Atlantic Richfield Co. v. State Lands Commission

No. C 663 010 (Cal. Super. Ct. Los Angeles County January 24, 1991)

The court holds the California State Lands Commission's denial under the public trust doctrine of an oil company's proposal to build new platforms on an existing offshore oil lease is valid if the proposal presents unacceptable environmental risks. The Commission alleges that even small amounts of pollution from the operation would contaminate the pristine seawater used by the University of California's marine research center in Santa Barbara, and would endanger a wildlife and marine life reserve. The court first holds that a federal court of appeals decision does not apply to this case because there is no federal public trust doctrine in California. Offshore oil and gas development in California waters is subject to the California public trust doctrine. Further, unlike the federal case, the Commission has not approved the project and the oil company is not justified in relying on statements by the Commission's staff that the project was likely to be approved. The court notes that under the California public trust doctrine, all public lands are forever held in the public use until actually used. Thus, California offshore tidelands are always subject to the doctrine until developed. The court holds that existing environmental impact reports are not adequate for the Commission to approve the location of the platforms. Those reports dealt with exploratory issues and did not envision the specific environmental concerns raised by the platforms. The court rejects the argument that the state must determine all limitations on an oil lease at the time of the leasing. Offshore oil development is a multi-stage process with a tiered environmental review process. The decision to lease does not mean that the state has lost its authority to review specific exploration and development activities. Finally, the court holds that the Commission is not estopped from denying the platform proposal.

John K. Van de Kamp, Attorney General
N. Gregory Taylor, Ass't Attorney General
3580 Wilshire Blvd., Ste. 800
Los Angeles CA 90010
(213) 736-2607

Counsel for Plaintiff
Edward S. Renwick, Ivan J. Tether
Hanna & Morton
600 Wilshire Blvd., 17th Fl., Los Angeles CA 90017
(213) 628-7131

Joseph L. Sax, Eric Behrens
University of California
590 University Hall, Berkeley CA 94720
(415) 642-5001

Counsel for the Defendant
Richard M. Frank, Deputy Attorney General
1515 K St., Ste. 511, P.O. Box 944255, Sacramento CA 94244-2550
(916) 485-9555

[21 ELR 21320]

Savitch, J.:

The plaintiff, Atlantic Richfield Company ("ARCO") contends that the Court is legally empowered to review the voluminous administrative record as an independent trier of fact, determine the weight, materiality and relevancy of the evidence adduced at the hearings before the Defendant State Lands Commission ("The Commission"), and agree with ARCO that:

1. The Commission's denial of ARCO's project for development by specifically locating the sites of two platforms is, legally and factually, tantamount to an indefinite, open-ended suspension of its five leases in tide and submerged lands in the Goleta area and works an unauthorized pro tanto cancellation of those leases because ARCO has properly addressed the feasibility or infeasibility of all adverse impacts, and that no feasible alternatives exist;

And to not agree with The Commission's position that the denial is only a temporary suspension because The Commission has invited ARCO to reapply to The Commission to explore and reevaluate the feasibility of development plans that might mitigate adverse environmental impacts, and The Commission is merely deferring and only denying maximum production now;

2. ARCO's experts are to be believed when they opine that the geological, geophysical and drilling placement of wells mandate the location of the platform selected by ARCO, particularly Platform Heron, for the full development of the Monterey Reservoir, the proposals of the Defendant State of California ("The State") to relocate the platforms would turn the project from a positive to a negative cost;

And to not agree with The Commission's experts that the Monterey Reservoir can be fully developed at a reasonable cost by other means such as using existing Platform Holley, placement of platforms at other locations, and drainage methods, reducing piping, all without disturbing the hard rock bottom marine habitat and thereby eliminating environmental problems;

3. Although ARCO's original application was based upon ARCO's then thinking that a fault existed and there were three separate pools necessitating the location of three platforms in the center of each pool, this was corrected in or about 1985, and The Commission was fully informed by maps and other data submitted to The Commission that there was no fault, and only one pool existed, albeit still using, for descriptive purposes only, the historical names of Ellwood, Coal Oil Point, and Embarcadero;

And to not agree with The Commission's experts who opine that this radically different interpretation now permits essentially full development by means of drainage, eliminates the need to locate wells all over the reservoir, allowing platform locations other than those proposed by ARCO, and permits well slots for Platform Holley to tap the Monterey Reservoir;

4. The denial was based on five adverse environmental impacts which were fully and completely addressed by the environmental impact reports, and ARCO has done everything feasible or the impact was defined as a Class I impact, one as significant and one which could not be enabled to mitigate to insignificance;

And to not agree with The Commission's arguments that the denial by The Commission was based on more than five adverse environmental impacts, and more than the environmental impact reports and statements, including the lease provisions, laws contained in the Public Resources Code, its own regulations, the doctrine that all public lands are held in trust for the benefit of the public, and the cases interpreting that document, and The Commission is not seeking complete mitigation of the five environmental impact reports, and, in all events, environmental impact statements are only informational and certifying them complete does not foreclose other rights;

5. The risk of oil spills is negligible and, in all events, ARCO has done everything feasible to protect against oil spills, a Class I impact;

And to not agree with The Commission's and the Regents of the University of California's experts that even a minor oil spill could seriously contaminate the pristine seawater which the University of California at Santa Barbara's World Class Scientific Marine Research Center is totally dependent upon, could threaten to eliminate the Coal Oil Point Reserve, a wildlife and marine life preserve of marshes and mudflats, one of the few such remaining areas in the State of California, and ARCO's proposed measures to protect the Reserve and the Marine Research Center are inadequate and ineffective;

6. ARCO's proposed relocation of Platform Heron would reduce to insignificance all possible effects on the hard bottom benthic habitat;

And to not agree with The Commission's experts' opinion that there is no conclusive evidence that ARCO's proposed relocation of Platform Heron would reduce to insignificance all adverse impacts on the hard bottom, and the only alternative would be to relocate Heron off the hard bottom entirely, and such proposed relocation would always require a supplemental environmental impact report;

7. ARCO has fully mitigated the visual impacts of the location of Platform Heron;

And to not agree with the Regents that the location would substantially affect the business and tourism in Santa Barbara, interfere with the University Research Programs, and cause students and faculty to be less attracted to the University;

8. Phasing of the operation of the wells is feasible, but only if the construction and utilization of Platform Heron is the first phase in order to obtain maximum production, phasing of operations is only a postponement and has no net environmental or reservoir benefit;

[21 ELR 21321]

And to not agree with the Commission's experts, who opine that phasing can commence by utilizing the well slots from Platform Holley to tap the Monterey Reservoir when they become available, as existing slots are abandoned, then erect Platform Haven in the second phase, and perhaps thereafter, erect Platform Heron.

The Environmental Defense Center contends that the Court's role is limited to reviewing the agency's decision for procedural compliance with the California Environmental Quality Act and determining whether the decision is supported by substantial evidence.

The State contends that the role of the Court is to review the administrative record with an eye toward determining whether there is sufficient evidence to support The Commission's decision, which it characterizes as a denial of only a site-specific project, with The Commission's invitation to ARCO to reapply to it for the development of the Monterey Reservoir, and whether or not it employed fair procedures within the scope of its authority.

It is the view of the Court that the rule of reason and law dictate that the role of the Court is not to act as a super state lands commission, and certainly not to inject itself into this highly complex field of offshore oil and gas exploration and development by independently analyzing the record and by other independent evidence, including hiring its own experts. The Court's role is to determine if the judgment of The Commission is not arbitrary.

But ARCO contends that in fact The Commission did not act within the scope of its authority. In support of that contention, it cites, among other cases, and strongly relies upon the holding in the case of Union Oil Company of California v. Morton (9th Cir. 1975) 512 F.2d 743 [5 ELR 20218].

Union Oil holds only that the Secretary of Interior could only suspend lease activities because the sole basis of his action was a newly adopted regulation permitting a suspension, and then the suspension must be temporary because the Secretary lacked authority under a new regulation to cancel a previous lease.

The Court does not agree with ARCO that Union Oil applies to this case because there is no federal public trust doctrine, as exists in California, which holds that submitting offshore California lands to oil and gas development is conditioned upon the public trust doctrine. In addition, in Union Oil, the application for the installation of the platform had already been formally approved by the Secretary and, thereafter, the Secretary reversed that formal approval and withdrew the permission previously given. In this matter, no such approval had been given, formally or informally, by The Commission, and there was no withdrawal in terms of this development. ARCO is not justified in relying on The Commission's staff representations, which indicated to ARCO that the ARCO project was likely to be approved after the exploratory operations approval. This preliminary approval does not bind The Commission to a full-scale development of the project, because The Commission must take into account and rely on different kinds of considerations, a different and broader view of that required of the staff. In Union Oil, the purpose of the federal government was to remove the area from oil drilling and to createa marine sanctuary. Here, the state has not sought to shut down or restrict other existing oil developments in the leased area. The Union Oil court stated that there were decisions that could have and should have been made by the Secretary at the lease stages. Here, the leases executed decades ago have no way of forecasting the unknowns and unknowables of developments such as the enactment of comprehensive development laws, the 1969 Union Oil well blowout, the creation and construction of a major educational institution in Santa Barbara, renowned for its World Class Scientific Study of Marine Life, the possible need to protect and preserve the few remaining shore reserves such as the Coal Oil Point Reserve. This is the beauty of the California doctrine that all public lands are forever held in the public use until irrevocably, physically and actually used. Thus, in conformity with such doctrine, thousands of acres of California offshore tideland are always subject to the public trust doctrine until so developed.

Relying on languages in Union Oil, ARCO states that The Commission had all necessary knowledge to approve the location of the platforms. This is too simplistic and incorrect. It argues that the environmental impact reports prescribed in 1974, 1980, 1982 and 1987 fully addressed all of the five environmental concerns, and that ARCO has done everything feasible to address those impacts. It must be understood, firstly, that the purposes of environmental impact reports is to provide input to a governmental agency and the interested parties in terms of knowledge and information, present that knowledge to people who are legitimately endowed with decision-making authority, and then they make the decision. The environmental impact statement does not make the decision. Additionally, these particular environmental impact statements were for exploratory purposes only and did not address or envision the specific environmental and platform concerns of this application, which were for entirely different concerns. Even if the March 1987 Environmental Impact Statements were appropriate for the projects proposed by ARCO, it was not adequate under the California Environmental Quality Act for approval of alternatives since adequate details were not furnished for alternatives.

ARCO also contends that its leases of offshore lands for oil and gas purposes would be rendered illusory unless, once The State decides that it will lease offshore lands for oil and gas development, it must determine the limitations on the leasing at the times of leasing. This, ARCO argues, is because no lessee would spend the enormous exploration sums and devote so much effort, as ARCO did, without assurances that it could go forward with production. Therefore, ARCO contends, having determined the lease conditions, subject only to tactical and statutory restrictions, it is only reasonable that The State loses its authority, even with important negative impacts, to deny the opportunity to go forward. But it is clear to the court, and this administrative record so directs the Court, and in a multi-stage development project, there exists a tiered environmental review process, a process that envisions preparation of environmental documents that are useful aids in forecasting on the tangible, concrete proposal then before the governmental agency. The first of such stages is to evaluate oil and gas applications for the issuance of leases, for certainly at that time, neither the proposed lessee or the government has any idea whether development activities will occur, and the preparation of comprehensive environmental statements would amount only to speculation to future events, and would not be of much use in deciding to proceed. The next stage would be the conducting of operations on leased lands and proposals for exploration and development, and to evaluate those proposals, knowing that in many leases, oil exploration is not undertaken, and that, if undertaken, no proposal might thereafter be made for oil production. The notion that ARCO or any other lessee would never proceed, would never enter into a lease, engage in exploratory drilling and spend a lot of money unless when development does come, it would be permitted to go forward is the antithesis of this multi-staged development process and the public trust. That notion means that the decision to lease becomes the decision to develop and produce, a notion that the record does not support.

Finally, The Commission is not estopped from denying ARCO the platforms because the application of estoppel is improper in a matter of great public importance. Additionally, the record is devoid of the elements necessary to invoke that doctrine.

The Court understands ARCO's anxieties and frustrations after expending enormous sums of money and time in order to find a large and profitable oil reservoir. But the Court's decision is that the denial by The Commission is reasonable, even if the environmental impact reports say that no significant problems exist. The Commission's decision is reasonable in that ARCO and The Commission should endeavor to make known the presently unknown, to explore alternatives of the proposed locations, and in that connection, to prepare and use supplemental environmental impact reports to analyze the alternatives of phasing of operations, location of other platforms, other reasonable alternatives, and the development of clear plans and procedures to protect the Coal Oil Point Reserve and the projects of the University of California and the ocean environment.

In the end, the Court determines that the judgment of The Commission was not arbitrary, and that it did not exceed the scope of its authority when it denied the specific project of ARCO.

The Court therefore denies ARCO's motion for judgment on the first, second and third causes of action, and grants the motion of The State that the following issues be deemed established.

(1) The causes of action against The State for mandate and injunction are not ripe for adjudication because the State Lands Commission has not made a final decision denying Atlantic Richfield Company ("ARCO") the right to develop further the leases and has [21 ELR 21322] invited ARCO to reapply for the purpose of exploring and evaluating alternatives to the particular project presented to and denied by The Commission.

(2) The State Lands Commission is not obligated under the Public Resources Code and the leases to approve a particular development plan if such plan presents unacceptable environmental risks.

(3) The State Lands Commission is not obligated under the Public Resources Code and the leases to approve a particular development plan, which includes the placement of particular drilling and production platforms, if the implementation of the plan would impair or interfere with other public trust uses.

(4) The State Lands Commission may defer further development of ARCO's leases for a reasonable period pending the exploration and evaluation of the technological and economic feasibility of alternative methods for further development of the leases providing greater environmental safeguards and greater compatibility with other public trust interests in the leased lands than ARCO's present proposal.