Gulf Crisis Gives New Life to Oil Fields

The roughnecks are back working on Pier G in Long Beach Harbor. Grease-spattered workers last week were clearing gas and sand out of a well, which had been idle for years, so that it can pump oil again.

It’s one of several signs that the sagging oil industry in Long Beach is rebounding in response to soaring prices.

The price of a barrel of California crude has doubled since the Aug. 2 Iraqi invasion of Kuwait.

Long Beach officials have reopened nearly 100 wells. State officials are planning to step up exploration of local oil fields. Independent operators--recently considered a dying breed--have started up idle wells and are scrambling to find qualified workers for their rigs. Some of these oilmen say their losing operations already have begun to show a profit.

Indeed, higher prices could bring windfalls for everybody from the state down to more than 8,000 Long Beach property owners who have a stake in oil reserves 3,500 feet below their lawns.

Crystal Soden, who receives a $17 royalty check every month for the oil under her Belmont Heights home, might see a modest increase of $10 or so. But state officials estimated that oil revenues from state tidelands in Long Beach could nearly double, to $180 million this year.

Long Beach officials say city oil revenues could jump from $5 million to $6.5 million in the current fiscal year.

That is, if prices stay high.

“It’s a very schizophrenic business, and it’s hard to know what will happen,” said Xenophon Colazas, director of the Long Beach Department of Oil Properties. “But right now, (the Persian Gulf crisis) is good news for Long Beach.”

The city is on top of one of the most productive petroleum patches in U.S. history, the Wilmington Oil Field. The 16-mile patch stretches from Seal Beach to Torrance and has yielded more than 2.3 billion barrels in the last 50 years.

A prospector struck black gold in the Long Beach area in 1921, when he drilled a hole into Signal Hill and discovered what is known today as the Long Beach Oil Field.

In 1932, a luckier prospector discovered the Wilmington Field when he stuck a drill into what now is a bed of begonias off Pacific Coast Highway on the west side of town.

Oil money built Long Beach’s mansions and huge harbor and propped up the city budget. A Saturday Evening Post story once called Long Beach “The Town With Too Much Money.”

By 1965, so much oil had been sucked from under Long Beach that its land sank up to 29 feet. And by the end of the decade, the city’s revenues began sinking too.

A flood of cheap oil from the Mideast, a state law requiring the city to turn over most oil profits to the state and a dwindling pool of easily accessible oil began to take their toll.

Production of crude from the Long Beach tidelands in the Wilmington field dropped from a peak of about 164,000 barrels a day in 1969 to 57,600 barrels a day last year, according to Jim Trout, assistant executive officer of the State Lands Commission, the agency in charge of overseeing the state’s holdings.

The 1964 state law funneled a growing share of tideland oil revenues to Sacramento, while reducing the city’s share from a peak of $20 million a year to $1 million in 1988.

In the last decade alone, the city’s total annual oil revenues from the tidelands and other fields fell from $15 million, to $5.5 million, according to city officials. And about a third of the city’s 3,000 wells were capped, mainly because prices plunged so low that it no longer paid to tap them.

The city scraped the bottom of the barrel in June, when the price of oil dropped to $10.63, Colazas said.

Assistant City Manager John Shirey concurred: “To tell you the truth, we were very nervous we wouldn’t meet the projections we had in our budget.”

But the price fetched by a barrel of local crude climbed to $24 last week, and city officials are positively gleeful.

“I was sweating (because estimated projections) came in too high, so we sent Xen (Colazas) over to the Mideast, and he stirred things up,” City Manager James Hankla said jokingly during last week’s meeting of the City Council.

Officials said if prices stay at their current levels, the city can pump an extra $1.5 million in oil revenues into the general fund this year. That is a sliver of the city’s $215 million in revenues, but as Hankla pointed out, it is enough to hire 15 more police officers. Or, more likely, he said, increase the city’s anemic $750,000 reserve fund.

Better yet, oilmen say, the increased prices could mean that it will become profitable again to drill for deeper reserves.

In the past, the city had predicted that its oil would run out by the year 2011. But City Auditor Robert Fronke said if the price of a barrel stays high, it is “likely” that companies can afford to turn to more expensive ways of getting oil.

This year, the state will install a $500,000 computer system in the Long Beach office of the State Lands Commission to collect information about the Wilmington field and help target sites for future exploration.

Independent oil companies are also reopening wells and considering exploration that just a few months ago would have been inconceivable in the face of environmental opposition and the fickle market.

Tidelands Oil Production Co. produces about 10,000 barrels a day from Long Beach Harbor. Its gross revenues jumped from $2.7 million in July to more than $5 million last month, General Manager Terry Smith said.

So many oil workers--known in the business as roustabouts and roughnecks and pushers--left during the slump, Smith said, that his company is scrambling to find qualified people to fill new jobs on rigs.

J.C. (Mac) McFarland runs a drilling company started by his father. He said revenues for the company, which owns about 40 wells in Long Beach, have increased by $25,000 a day in the last two months.

But he also has mixed feelings: His brother-in-law, who works for a military contractor, is being sent to Saudi Arabia.

“This is great for us,” McFarland said, “but terrible for the country.”

Most of the city’s 3,000 wells--including those being reopened--are along the city’s shoreline and under the ocean floor. In 1964, after decades of bitter wrangling over who should get the money from this “tidelands” portion of the field, a state law made Long Beach trustee for the state’s holdings, and the city became the first in the country to operate a major oil field.

The city’s Department of Oil Properties is the seventh-largest producer of oil in California, ahead of such companies as Exxon and Arco. The city administers a complicated patchwork of agreements with thousands of different operators and owners of these wells, who range from the state to individual property owners to about a dozen larger companies, such as Mobil and Chevron.

There are about 300 other wells on dry land owned by the city, for which the city receives some type of royalty. The biggest concentration of these wells, some of which tap into smaller oil fields, flank Signal Hill. Pumps also operate in a fenced lot in Recreation Park, along Long Beach Marina and near Long Beach Municipal Airport.

Dwayne (Bud) Eatmon, a supervisor in the city oil properties department, oversees the complex operations. Every day, Eatmon makes his rounds of the city’s holdings, driving up and down desolate piers where metal arms pump up and down without stop, pushing oil through an underground pipe network that resembles spaghetti.

Some days, Eatmon heads out to the city’s four drilling islands. Built in the 1960s, the islands’ rigs are camouflaged with siding and palm trees to resemble high-rise condominiums.

Eatmon’s family moved from Oklahoma to Long Beach during the oil boom days, and he has been around long enough not to notice the sour smell of petroleum that hangs over the harbor. He talks about oil as if it were a living creature.

“If you don’t clear the well,” he said, “the oil begins to talk to you. It bubbles and comes to see you.”

Eatmon is one of several city and industry officials who predict that the price surge will not last: “The market is a yo-yo. I’ve been around long enough to see it go up and down many times. I don’t get excited any more.”

Another skeptical old-timer in the department is Grover Cleveland (Slim) Chapman, who said much of the fun has been taken out of the industry with the decline of wildcatting. When asked whether the current upswing will last, Chapman grinned and said he is looking forward to retiring and doing some fly-fishing.

Councilman Jeffrey Kellogg can also be counted among the pessimists. “The industry is dying,” said Kellogg, who recalled playing Little League baseball in a Signal Hill field surrounded by so many old wooden derricks that it resembled a “pincushion.”

About the only one of those derricks left, Kellogg said, is a decorative base in front of the Oil Patch Liquor Store. Kellogg’s family drilling business closed in January.

Environmentalists have expressed concern, however, that the Persian Gulf crisis will lead to renewed attacks on regulations barring offshore drilling.

“Oil companies are going to try and use this to open up new exploration and drilling off the coast again,” said Marshall Blesofsky, environmental co-chairman of Long Beach Area Citizens Involved.

Oilman Dan Elliott agreed.

Elliott, an independent producer whose company has about 16 wells in the Long Beach area, said that because of the high price of oil, he wants to drill a well in an unexplored portion of East Long Beach.

There is plenty more oil under this city, Elliott said, but community opposition may prevent him from getting at it--just as it forced him last year to pull down a rig that had been standing for years.

“We got a problem with people who don’t want drilling,” he said. “But we can’t go out to the Mojave Desert and look for oil. People are going to have to decide if it’s more important to them to have drilling or to have their sons overseas to protect oil there.”

Times staff writer Chris Woodyard contributed to this story.

LONG BEACH CITY OIL REVENUES

Listed below are the approximate oil revenues to city and state from oil fields in Long Beach. The city can use its share of the money from the “tidelands,” where it produces the oil as trustee for the state, only for its Harbor Fund.

Money generated from wells not in the tidelands, on upland that the city has an interest in or owns, flows into the city’s general fund.

In millions of dollars

Tidelands

Year City State 1940 $ 1 -- 1945 13 -- 1950 23 -- 1955 24 -- 1960 4 -- 1965 20 $ 20.5 1970 8.5 18.5 1975 11.5 82 1980 8 392 1985 5 318 1989 1 100

Non-Tidelands Wells

Year City 1980-81 $ 9.7 81-82 10.8 82-83 10.7 83-84 14.8 84-85 9.7 85-86 7.9 86-87 4.3 87-88 6.8 88-89 3.9 89-90 5