before the city. It lacks the health and safety protections normally required under municipal law, and it won't be subject to an environmental review. "When voters go to the polls they'll have no official report telling them what the impacts are," he told me. Although the project would still be subject to state Coastal Commission approval, the initiative would take the city out of that process -- in effect, only Venoco could dicker with the commission over the project.

Will Carpinteria's 6,000 or so voters be taken in? No one suggests that Venoco's proposal doesn't deserve formal scrutiny, especially amid concern about our appetite for imported oil. But the city was doing exactly that, and no one, including Venoco, suggested that the process was rigged until Venoco itself moved to rig the game by writing its own rules and trying to buy them a place in the municipal code.

Carpinteria has traditionally been sensitive about its natural setting and the fragility of its environment, so perhaps Venoco's money won't count for much. On the other hand, this new sign that government in California is for sale to the highest bidder reminds me of a line from Lily Tomlin: "No matter how cynical you become, it's never enough to keep up."

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at michael.hiltzik@latimes

www.latimes.com/business/la-fi-hiltzik21-2010feb21,0,3506662.column

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