By: Martín Olvera
Ever wondered what those massive structures off the coast of California are, and how much longer they are going to be there?
Those are offshore oil platforms that, at their peak, supplied California with thousands of barrels of oil, but today are in their twilight years of production and facing eventual removal, or decommissioning. Complete removal is the status quo, but should California mandate that these structures are completely removed? Or should they investigate other decommissioning options, such as repurposing part of the platform structure as an artificial reef? To break the status quo, California would need to establish its own “Rigs-to-Reefs” (RtR) program, similar to the RtR program established in the Gulf of Mexico by the States of Louisiana and Texas, whereby retired oil platforms could be converted into permanent artificial reefs for local marine species.
The first push to establish a California RtR program was in 2001, with Senate Bill 1 made its way to the desk of former Governor Gray Davis, who ultimately vetoed the bill, citing the lack of solid evidence that “artificial reefs” provided any benefit to the environment. Afterwards, several studies – namely, those by Dr. Milton Love and Dr. Jeremy Claisse – concluded that there were environmental benefits to converting California’s offshore oil and gas platforms to artificial reefs, based on the abundance of marine life and the thriving marine ecosystems found to be underneath them. Subsequently, in 2010, then-Speaker of the Assembly, John A. Pérez (D-Los Angeles), introduced Assembly Bill (AB) 2503. This bill, also known as the California Marine Resources Legacy Act (CMRLA), looked to lay down some guidelines for establishing a California RtR program. However, there were several underlying issues with the bill, principally pertaining to matters of liability among other disputes. As a result, today nearly ten years later, California has still not utilized AB 2503 and none of California’s offshore platforms have been converted into artificial reefs. Where did AB 2503 go wrong?
There are several fundamental problems with AB 2503 that need to be addressed before a RtR program in California can be successfully implemented. One of the main sticking points for the oil companies is the liability issue. Under the CMRLA, the oil companies maintain liability for the platform jacket even after having turned ownership of the structure to the State, indemnifying the State of California against any future violations. While liability for the wells remain with the oil companies in perpetuity, so should there ever be a leak, they will be responsible, the continued maintenance of the platform jacket liability is considered a major risk to oil company stakeholders. This is especially a concern should the state of California retroactively eliminated the RtR program, forcing oil companies to return to remove their reefed structures. To make RtR a viable and attractive option for oil companies, the State of California needs to amend AB 2503 to allow a state agency to take on the liability of the structure once ownership has been transferred to the state.
In addition, the CMRLA includes a progressive payment scale that proves to be economically unfriendly for interested oil company stakeholders. It boils down to 3 numbers: 55, 65, and 85 percent. From 2010 to 2017, oil companies would have paid 55 percent of the cost savings[1] of the artificial reef conversion to state, into an endowment for Marine Preservation and Conservation in California. If they waited after 2017, then the payments would jump to 65 percent of cost savings and 85 percent of cost savings after 2023, respectively. This was intended to incentivize oil companies to implement RtR sooner rather than later. Since a state run RtR program never materialized, the cost to enter the RtR market for oil companies has become expensive and burdensome to participate in. If the State of California set a fixed cost savings rate, it would be more likely to bring oil companies to the table. Since the passing of AB 2503, there have been several attempts to modify the CMRLA to address its shortcomings, including efforts lead by State Senator Bob Hertzberg in 2015 (SB 233) and 2017 (SB 588). SB 588, the most recent amendment attempt would have modified the CMRLA to streamline the RtR permitting process and potentially modify the financial incentives. However, efforts to pass these new amendments have all failed.
Similar programs have been successfully implemented in the Gulf of Mexico and states such as Texas and Louisiana have converted hundreds of offshore oil platforms into artificial reefs. However, California has not established any precedence for this type of artificial reef conversion, and since the passage of AB 2503 in 2010, there have still been no offshore oil platforms converted into artificial reefs in California waters.
Although this law has various flaws that need to be addressed, we can confidently make assumptions as to where California should start. AB 2503 represents a step in the right direction to ultimately provide options for the future of California’s offshore decommissioning and help preserve the robust and complex ecosystems along its coast.
[1] The difference between the estimated cost of removing the offshore oil platform from the ocean and from partial decommissioning.