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    Lease holders seek own deal

    After three oil- and gas-drilling firms got big federal buyouts, others holding leases hope they're next.

    By JULIE HAUSERMAN, Times Staff Writer
    © St. Petersburg Times
    published May 31, 2002


    TALLAHASSEE -- In an office in sleepy Apalachicola, the president of Coastal Petroleum Co. answers the phone himself. He has just one employee. His company has reported a loss every year since 1953.

    But the company, partly backed by Tampa's Lykes Bros., owns oil- and gas-drilling rights along 425 miles of Florida coast, stretching from Apalachicola to Naples, about a third of the state's coastline.

    Theoretically, Coastal Petroleum could have oil rigs seven miles from some of Florida's finest shorelines: Anclote Key near Tarpon Springs, Sanibel Island near Fort Myers and St. George Island near Apalachicola.

    But Coastal doesn't plan to hunt for oil here anymore because the state denied its latest permit. Instead, Coastal hopes to collect from taxpayers, just as Chevron, Conoco and Murphy Oil did this week in a deal cut by President Bush and his brother, Florida Gov. Jeb Bush.

    The federal government plans to buy back some offshore oil-drilling rights to protect Panhandle beaches and hopes to buy other drilling rights from Florida's Collier family to stop new wells in the Big Cypress Preserve, near the Everglades. The price tag: $235-million.

    "At this point, it's a matter of compensating us for our property interest, just as they compensated these other companies," said Phil Ware, a 52-year-old geologist who has run Coastal's tiny shop since he was a fresh-faced University of Florida graduate.

    In September, Coastal will square off in a Tallahassee courtroom with the state of Florida. Coastal says the state took its rights in 1998 by denying its plan to drill near St. George Island south of Tallahassee, a beach popular with the Capitol's powerful.

    It's a strategy that has worked before: The government denies a drilling permit, the company sues, and the government pays millions to settle.

    It worked Wednesday and it worked in 1995. That year, former President Bill Clinton and former Florida Gov. Lawton Chiles used $198-million in federal dollars to buy back leases from nine oil companies to stop drilling off the Everglades and the Florida Keys.

    "Offshore oil drilling in Florida tends to be like the cat who comes back," said Mark Ferrulo of the Florida Public Interest Research Group. "We won the moratorium in the Florida Keys, and 10 years later we were fighting the issue off North Florida."

    Through it all, Coastal bided its time, filing permits and lawsuits.

    To pay its legal bills, Coastal raised $3-million in a stock offering this month, Ware said.

    "You, the shareholders, have steadfastly supported your company for many years. We must once again ask for your financial support and sincerely hope this will be the last time such support will be necessary," read a letter from Coastal's parent company, Coastal Caribbean Oils & Minerals.

    At this point, investors are banking on a payoff from the state. In the past 60 years, Coastal has paid the state $2.3-million in rent for its leases, which cover a whopping 3.6-million underwater acres.

    A judge must first decide whether Coastal deserves any money. Then a jury decides how much.

    Wednesday's settlement with Conoco, Chevron and Murphy Oil could be one example of what the government is willing to pay.

    "We're very interested in what happened" in the Panhandle drilling settlement, said S. Cary Gaylord, Coastal's attorney in Tampa. "Coastal had a right to drill, and the state took it."

    The state tried to get Coastal to put up a $500-million bond before it could drill, but that was overturned.

    David Guest, a lawyer from the Earthjustice Legal Defense Fund who has battled Coastal off and on for years, said the company is "greenmailing" the state.

    "Coastal Petroleum isn't an oil company," Guest said. "It's a stock sham. All they've done is shake down investors."

    Coastal president Ware called that "a lie."

    It's an old Florida story: buy cheap and hold on for the best price.

    Still, the endless lawsuits -- and the taxpayer-funded settlements -- have some wondering if there's a better way.

    Last year, Florida's two U.S. senators, Democrats Bob Graham and Bill Nelson, co-sponsored legislation to ban all oil and gas drilling off the Florida coast. The bill went nowhere.

    "It never had enough support," said Dan Shapiro, Nelson's legislative director. "Too many senators wanted the option to drill."

    And now that Florida got federal money to pay off the oil companies looming at its shores, people around the country are asking questions.

    Joe Theissen, executive director of Taxpayers for Common Sense in Washington, said Congress should review the deal. Theissen wonders if taxpayers will pay too much.

    "We're talking about a quarter of a billion dollars at a time when budgets are tight. It bears looking into," Theissen said. But, he added, "I'm not prepared to say it smells to me."

    Other states wonder if Florida got special treatment.

    "There is nowhere, from the Arctic Circle to the Caspian Sea, that George Bush doesn't want to drill for oil and gas, except Florida," said Philip Clapp, president of the National Environmental Trust. "In essence, he's willing to write a separate energy policy for Florida . . . and spend $235-million doing it."

    On Wednesday, Sen. Barbara Boxer, D-Calif., sent President Bush a letter, demanding that he support "retiring all the leases off the coast of California."

    The Florida deal "ignores the fight that Californians have been waging since a devastating oil spill off the coast of Santa Barbara in 1969."

    Boxer said there are 36 oil and gas leases off California's coast. Four other leases are in legal limbo, she said.

    Florida, too, has more leases out there, and not just Coastal Petroleum's. Ferrulo estimates there are more than 100 leases in the eastern gulf, ranging from 10 to 100 miles offshore.

    -- Times staff writer Paul de la Garza contributed to this report.

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