“That’s a loaded question,” Bob Geis told Salud Carbajal at a county budget hearing last week. “Oil is a very complicated subject.”
Carbajal, who is supervisor for the county’s 1st District and is running for Congress, asked Geis, the county’s auditor-controller, if the loss in tax revenues would impact school districts after oil production at seven offshore platforms shut down following the Refugio Oil Spill in May. Specifically, Carbajal asked, will Plains All American Pipeline, the company responsible for the spill, repay schools and other government entities for lost tax dollars?
The question is at the heart of the lasting economic impact of the May spill. Earlier this month at the Economic Action Summit, Mark Schniepp, director of California Economic Forecast, which is funded in part by oil companies, grabbed headlines when he said the ruptured pipeline could be shut down for up to five years. Further, he claimed, school districts — namely Goleta Union School District — could suffer property-tax losses to the tune of $26 million dollars over three years. “These numbers are preliminary,” Schneipp said in an interview this week. “They may end up going higher.” He added the annual loss in federal and state royalties translates to about $5 million absent from county coffers.
But naysayers contend those lost revenues are legally required to be repaid by Plains. According to County Counsel Mike Ghizzoni, federal and state laws allow various entities to claim net loss of taxes caused by an oil spill. But it remains to be seen if Plains will readily fork over the money or if the matter will turn into an ugly court battle.
On Monday, the county received a second check from Plains for the amount of $1.2 million, bringing its total recovered to date to $1.6 million for short-term overtime staff costs and cleanup costs. Both were 100 percent of what the county asked for. The preliminary estimate for the next claim, Geis said, is $117,000, but his office is still collecting daily time cards.
Those who lean on the sanguine side of the oil industry doubt Plains will be responsible for losses in taxes because the county denied Exxon’s emergency permit to haul oil by truck — and therefore resume operations — in June.
Interestingly, Venoco’s Platform Holly — located off Ellwood beach in state waters — is in a tax rate area that includes the Goleta Union School District, which is a “basic aid” district and gets to keep most of the excess money raised through property taxes.
When the price of oil peaked the year before last, Geis said, Venoco began to pump more oil at its onshore facility. But the price of oil tanked last year from about $100 to $58 per barrel, and the school district’s tax revenues took a $1.2 million hit. Other facilities had similar impacts on the tax revenues, Geis said, but not as significantly.
The impact in tax revenues from the spill will not be known until next summer. The seven platforms — excluding Holly — are located in federal waters and do not impact county tax revenues. County departments, such as the Air Pollution Control District, which is funded in part by oil companies, might delay filling some open positions.
In coming weeks, Plains workers will dig up 11 sites along Line 903 — the 130-mile pipeline that runs from the Gaviota Station to a Kern County facility — which has been idled with viscous crude in it since it was ordered to shut down nine days after Line 901 ruptured on May 19.
The workers must expose corroded areas and make repairs before the pipeline is purged, which is expected to take two weeks. This action is a result of an updated corrective action order issued by agents with Pipeline and Hazardous Materials Safety Administration (PHMSA) last week. It remains unclear why the federal regulators chose now — just before a possible rainy winter — after the South Coast experienced a very warm autumn. Since May, viscous crude oil has sat unprocessed in the unheated metal pipes. The protective anti-rust chemicals introduced — also known as pickling the line — only last about six months.
PHMSA’s independent review of inspection results from the past decade found that Line 903 — particularly the Gaviota to Sisquoc segment — had corrosion similar to that of Line 901. In fact, Line 903 has larger areas of external corrosion, the report stated.
“The fact that both lines had such pervasive corrosion for tens of miles is really alarming,” said Environmental Defense Center attorney Linda Krop. “It reinforces our concern about the lack of appropriate oversight.”
Krop submitted a Public Records Act request to PHMSA for copies of prior inspection reports of the pipeline. “They thought it would take 54 days, but it has been six months, and we’re still waiting,” she said.
According to the corrective action order, Plains failed to provide the third-party inspector (also known as “pig vendors”) with field data from direct investigation and measurements.
Plains executives claimed they did not agree with several of the findings but stated they were already engaged with PHMSA to purge Line 903. “As called for in the [corrective action order], Plains will complete the activities in coordination with and under oversight from PHMSA as quickly and safely as possible,” the statement read.
Once the crude and water is pushed up to the Santa Luis Obispo refinery, the pipeline will remain shut down. In addition, Plains must submit a plan to federal regulators that identifies and remedies any anomalies on Line 903 that are similar to the broken pipeline’s. It also must turn over field data to the third-party inspector and request a reevaluation of the smart pig results.
Federal regulators are planning to meet with county Planning & Development staff on November 19 to discuss the order. Representative Lois Capps, who helped arrange the meeting, said in a statement she was pleased PHMSA was taking precautions to prevent another spill. “The Corrective Action Order amendment’s inclusion of Line 903 is an important step to ensure that all necessary repairs are in place before this pipeline service is restored,” she said. “Transporting oil is inherently risky, and we must do all that we can to ensure that, if we are going to continue transporting oil, it is done with the utmost care and caution.”
According to the county, Exxon’s crude-oil pipeline from the platform to shore is also filled with crude oil. The company is reportedly in the process of applying for a temporary trucking permit to purge the pipeline, but it has not been submitted. Earlier this year, the City of Goleta approved a temporary trucking permit to allow Venoco to drain its Ellwood Onshore Facility.
It remains unclear exactly how many oil-industry workers — many earning six-figures — were relocated after the spill. Speculation abounds that 200 Exxon platform workers on rotating shifts were relocated. (Earlier this year, Exxon shut down its Torrance refinery after a large explosion.) The oil industry hires a lot of contract workers, and none of the company employees are represented by a labor union.
Santa Barbara attorney Barry Cappello, who was the City Attorney during the 1969 oil spill, is the lead trial counsel for Refugio class-action spill cases filed in federal court, representing industry workers, fishermen, tourist industries, and property owners, among others. Though he has not yet seen the actual paperwork, Cappello stated that people who file claims against Plains could be giving up claims for future damages.