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OIL: Santa Barbara braces for a boom it doesn't want

As dawn begins to reach across the cobalt edge of the Pacific, the royal palms towering over Cabrillo Boulevard rustle in the breeze. Their rough chattering mingles with the cries of gulls overhead and the soft thump-thump of the day's first joggers on the beach.

The sun hasn't yet struck the terra-cotta roofs dotting the Santa Ynez mountainsides nor burned off the haze that gilds the horizon - hiding, for a time, the tinkertoy-sized structures offshore - 19 nearly invisible oil rigs. They are distant reminders that the Santa Barbara Channel and nearby Santa Maria Basin are taking their places alongside Alaska's Prudhoe Bay and the North Sea as world-class oil fields.

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Santa Barbara has become the country's latest - and most important - focal point for that clash between a world in need of more energy and a deeply entrenched environmental ethic.

New pools of crude have been discovered here, and the Reagan administration's intention to lessen US dependence on foreign oil sources as much as possible is hastening the drive to tap them.

That could, critics argue, turn Santa Barbara into a boom town.

On the other hand, bitter reminders of the ruinous oil spill of 1969 and the vast new powers local officials have acquired as a result are working to ensure that when the oil spigot is turned on, it will be turned on slowly.

Thus, this section of central California coastline promises to become one of two things: either some of the country's most hotly contested real estate or a model for local-government/industry cooperation in exploiting a resource without threatening a fragile environment and easy-paced life style.

''How these issues are resolved will set the stage for oil development in Santa Barbara for the rest of this century and lay down policies for the rest of the country as well,'' says Naomi Schwartz, former chairman of the California Coastal Commission.

''We're on at the cutting edge of what's happening on the Outer Continental Shelf [OCS] areas,'' adds Diane Guzman, director of the Santa Barbara County Department of Resource Management. ''What happens here will have a very large effect on OCS development elsewhere. Our procedures will set the standard for what follows.''

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For all its sleepy elegance, Santa Barbara is not a place that forgets.

Fourteen years ago last winter, this community 120 miles north of Los Angeles watched in disbelief as thousands of gallons of syrupy crude a day gurgled up from an errant Union Oil Company drill probing the ocean floor. For two weeks oil washed ashore, killing wildlife, coating beaches, and threatening property values as well as the local tourist industry. Eventually the blowout was capped, but oil continued to leak from the site for months.

That was exactly one year after the first major federal offshore lease sale, and it realized the worst fears of many Santa Barbarans. It was the nation's first major oil spill and still ranks as one of its worst.

Santa Barbara quickly became a seat of anti-oil-development sentiment. Angry residents sopped up the spills, sued the oil company, and shouted, ''Get oil out.'' They succeeded: Petroleum development in the area slumbered for 10 years.

But now that sleeping giant is awake again.

The dynamics of the international oil market - embargoes, pricing changes, important new discoveries, and the like - have brought a new luster to Monterey crude, a low-grade, high-sulfur oil previously held in low regard by the industry.

Current estimates put the amount of recoverable oil off Santa Barbara at between 1 billion and 3 billion barrels. Only Prudhoe Bay, with an estimated 9 billion barrels of recoverable oil, is a larger offshore reservoir. By 1990 California is expected to surpass Louisiana and become the country's third-largest petroleum-producing state - largely because of the activity anticipated here.

''The Santa Barbara channel is the largest undeveloped proven reserve in the Lower 48,'' says Donald Cornett, Western production division conservation manager for Exxon. ''And the Santa Maria Basin looks even more promising.''

Already 800,000 acres in the Santa Barbara vicinity have been leased to oil companies by the federal government. That makes the channel the most-leased offshore area in the country. And more tracts - including those offered in the first state lease sale - are scheduled to go on the auction block in a few months.

Peak production could result in as many as 500,000 barrels a day being drawn from the ocean depths. That level isn't expected to be reached for at least a decade. In the meantime, exploration of previously leased tracts goes on at a stiff pace. Drilling rigs, supply boats, and other equipment dot the channel like so many erector sets. If new production is allowed to go unchecked, some observers estimate that as many as 40 to 50 production platforms and dozens of tankers and supply boats will inhabit the channel.

Plenty of onshore support industries would spring up as well.

The oil companies say that increased production here will yield major new revenues for the county - $120 million over the life of the project, according to some estimates. And, they say, better spill prevention and cleanup technology should allow that to happen without any more disasters.

New technologies notwithstanding, county officials and local environmentalists worry about the threat of another oil spill as well as increased air pollution levels, water shortages, and onshore industrialization.

Santa Barbara is largely a well-heeled retirement and university town whose major sources of income are multimillion-dollar-a-year tourism and fishing industries. Political thinking here runs the gamut from conservatism to activism: President Reagan maintains a home in the nearby hills and the local University of California campus was one of the original sites of student antiwar uprisings.

Indeed, most observers split the county down the middle in terms of grass-roots support for oil development. Residents of northern sections tend to favor oil-related job opportunites, while those in the south seem more fearful of jobs lost due to pollution and industrialization.

But all parties seem determined to control the county's coastline as never before.

''No one had any feeling for the enormity of the problem at the time of the spill,'' says Ellen Sidenberg, executive director for Get Oil Out, the local environmental group born out of the 1969 spill. ''We were still being warned about the impending development back in the mid '70s.''

However, not only have federal and state land- and water-use requirements been stiffened - the Santa Barbara Channel now has three protected areas - but under state sanction a Local Coastal Plan also has been formulated. Under the 1972 federal Coastal Zone Management Act (CZMA) and the California Coastal Act of 1976, the county now has permitting authority over its own coastal zone - a power that few other local bodies in oil-rich areas have. (The US Supreme Court is reviewing certain provisions of the CZMA.)

While the federal and state governments regulate offshore drilling, Santa Barbara's strengthened ability to deny development permits to any company violating its local coastal plan has given the community new leverage with the state, federal government, and the oil industry.

''This is a different playing board than it was 10, 20 years ago,'' explains Naomi Schwartz. ''Nationally and regionally, we are operating under a new set of rules than when the Texas and the Alaska finds were developed.''

''Because the oil companies have to get approval from all three levels of government, we can pretty much stop a project,'' says Kirvil Skinnarland, deputy director of the Santa Barbara County Energy Division - a new 12-member agency that reviews all onshore development plans.

However, not all parties have hailed the revised procedures; even those applauding them admit the requirements have added to the already formidable bureaucratic tangle governing California coastal development.

''The oil companies are going to go through all kinds of gymnastics to satisfy the federal government, the state, and now the county,'' says Arthur Spaulding, vice-president of the Western Oil and Gas Association, a Los Angeles-based industry group that is suing for exploration rights in one of the Santa Barbara Channel sanctuaries. ''Why are the people of Santa Barbara dictating what goes on in federal waters?''

Other critics contend that the process is not only complex but also expensive. Fees payable to the county for development proposals run from $10,000 to $40,000. Exxon, the only oil company to file for permits so far, is already paying $1.7 million for one environmental impact study.

And none of this includes oil-company spending during the federal lease sale. Chevron alone paid more for just three tracts - $600 million - than the federal government received for all its Santa Barbara Channel leases in 1968.

With so much at stake, interested observers here say, the question here is no longer ''if'' but ''how'' the oil industry and government at the federal, state, and county levels will cooperate over the coming decades.

''I don't think there is a comparable situation in the country,'' says Robert Sollen, oil reporter for the Santa Barbara News Press. ''The people here understand that they're not going to stop oil development. And industry understands the only way they'll get what they want is to cooperate.''

These are the key players in the controversy:

* The energy barons. In all, there are 45 companies, ranging from Exxon to mom-and-pop-sized service support firms.

* Santa Barbara County. In the next two years it will process at least seven proposals for offshore oil development, not including those coming from future lease sales.

* California Coastal Commission - an independent 12-member body formed in 1972 under the federal Coastal Zone Management Act. It issues development permits for all drilling in state waters and has the authority to review all federal leasing and commercial drilling for consistency with California's coastal plan.

* State Lands Commission. It controls coastal waters out to three miles. Eager to capitalize on potential oil discoveries, this fall it is leasing for the first time 40,000 acres in an area north of Santa Barbara. Another series of state tracts is scheduled for leasing next year.

* US Minerals Management Service - an agency of the Interior Department. It controls more than 1 million acres of California's outer continental shelf and has scheduled two lease sales - Nos. 73 and 80 - for November and next February, respectively.

The oil companies are determined to transport the new crude they pump to refineries onshore by tanker, claiming that this would give them greater market flexibility. The state and county are just as adamant that an onshore pipeline, similar to one already in use in the eastern part of the channel, be built to minimize the environmental risks.

To process the low-grade Monterey crude, billions of dollars will be spent to modify California refineries. But even with the modifications, air pollution will be significant. One proposal calls for an entirely new ''crude upgrade'' facility in the nearby San Joaquin Valley as an alternative to retrofitting old refineries.

Meanwhile, air quality in the county, already below certain federal standards , seems likely to be adversely affected by offshore drilling and by tankers, both of which operate under less-stringent exhaust emissions standards than apply onshore. In both cases, prevailing winds blow the exhausts directly over the land.

Another point of contention is onshore development. Seven oil companies - among them Exxon and Getty - have proposed separate processing and storage facilities. State and country officials, however, want consolidated, shared facilities rather than a heavily industrialized coastline.

Exxon's proposals and the projected state lease sale are likely to be the most critical issues Santa Barbara County will have to confront in the coming months.

Exxon is insisting on tankering the crude to its Texas refineries. The county and state are lobbying for a shared onshore pipeline. While the county has no jurisdiction over offshore tankering, it can twist Exxon's arm by denying it the permits necessary for new onshore facilities.

But Exxon is dangling a carrot at the county by promising new emission controls on its offshore platforms if it is allowed to ship the oil. Should the tanker option be denied, the company says it will keep all its production and treatment facilities offshore, denying the county significant tax revenues.

But that plan has already been vetoed by the coastal commission, so Exxon is contesting it before the US Department of Commerce, which has sole power to overrule in such cases.

''Once you've sold the lease and they've found oil, there is tremendous pressure to permit,'' says Mr. Skinnarland. ''If there were more attention paid to local government during the lease sale, we wouldn't have to go through all this.''

The most crucial test case of this argument will be the state lease sale. The lands and coastal commissions have locked horns over the right to lease eight environmentally sensitive tracts in state waters.

The California Coastal Commission insists it has the right to approve leasing of all state acreage, while the State Lands Commission denies such involvement until the permitting stage. The matter is further complicated because environmental groups, fisheries associations, and the county have brought suit demanding further ecological studies be made and safeguards be implemented before the leasing takes place.

The sale has already been delayed until Sept. 31 and is likely to be put off again.

''Once the government makes the sale, it's very hard to stop development,'' explains Michael Cox, director of the Environmental Defense Center, a Santa Barbara public-interest law firm that is a plaintiff in one of the suits. ''That's why it's so crucial for us to get in on the actual lease-sale stage.''

Awaiting the outcome of both the Exxon and lease-sale issues, Santa Barbara continues to wrestle with the uncertainties of development.

''There are two ways to look at this,'' says Ms. Guzman. ''One is that it's such a beautiful coastline, why did they have to find all that oil here?

''On the other hand, if we start here and can find a way to do it responsibly , we will have set a standard for the rest of the country.''

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