Tim Marquez wants to drill for oil from inside Carpinteria, the small town where I live. Technically, it’s Venoco, Marquez’s oil company, that wants to drill. But I’m pretty sure that for the purposes of the current discussion, when we talk about Venoco, we’re talking about Marquez.

He was going through the usual environmental review process for his project (called the “Paredon” project, after the oil field he wants to drill into), but a little over a year ago, just as the environmental impact report, or EIR, was about to be reviewed by Carpinteria’s planning commission, he announced that he was putting the project on hold, and instead would use a ballot initiative so voters could decide the project’s fate directly. He hired a bunch of signature gatherers, and succeeded in qualifying his initiative for the ballot. We’ll be voting on the initiative — which is now called Measure J — in June.

Marquez took out a full-page ad in my local paper last week, urging Carpinterians to vote “Yes” on Measure J. The letter is pretty interesting. Everything — or nearly everything — Marquez says in it is true, technically. But some of the impressions it creates are pretty misleading.

Disclosure: I’m a member of Carpinteria’s planning commission (though I’m writing this as a private citizen, not in my capacity as a planning commissioner). I’m also a volunteer with Citizens Against the Paredon Initiative, the grass-roots organization that is working against Measure J. Again, I’m doing that as a private citizen, separate from my role as a planning commissioner.

You can view Marquez’s letter on the web site of our local paper, the Coastal View News (A Personal Message to Our Carpinteria Neighbors).

The letter starts off like this:

Dear Friends and Neighbors:

When I founded Venoco here in Carpinteria back in 1992, we had no revenue and no income. I had a small office at 5655 Carpinteria Avenue where I spent the next two years struggling to create this company. In those days our family survived on my wife Bernie’s income as a nurse at Cottage Hospital.

The story of Marquez’s founding of Venoco, and his subsequent history with the company, is actually really interesting. I recommend a 2003 article from Inc magazine (Oil Slicks), and a 2007 article from the Denver Post (Tim Marquez: Oil and opportunity), if you’d like to learn more of the details.

These days, Marquez is doing really well financially. I don’t have a problem with that. But I think it’s important for Carpinterians reading his letter to understand how much his circumstances have changed since 1992, and how closely those circumstances are tied to Venoco’s stock price.

According to the latest SEC filing, Marquez currently owns 32,271,532 shares (60%) of Venoco stock, either individually or through the Marquez Trust and the Marquez Foundation. A year ago, when Venoco stock was trading at $3.05 per share, Marquez’s holdings were worth about $98 million. As of March, 2010, with Venoco stock at $14.04 per share, his holdings are worth about $453 million.

Returning to the letter:

I’m very proud of what we have accomplished since 1992. We were recognized last year as the top operator in the Pacific Region by the U.S. Government with the Safety Award for Excellence. And we now have almost 80 local employees here in Carpinteria — of whom you probably know from their active participation in the community.

Marquez doesn’t actually say who gave Venoco that award (other than “the U.S. Government”). As it turns out, the award was given to Venoco by the regional office of the Interior Department’s Minerals Management Service (MMS), and covered operations on Venoco’s offshore platforms Gail and Grace during 2008. MMS officials report that they performed 20 inspections at the two platforms that year, and found “only three, minor incidents of noncompliance” with safety regulations.

I’m not sure how much confidence Carpinterians can place in the MMS award, though. The agency has been widely criticized as being overly friendly to the oil and gas industry, and was the subject of a 2008 internal government investigation that found extensive wrongdoing. According to Wikipedia:

On September 10, 2008, Inspector General Devaney found wrongdoing by a dozen current and former employees of the Minerals Management Service. In a cover memo, Devaney wrote “A culture of ethical failure” pervades the agency. According to the report, eight officials accepted gifts from energy companies whose value exceeded limits set by ethics rules — including golf, ski, and paintball outings; meals; drinks; and tickets to a Toby Keith concert, a Houston Texans football game, and a Colorado Rockies baseball game. The investigation also concluded that several of the officials “frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives.” According to the New York Times, “The reports portray a dysfunctional organization that has been riddled with conflicts of interest, unprofessional behavior and a free-for-all atmosphere for much of the Bush administration’s watch.”

As far as I’m aware, Venoco was never implicated in the MMS scandal. But I think voters should be aware of it, and take it into account when evaluating the significance of Venoco’s MMS safety award.

When it comes to safety, oil companies tend to fall into a spectrum, with those that have the highest safety standards at one end, and scofflaws that treat spills and fines as a routine cost of doing business at the other. Venoco definitely is better on safety than some — see, for example, this recent article on Greka Energy, another local oil company: No Really, Greka Spills Again. But Venoco’s record isn’t perfect.

One incident involved Venoco’s drilling operation in Beverly Hills. This was one of the first drilling operations Marquez bought when Venoco was starting out. In some ways it’s a good analog for what Marquez wants to do in Carpinteria: It’s in a populated area, just a hundred yards or so from the Beverly Hills High School athletic field. Supporters of the Paredon project like to cite the Beverly Hills operation as evidence that Venoco can operate in a residential area without causing problems for its neighbors.

Except that there have been problems. In March 2003 Venoco was the subject of a lawsuit that alleged the company had released benzene, a carcinogen, into the air at the Beverly Hills facility. The suit was dismissed by the court when studies found no connection between the facility and cancer rates, but not before the increased scrutiny had resulted in Venoco being fined by the Air Quality Management District (AQMD) for violations regarding gas releases. See the following AQMD announcement for details: Venoco to monitor air quality at Beverly Hills High School.

Venoco had a similar run-in with the Santa Barbara County Air Pollution Control District (APCD), our local version of the AQMD, in 2006. The issue concerned the height of six smoke stacks at the Carpinteria Processing Facility (CPF), the same place where Marquez wants to do the Paredon project. According to the APCD (see Santa Barbara County APCD Health Risk Assessment Report), Venoco submitted a report to the APCD in 1999, and again in 2004, giving the height of the stacks as being twice as high as they actually were. In 2006, after an outside party raised questions about the issue, the APCD measured the stacks and discovered the discrepancy.

The difference between the reported and actual stack heights was not very large (the stacks were reported as being about 30 feet high, when in fact they were about 15 feet high). But the discrepancy was enough to make the difference between the APCD reporting that the facility’s benzene emissions did not represent a significant cancer risk to the surrounding community, and reporting that those emissions did represent a significant cancer risk. And Venoco probably was aware of that, since Chevron, the company from which Venoco bought the CPF in 1999, had asked for, and received, an assessment from the APCD on exactly that point at the time the CPF sale was being negotiated.

From the time he founded Venoco, Tim Marquez has had a pretty consistent strategy: find oil and gas operations where production has declined, such that the current owner is having a hard time making a profit, but where there still are significant reserves in the ground. Buy out the current owner, then upgrade the operation to make it more efficient and increase production. The result: A profitable well.

It’s an approach that has been very successful. But for Marquez’s neighbors, it’s important to understand the economic realities under which Venoco operates. It’s all about cost-efficiency, finding ways to squeeze out a little more oil for a little less money.

My impression is that problems like the Beverly Hills gas releases and the misstated stack heights at the CPF are not common for Venoco; the company really does have a pretty good track record on safety. But the track record isn’t as good as the picture Marquez paints in his letter, and Carpinterians should be aware of that when considering Measure J.

Marquez continues:

My experience leading a local company has a lot to do with why Measure J is on the ballot this June. The State of California has never before allowed a local community the right to receive royalties from oil development. That’s why Measure J is so important. It is a one-time opportunity to generate enough royalty and tax revenue to double city revenues and meet critical needs of local school children.

A casual reader could interpret this passage to mean that Measure J somehow changes how the state would distribute royalty payments from Paredon. But that’s not true. All Measure J does is to rewrite Carpinteria’s planning laws to approve the project, and require the city to issue Venoco the necessary permits to proceed. Any royalty split between the state, county, and city would be up to the state, as it always has been. Measure J does nothing to change that.

I also was struck by how Marquez tries to create a sense of urgency here by describing Measure J is “a one-time opportunity.”

Here is how we got to this point. Eleven years ago we acquired a lease from the State of California to explore for oil and natural gas just off the coast of Carpinteria. Environmental reviews identified two basic options for pursuing these reserves — either from an onshore facility or from an offshore platform located in coastal waters. Independent experts stated that the best choice for the environment was to drill from our existing onshore facility. [underlining in original]

This is all true. The EIR for the original Paredon project goes into detail about the environmental benefits of drilling from shore, as opposed to drilling from an offshore platform. That isn’t to say that any particular onshore drilling project is environmentally superior, though. Part of what makes onshore drilling environmentally superior is that it allows for easier monitoring and maintenance — but you only get those benefits if the monitoring and maintenance actually happens.

By bypassing the city’s review process, Measure J tries to avoid a lot of monitoring and maintenance that the city was trying to include as mitigation measures in the original project. Steve Greig, Venoco’s government relations manager, admitted as much during a public hearing before the Carpinteria City Council. Here’s the video:

A Venoco Confession (running time 1:15) from Ted Rhodes on Vimeo.

Grieg subsequently tried to walk these comments back a bit, but I think this probably is one of those cases where an official accidentally told the truth.

Returning to Marquez’s letter:

Our existing onshore facility covers 55-acres and it has operated in Carpinteria since the 1950s. Our plan would use just one-acre of this facility for our exploration activities.

Measure J simply modifies the current land use designation (this is already an industrial site) to allow us to use a small portion of the land for exploration activities. But you should know that Measure J does NOT actually approve our application. It is merely the first step in a long review process. [underlining in original]

I think this creates a misleading impression. Yes, there are other hurdles that Paredon would have to clear even if Measure J passes. But as far as any oversight or review by the city of Carpinteria is concerned, Measure J absolutely does approve Marquez’s project. That’s the whole point of Measure J.

Approval of Measure J would be followed by a full environmental, health and safety review. The reviewing and approving agencies include the State Lands Commission, Coastal Commission, Air Pollution Control District, Regional Water Quality Control Board and the Summerland/Carpinteria Fire Department.

This statement would be true, except for the word “full.” A full environmental review under the California Environmental Quality Act (CEQA) would be led by the city of Carpinteria. That’s the one agency in the long list of those required to sign off on the project that has the principal responsibility for evaluating the project’s cumulative, overall impact on nearby residents. Those other entities are charged with doing more-limited reviews dealing with specific aspects of the project (its impact on air quality, or water quality, or provisions to assist firefighters in the event of a fire or explosion). It’s the city of Carpinteria, as the “lead” agency under CEQA, that is supposed to do the most-comprehensive analysis of the project’s impacts. And it is that review that Measure J would bypass.

If Measure J is not approved, then we’ll have to submit a new application to drill from offshore and the State will keep all the royalties.

Again, I think Marquez is being misleading. Defeat of Measure J would not force him to drill offshore. All it would do is require that he go through the same review process that any other developer has to go through to do business inside the city limits. If Marquez wants to try to get approval to drill offshore he’s free to pursue that — just as he’s free to pursue it today. But Measure J’s failure wouldn’t compel him to do so.

This is an exploration project. After we drill the first well we may not find enough oil and gas to continue. If that occurs, then we’ll stop the project and remove all of the equipment. However, if oil and gas supplies are found (we estimate as much as 11,000 barrels of oil per day could be produced from this project) then there will be substantial benefits to the Carpinteria community.

A successful project would mean the City of Carpinteria could receive enough income to double its current annual budget for years to come. We have also pledged to donate up to $5 million to the Carpinteria Education Foundation to help local school children. [underlining in original]

It’s important to read this passage carefully. “…the City of Carpinteria could receive…” “…pledged to donate up to $5 million…” Those phrases I’ve emphasized are terms of art. They’re easy to overlook, but they’re important. Because of them, and because of similar language in Measure J, neither Marquez’s letter nor Measure J actually guarantees any money to Carpinteria or its schools. I think it’s likely that if Measure J is approved Carpinteria will eventually see some money. But how much? And at what cost? You can’t actually tell from what’s written in Marquez’s letter, or in Measure J.

My parents were both school teachers, so I have a special affection for public education and the great teachers who can make a difference.

I think this part is true. A lot of the goodwill Marquez enjoys in Carpinteria comes from his practice of donating significant amounts of money (tens of thousands of dollars per year) to local educational nonprofits. Even more, when Venoco went public and Marquez became wealthy, he donated $85 million in Venoco stock to establish the Denver Foundation and the Marquez Foundation, creating scholarships for Denver public school students. (See The 2006 Slate 60: Donations, which lists Tim and Bernadette Marquez among the largest charitable donors in the US during the year 2006.)

Returning to Tim Marquez’s letter to Carpinterians:

There is some false and misleading information being distributed about Measure J in the community. I encourage you to read and study the facts about Measure J for yourself.

I agree that there is false and misleading information being distributed about Measure J, but I’m probably thinking of different information than Marquez is. For example, when his paid signature gatherer came to my door as part of the effort to qualify the initiative for the ballot, that signature gatherer told me that 1) the signature-gathering effort had been underway for several weeks (it hadn’t; I knew that it had started only a few days before), and 2) there was a deadline that very day at 5:00 p.m. if they were going to gather enough signatures to qualify for the then-upcoming Fall election (again, not true; there was no deadline, and Venoco had no intention of trying to get the initiative on the Fall 2009 ballot). When I told the signature gatherer that I didn’t think his statements were true, he backed up like I had physically threatened him (which I hadn’t; I thought I was being pretty reasonable), and told me, “well, that’s what my supervisor said; she told me that before I came out today.”

There was fairly widespread outrage in Carpinteria over the tactics these signature gatherers used. Carp is a small town, and word gets around. But Marquez got his signatures, and the initiative is on the ballot.

I certainly agree with the part about encouraging voters to get more information about the initiative. A good place is to start is the City of Carpinteria’s Measure J page. In particular, I recommend the city’s Elections Code 9212 Report (PDF), which gives a more-balanced version than Marquez’s letter of the likely consequences for Carpinterians should Measure J become law.

Update: Some other resources from the city of Carpinteria’s web site (all of these are PDFs):

• Measure J full text
• Impartial analysis of Measure J prepared by City Attorney
• Argument in favor of Measure J (with rebuttal)
• Argument against Measure J (with rebuttal)

Returning to the letter:

There are also some interesting claims being made about our existing facility which has been in operation for more than 50 years. If our onshore exploration permit is approved there will be far less oil and natural gas going through this facility than it processed in the 1980s without incident.

It’s hard to get a handle on what Marquez is actually saying here. If Paredon is approved and the amount of oil and gas found is in line with Venoco’s hopes, there will be a lot more oil and gas processing at the facility than has been the case for a long time. Whether the facility will be able to handle that load safely without a lot of costly upgrades and mitigation measures is a complex question, one that would have been analyzed in detail as part of the now-suspended environmental review of the original project.

I want to offer you a tour of our existing facility so you can see the location for yourself and ask us questions. You can make a reservation for a tour or get answers to your questions by either calling us at 745-2165 or emailing us at lm.rivas@venocoinc.com.

Actually, I think I’ll take Marquez up on this. I’d like to get a tour of the facility. I’d also like to ask some of the questions I’ve raised here of Lisa Rivas, Venoco’s Carpinteria community relations manager. One thing I want to ask, more for my own curiosity than anything else, is whether she’s the supervisor who allegedly told my paid signature gatherer misleading facts to pass on to voters.

Imagine the possibilities for Carpinteria — making the best choice for the environment by moving oil exploration onshore, providing significant new revenues to meet community needs for years to come, and generating millions in new funds to support our local school children.

I can promise you that our company and our employees will continue to be strong supporters of this wonderful community. And it won’t matter if you vote “YES on J” to start the formal environmental review of our onshore permit or vote NO on J to send us offshore to explore for these resources. [underlining in original]

For me, this is probably the most misleading statement in the letter. According to Marquez, it doesn’t matter if I vote “Yes” (thereby starting the formal environmental review) or vote “No” (thereby making it so Venoco uses offshore drilling to tap these resources). The reality, of course, is just the opposite: a “Yes” vote means Venoco gets to bypass the most-comprehensive environmental review. And voting “No” doesn’t “send Venoco offshore”; that would be up to Venoco (and to state and/or federal policymakers and voters, who would have to approve any new offshore drilling). But by misrepresenting a “No” vote as leading inevitably to offshore drilling, it sounds like Marquez is trying to trick low-information voters who oppose offshore drilling into voting “Yes”.

Offshore drilling is very unpopular around here (and likely to become more so, with a push currently under way at the state level to approve new offshore drilling in the Santa Barbara Channel). The 1969 Platform A blowout and the oil spill that followed hit Carpinteria’s beaches hard. The outrage provoked by that 1969 spill is credited by many with being the trigger that launched the modern environmental movement, which eventually led to passage of the very same laws Marquez appears to be trying to evade with Measure J.

I would be delighted to hear from you. Please send any comments or questions that you might have to us at the email address or telephone number listed above.

Yours Truly,

Tim Marquez
Chairman/CEO

I have a question for Tim Marquez: Is Measure J an attempt to evade CEQA? Why would you want Carpinteria voters to decide this issue without the benefit of a detailed analysis of the environmental impacts? I’ll grant that you may have the legal right to do this (the courts have sided with you so far), and I can certainly see how it is in your interest financially. But is pursuing the Paredon project this way — bypassing environmental review, and using misleading statements to try to sell the project to voters — morally right?

I know you live in Colorado now. But to the extent you still think of yourself as a Carpinterian, let me speak neighbor-to-neighbor.

I really like Carpinteria. I like raising my family here, and pursuing my own modest version of the American dream. The thing I like most about Carpinteria is that it’s sort of a throwback to an earlier time. It’s a place where a farmer will take a break from plowing a field to chat with a passing stranger and his son, then offer the boy a ride on his tractor. That actually happened to me one day while I was out walking at the Carpinteria bluffs, about a hundred yards from where you want to drill.

I probably don’t have much in common with that farmer in terms of my politics or how I make my living. But in that moment we shared something more important than what divided us. What we shared was that we saw ourselves as part of a community, as neighbors.

Neighbors look out for each other. And as a neighbor, I have to say, I wish you’d give some more thought to how you’re going about this project.

Thanks.

This entry was posted by jbc on Tuesday, March 9th, 2010 at 11:44 pm and is filed under business_lies, Oil drilling. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.