We’re finally seeing a rational policy coming out of Sacramento. In order to fix the state’s massive $26 billion deficit, California has come to an agreement to cut major aspects of the budget, change some things around in the accounting department, and even allow oil drilling off the coast of Santa Barbara.

California could allow new oil drilling under a tentative agreement the state’s governor and lawmakers reached to plug the state’s $26.3 billion budget hole.

In a rare agreement with environmental groups, oil producer Plains Exploration & Production Co. (PXP) has proposed promptly expanding oil drilling off the coast of Santa Barbara, then shutting down four oil platforms and two onshore processing facilities in Santa Barbara by 2022. The company also agreed to donate 4,000 acres of land for public use. The company would slant-drill into the state’s seafloor from a platform it operates in federal waters.

Environmental and community groups in Santa Barbara have hailed the project, called Tranquillon Ridge, as a major milestone in their efforts to shut down the oil rigs off Santa Barbara’s coast. Current law allows offshore drilling operations that were in place prior to a 1981 moratorium on new offshore drilling to continue indefinitely.

Gov. Arnold Schwarzenegger has championed the project as a new source of desperately needed cash to fill the state’s budget gap. The state would collect an up-front payment of $100 million from Plains, followed by and as much as $2.3 billion in royalties over the 13 years of the project.

The best news, of course, is that the budget has been fixed (for now) without any tax increases. Apparently the Californian people entirely and roundly rejecting such a route drove the message home with their legislators. A good day for the The Golden State.