Torrance Panel OKs Oil Drilling

Despite an outpouring of concern from worried homeowners, the Torrance Planning Commission has unanimously approved a little-known company’s plan to extract 27 million barrels of oil from beneath a southeast Torrance neighborhood.

The commission’s approval of the Kelt Energy project just before midnight Wednesday is certain to be appealed to the Torrance City Council, which will decide the fate of the drilling project, possibly as early as this fall.

The Planning Commission attached 95 conditions to its approval, including a requirement the company prove it has adequate insurance, performance bonds, financial resources and assets to protect the city and homeowners if any problems develop during the 30-year project.

Area for Drilling

Kelt plans to drill 108 slanted wells from a 2.2-acre site on the northeast corner of Sepulveda Boulevard and Border Avenue. The diagonal wells would extend under a 560-acre area of southeast Torrance, roughly bounded by Sepulveda, Crenshaw Boulevard, Western Avenue and the southern city limit.

The area is an oil field that already has been tapped by standard drilling and pumping methods. To force out the remaining oil, salty water from deep underground would be pumped into some of the wells, known as “injection wells.” That would force the remaining oil toward “recovery wells,” which would be used to bring the oil to the surface. From there it would go by pipeline to local refineries.

Kelt’s Pacific Division manager, Gregg Martin, said such systems already are in operation in Wilmington, Long Beach, Huntington Beach and another part of Torrance. He noted that Kelt has assumed control of the nearby Del Amo Energy project at Torrance Boulevard and Madrona Avenue. City officials said they have had only minor problems with that project, which has been in operation for several years.

But during three hours of public testimony Wednesday night, every speaker other than Kelt and its prominent local attorney, Peter Lacombe, opposed the southeast Torrance project. Several speakers said they worried about potential noise, vibrations, dust, gas leaks, ground movement and traffic. Others questioned whether the drilling would affect abandoned wells in the area, some of which are underneath homes.

Two poster-size signs reading “No Kelt Energy” stood in the back of the crowded City Council chambers.

Sharon Schell, who lives two blocks south of Sepulveda, said she would not have bought a home in the area had she known of the drilling project. She said the least expensive house in the neighborhood is valued at $200,000, and expressed fears that the rapid rise in property values could stop because of the drilling. If that happened, the royalties that Kelt is promising to property owners would not make up for the loss, she said.

Kelt has offered property owners 16.6% of the project’s revenues, with each person’s share based on the size of his property. The company has said it expects to extract $300 million in oil and gas.

But Kelt attorney Lacombe said that under California law, the company does not need the approval of every property owner to tap the oil beneath the neighborhood, as long as it has mineral rights to the land where its wells are. The company has obtained mineral rights to about 76% of the acreage.

Resident Bernard Hila protested. “I want to get my share of what’s in the ground.” he said. “If somebody can slant drill and steal my oil, I’m not happy about that.”

‘Going to Be a Nuisance’

At the urging of Jerry Haffley, who lives across the railroad tracks from the drilling site, the commission restricted certain maintenance operations and deliveries to weekdays to limit the impact on neighbors. “Without a doubt,” Haffley said, “it’s going to be a nuisance to us.”

Neil Larson said he was worried that the drilling and injecting could cause the ground to subside and rebound. He urged the city to “use a lot of moxie” in obtaining financial guarantees because “everyone has a lot at stake here.”

Larson said that if 10% of the nearly 3,000 homes in the area were damaged, the city could be liable for as much as $25 million. He cautioned that the city and property owners should not be “left to hang out to dry if anything happens.”

Kelt division Manager Martin denied that the project would cause any of the problems described by homeowners. He did not object to any of the nine pages of conditions attached to the commission’s approval. He also noted that 25 additional wells would be drilled to relieve pressure on some abandoned wells in the area.

Lacombe said: “What they are really worried about is fair play. (The homeowners) can be assured they are going to get fair play.”

City Atty. Stanley E. Remelmeyer said Thursday that he is unsure of Kelt’s corporate structure and is trying to determine whether the company is financially sound.

What is known is that Kelt Energy Inc. is a wholly owned subsidiary of Kelt Energy PFC, an oil company based in Great Britain, whose stock is publicly traded on the London Stock Exchange. The firm is controlled by a French businessman, Hubert Perrodo, who owns a majority of the stock and serves as chairman of the board. Officials of Kelt’s Pacific Division in Torrance have declined to discuss details of the company’s ownership.

Exploring Implications

They have said the company has oil and gas holdings in California, Texas, New Mexico and Kansas as well as in the North Sea and off the west coast of Africa.

“They’ve told us who they are,” Remelmeyer said. “What we are exploring are the implications of that.”

The city attorney said he wants to ensure that Kelt has sufficient assets in the United States that could be attached if serious problems develop. However, he said, “a lot of their assets are almost unreachable” because the firm is not located in the United States.