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California Gov. Gray Davis on Monday rejected a Bush administration offer to settle a suit that questions the state’s authority to oversee offshore oil drilling leases. The state’s refusal to back down means it’s now up to the 9th U.S. Circuit Court of Appeals to decide who has final say over future oil production sites off California’s coastline. The suit, which was filed by the state in 1999, challenges a Department of Interior decision to renew 36 new leases for oil and gas development off California’s coast. The state won the first round in June when U.S. District Judge Claudia Wilken of the Northern District of California gave the California Coastal Commission final authority to determine if those lease extensions are consistent with the state’s coastal protection plan. Wilken held that California, where oil companies pump an average of 800,000 barrels of oil per day, has a right to review the leases. The leases cover undeveloped undersea sites. California Resources Secretary Mary Nichols said Monday that she couldn’t reveal the details of the rebuffed confidential settlement offer, but she described it as “unacceptable” because the state would have to concede its power to review the lease extensions. And Nichols said she was ready to pursue the matter to the U.S. Supreme Court if necessary to prevent increased drilling that could be harmful to the environment, including the sea otter population. “We’re insisting that the feds don’t follow through with this plan,” she said. Nichols said the decision to renew the leases, which dates back three decades in some instances, failed to take into account the possible environmental effects that could come from new drilling. Under the Coastal Zone Management Act of 1972, which was amended in 1990, states can oppose any activity that may prove harmful to the coastline. Gov. Davis was also adamantly opposed to the offer. “Any settlement would have compromised the fundamental principle that California has a right and a duty to review all phases of oil and gas development off its shores,” Davis said in a prepared statement. “The court made their decision last June based on clear and convincing evidence and we stand by it.” The Bush administration filed its brief in State of California v. Norton, 01-16637, to the 9th Circuit on Friday. In it, administration lawyers argue that the lease suspensions are outside the jurisdiction of the state because they affect an area outside California’s coastal jurisdiction. They also say there is no need for state review since any activity, such as drilling, would be subject to further review under the National Environmental Policy Act. Washington, D.C.-based Covington & Burling is representing several energy and petroleum companies involved in the suit, but attorneys from that firm couldn’t be reached for comment Monday. The oil companies, however, have sided with the feds, saying the state does not have the right to regulate the offshore leases.

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