Council Has Plan to Keep Oil Revenues in the Black

The three most profitable workers at City Hall look like giant metal grasshoppers, but together they bring in hundreds of thousands of dollars to the city treasury.

Those “workers” are three brown-painted oil rigs on the Civic Center grounds. For more than two decades, the city-owned wells have diligently and profitably pumped black gold. Their output has paid for the Civic Center grounds many times over, and even more income from the city-owned oil is expected in the future.

Little wonder then that the City Council last week quickly passed a measure to solve a natural gas disposal problem for the wells and to keep the oil flowing.

The oil wells currently generate about $300,000 a year in revenue. The rigs are expected to triple production in the next few years--bringing in close to $1 million annually. That money goes directly to the city’s general fund.

Few other communities in the nation have such a treasure trove on their City Hall front lawns. And the Huntington Beach City Council made it clear last week that it is grateful for its bonanza and wants to protect it.

The little-noticed item about the wells on the City Council agenda last week underscored the good luck this coastal community had in buying its Civic Center site in 1969. The city purchased 11.7 acres at Yorktown and Main for just $360,000. The land had oil under it, and the wells have been pumping black gold for the city treasury for more than two decades. City officials said the oil income has come virtually problem-free for most of those years, but in recent months a dilemma has surfaced about how to dispose of the natural gas byproduct from the wells.

“If the gas cannot be disposed of, the oil wells must be shut down, resulting in the loss of considerable revenues,” Fire Chief Michael Dolder said in a memo to the council.

And that is something the city can ill afford.

Officials say the city is facing a $3.8-million shortfall this fiscal year, primarily because of the recession. Losing the oil revenue would only make matters worse.

In his memo, Dolder noted that the three wells currently produce about 60 barrels of oil a day. The wells also generate 61,000 standard cubic feet of natural gas every day as a byproduct. Heretofore, Dolder noted, the city has disposed of the natural gas by selling it to Chevron, usually netting about $20,000 a year.

But Chevron is phasing out its Huntington Beach operations, and Dolder said the company will not accept the natural gas after July 1. No other commercial oil dealer so far has been found to buy the gas, Dolder added.

Dolder said the city will try to find a buyer for the natural gas, but he urged the council to appropriate $60,000 to buy and install a “burner device” that could dispose of the gas if no buyer is found. The council accepted the recommendation, and approved the money.

“It’s not going to be a (burning flare) tiki torch,” said Mark Bodenbender, the Fire Department’s petroleum expert and oil field inspector. “It would be in a small structure, all internal, and you’d never see a flame. You’d walk by it and never realize what it was.”

Bodenbender said the device also would meet local and regional air quality standards and controls. If the gas burner is installed, he said, the city will try to use the heat it generates for hot water or powering air conditioners.

The city, however, hopes it can yet find a buyer for its natural gas before July 1.

The city-owned wells are something of a relic. From 1920, when oil was discovered here, until the late 1950s, oil wells flourished all over the city. At one time, there were about 4,000 oil wells in the city; today, there are about 600 active wells.

Declining oil prices in the 1950s and 1960s, coupled with a demand for land for housing, prompted big landowners to shut down oil wells and build residential tracts in their place.

But oil prices boomed in the late 1970s, and there remains a strong economic incentive to tap the oil pool under Huntington Beach. Bodenbender said there is still a vast pool of oil underneath the city left to be tapped.

“Even with all the years of drilling, only about 20% of Huntington Beach’s oil has been taken out so far,” Bodenbender said. “With the new technology, we expect another 20% to be able to be taken out in the next few years.”

“The city expects its production to rise from about 60 barrels a day to close to 150 barrels a day,” Bodenbender said. Unless oil prices decline sharply, that will translate into about $1 million a year.

“The city got a great bargain when it got this land,” Bodenbender said. “We’re going to be in the oil business here for many more years.”