Deep Feelings : Neighbors Voice Resentment, Oil Officials Disappointment Over Well

In 1982 Chevron USA had high hopes for the San Fernando Valley’s first urban commercial oil well, which the oil giant had just finished digging in a residential section of Pacoima.

Neighbors, some of whom lived as close as across the street from the drill site, were not as enthusiastic. They feared that the Paxton Street well would be a safety hazard, alter the neighborhood’s character and lower their property values.

Seven years after drilling started, neither Chevron officials nor area residents are satisfied.

Chevron’s hopes for a significant oil find have been dashed--production levels at the site are a fraction of what was expected. And neighbors are upset with Chevron. Mostly, they resent the oil company’s actions because they felt powerless to stop its intrusion into their neighborhood. Some still have nagging concerns about the danger posed by the operation and others say it scars the community.

Doubly irritated are those who opposed the drilling and refused to sign oil lease agreements with Chevron. The company ended up taking the oil anyway and paid nothing for it, all of which city officials say is completely legal.

The site yields an average of 268 barrels of oil and 5 million cubic feet of natural gas per day, far below the daily 2,400 barrels of oil and 24 million cubic feet of natural gas that Chevron officials had predicted.

“It’s been very disappointing,” said Margo Bart, Chevron’s district supervisor of lands. “It’s a wonderful facility and it’s capable of handling far greater volumes than we have been able to produce.”

Looming over neighboring homes, the main oil drilling tower is on Paxton Street just south of the intersection of the Golden State and Simi Valley freeways. The drilling district holds 10 wells in a 700-acre area between Burnet Avenue and Whiteman Airport. Only six of the 10 wells, however, have yielded any oil, Bart said.

Despite the disappointing output, Chevron officials say they have paid more than $10 million in royalties to mineral rights owners since drilling began, distributing $1.3 million of that last year.

Property owners do not necessarily hold the mineral rights to their land. The rights may be held by a previous owner or developer who did not sell them along with the land. The mineral rights entitle the holder to profits generated from valuable minerals, such as gold or oil, discovered underneath the property.

Chevron refused to say how many area residents receive royalties from production at the Paxton Street site or to provide a breakdown of its royalty payments.

City officials, however, said the city Department of Recreation and Parks, which owns a park in the drilling district, collects about $36,000 annually, and Los Angeles County officials said the county Division of Public Works, which has a flood control channel there, receives about $150,000 a year in royalties.

The state Department of Transportation also owns freeways in the district, although representatives were unable to provide estimates of their annual royalty collections.

Quarterly Checks

Some residents who get royalties say their checks average from $52 to $200 per quarter, a sum that amounts to their share of one-sixth of the value of the oil produced in the Paxton Street district.

Michael Kmet is among those who are content with their checks.

Kmet, 70, who has lived in his Pacoima house for 35 years, said it was as if the money was “just falling from heaven.”

But some neighbors believe that they are not receiving fair compensation for the oil drilling taking place against their wishes right under their back yards.

Arthur Savage, 71, a retired systems analyst, has lived for 30 years in a house virtually across the street from the drill site. He gets no royalties even though he owns the mineral rights to his land because he opposed Chevron’s oil drilling plan from the beginning and refused to sign a lease.

Savage refused to consent to the company’s request to tunnel under his property. He believes that Chevron secretly takes oil from under his house, using wells drilled through neighbors’ properties.

‘We Are Losing’

“We have no guarantee that they are not drilling under our house,” he said. “How do we know precisely how they are drilling? We are losing.”

Other residents have grumbled that Chevron is drawing oil from beneath their properties without their permission and without paying them.

Bart said Chevron officials indeed presume that they are drawing oil from beneath every property in the drilling district.

Chevron and city officials, however, say such practices are legal. Under city and state law, oil companies are allowed to draw oil from beneath a property in a designated drilling area if that property is smaller than an acre and if 75% of the other mineral rights owners in the area have already signed oil leases, said Jeff Druyun, senior legislative analyst for the city and former city petroleum administrator.

Thus many Pacoima residents who decided not to lease their mineral rights to Chevron and thought that they had denied the company permission to draw oil from their land may actually be supplying Chevron, he said. Chevron refused to disclose how many residents may be in this position.

Back-Yard Wells

Druyun said the city and state regulations were designed to ensure that oil is pumped efficiently in residential neighborhoods. Unlike the 1930s and ‘40s, when many people drilled oil wells in their back yards, Los Angeles residents are prohibited from operating their own wells, he said.

“Our city rules are in the best interests of all the property owners,” he said.

City law does not ignore the needs of those who refused to sign agreements consenting to the drilling. The law stipulates that mineral rights holders can collect royalties as soon as they sign the agreement leasing their oil rights to a company, Druyun said. If they sign during the first five years of drilling, they can even collect the back royalties.

The agreement with the oil company is essentially a consent form and specifies the terms of drawing the oil and natural gas, and the method of calculating the royalties.

Residents may be unaware of this opportunity to collect royalties, but Bart said she believes that the company did a fair and thorough job of educating property owners about their rights. “Efforts were made to re-contact people. We had people out there knocking on doors. But they don’t get the royalty if they don’t sign the lease.”

But Miriam Savage, Arthur Savage’s wife, said no one contacted them either in person or by letter to tell them that they were eligible for royalties despite their initial refusal to consent to drilling.

“They never came around and told us that,” she said. “When they first came, we told them we weren’t going to sign because we didn’t want to be a party to the oil drilling. They never came back afterwards to tell us.

“What would we have to do now to collect the royalties?” she asked.

Chevron does not profit from withholding royalties from people because any unclaimed money is divided and redistributed to the other mineral rights owners, Bart said.

Bart said there is no question that Chevron pays the people who signed leases if the company takes oil from their property. However, no government agency monitors the oil production to ensure that mineral rights owners receive the full royalties to which they are entitled.

Royalties are not the only sore point among neighbors of the Paxton Street drill site.

Many of those interviewed, even those who are happy with their royalties, said they are concerned that the well may be unsafe. Those fears have loomed larger since September, 1987, when a refinery worker was killed and two others were injured after a spark inside an oil tank caused an explosion.

“There is no guarantee of safety. Emergencies do happen, unforeseen mistakes, blunders,” Savage said. “When you are in a residential neighborhood, you are playing with dynamite before you even begin.”

Chevron officials and experts said the neighbors’ fears are unfounded. They say urban oil drilling accidents are rare.

“There is nothing terribly unique about these urban drill sites. They are relatively benign,” Rod Spackman, public affairs manager for Chevron, said, noting that the company has eight other urban drill sites throughout Los Angeles. The accident, he said, was “unrelated to the operations of the plant,” which he called “one of the safest, most well-operated sites of its kind.”

Tom Heaton of the U.S. Geological Survey said: “The biggest problem is that something could break and cause a fire, but those residents all have natural gas pipes in their houses, and you have the same risk with those pipes.”

Still, neighbors are unfazed by those assurances.

Earthquake Fears

Tennie White, who has lived in her home on Paxton Street for more than 20 years, is worried that an earthquake could cause the ground to collapse because of the underground space left by oil drilling. Others said they fear explosions or fires.

“We have heard a lot of things that have happened in other places with oil wells, like explosions,” said Mercedes Carlon, 62, who lives across the street from the site. “We are senior citizens already and we can’t run as fast as we used to.”

Despite the discontent of many neighbors and the disappointment of Chevron officials, the company insists that it made the right decision to drill for oil on Paxton Street.

“It’s not a gold mine, but it is an economically productive site, and that’s the bottom line,” Spackman said. “It’s a decent field.”