Land Is New Black Gold for Oil Firms

The oil company man stands on a rise over this city named for its tar-rich soil, a far cry in his handsome suit from the oil-soaked adventurers who first pumped crude here more than a century ago.

Wielding a cell phone instead of a pickax, Dennis Chapman is a prospector of a different sort. His gaze is fixed beyond the massive pumps lumbering atop Brea’s lakes of oil, on a cluster of men in hard hats working to mine his company’s newest resource--real estate.

“These fields just aren’t producing like they used to. Not here, not anywhere in Southern California,” Chapman says of the tapestry of oil pipes and pumps woven across the hills before him, the frames of new houses rising in between. “The life of the fields is sort of reaching the end of the road.”

As property manager of Unocal Land and Development Co., Chapman is at the forefront of a quiet transformation of oil lands that is changing the face of Brea and other cities where crude was once king.

With the surface of oil fields more valuable today than what’s underneath, and drilling an increasingly uncomfortable fit with urban sprawl, oil giants are pulling out pumps and shutting down wells by the thousands across Los Angeles and Orange counties. As fast as they can get permits, they are building houses and shopping centers in their place.

In the past 10 years, fewer than 500 oil wells have been drilled in Los Angeles, Riverside, Orange and San Bernardino counties; more than 5,700 have been capped and abandoned over the same period. Last year, Chevron USA sold off the last of its more than 2,000 acres of oil fields in Southern California to developers. Shell, Unocal and other oil giants are on their way out.

“This is the final development of the Los Angeles Basin, and the final chapter in the story of oil in these parts,” said historian Kevin Starr, librarian of the state of California. “This is basically the last land still to be developed, and from the perspective of that dreary march toward filling in the basin, its time has come.”

Little Opposition

The oil companies’ exit from these lands is bringing a slow close to the uneasy coexistence between petroleum and people that began with the first oil wells drilled in California.

It is altering the shapes and sizes of cities, as local governments annex land to cope with development ahead. It is straining municipal finances in cities that had relied on oil tax revenues--replacing those sure money generators with the unproven promise that more homes and shopping centers can bring new jobs and people to aging regions.

And the surge of building on former oil fields is filling in the last open space in many communities nearly without opposition, despite requiring million-dollar cleanups of oil-saturated land.

“I watched them build the golf course on this oil field. I watched them change the contours of the hill and put up houses on it,” said William Ellis, 71, a former aerospace engineer who has lived in a house at the edge of a Fullerton oil field for 35 years. “You come to Southern California, and you get used to the idea that someone is always going to find another use for the same land.”

The oil industry’s turn as developers began in some parts of Southern California as long as 20 years ago, when petroleum prices first began to sink. By 1991, the tens of thousands of oil pumps that once lined the shores of Huntington Beach and Long Beach had dwindled to just above 300, and more than 800 acres of former oil company-owned land in those cities had sprouted thousands of tract homes.

Now, with the oil giants eager to pull out the last of their drilling operations, the building boom is accelerating: From La Mirada to Signal Hill, from Fullerton to Huntington Beach, wells are coming out and homes are going in.

In cities like Brea, Yorba Linda and La Habra, sitting on top of what were once some of California’s richest oil reserves, the building has been particularly explosive. More than 3,000 acres of former oil fields have been approved for development in north Orange County in the past year alone.

More than 5,400 homes are planned on former oil fields in Huntington Beach. More than 10% of land in the former oil company city of Signal Hill is slated for houses and stores by the year 2000.

Although coastal development proposals have clashed with concerns over natural resources such as wetlands, inland building is proceeding with little opposition.

Pinehurst, a development of upscale homes along a Fullerton ridge still studded with oil wells, is a petroleum company’s modern gusher. Recently sold by Unocal to a developer, the land features new homes winding around a golf course that is owned by the oil company.

“I’m surprised at how quiet the pumps are; they’re just sort of a silent part of the landscape,” said Jay Hutchison, 47, a businessman who was putting next to one. “It seems like these old oil fields make pretty good courses. That and old garbage dumps. It’s sort of the California way.”

In nearby Brea, where oil derricks once reached into the sky, construction crews are hammering at homes on old oil fields. Developers are cutting new roads like Shopping Center Way.

Last year, the city annexed the steep hillsides of Olinda Heights, where more than 3,000 oil workers lived in the industry’s heyday. In October, city officials approved building 662 homes on the 284-acre site. Of the 400 oil pumps on the land until two years ago, all but 49 are gone, replaced by land sifted and cleaned of oil residue.

Towns Built on Oil

Brea’s neighbors are hurrying to follow its example. In November, the Yorba Linda City Council approved a Shell Oil Co. plan to build 2,100 homes on 843 acres of hillside. In La Habra, city officials agreed in January to permit 700 homes on 371 acres Chevron sold last year.

And in Fullerton, after more than 12 years of debate, Unocal last year began building hundreds of homes on 400 acres in the East Coyote Hills. The first part to be completed, a golf course that snakes around oil wells painted deep green to match the color of the hillside, opened last spring.

Brea and cities like it were built on oil. Seventy years ago or so they were boom towns, with workers living in tiny frame houses pierced by the noise of the oil wells pumping through the night.

“You’d work out on the hills drilling wells all night. You’d kill rattlesnakes sometimes. Sometimes we made friends with the wild dogs up there,” said Siebolt Dykstra, 73, who worked as a “roughneck,” or oil driller, in Orange County.

A drive down the Southern California coast in the 1960s still meant passing a forest of oil pumps and offshore rigs. Gradually, environmentalist pressures forced oil companies to yank many of the biggest pumps off the coasts, though offshore rigs today pump more oil than ever.

It wasn’t until the early 1980s, with oil reserves in California dropping, a glut on the world market sinking petroleum prices and the value of land skyrocketing, that oil companies decided it was time to clear the wells out of their biggest holdings in the Los Angeles Basin.

Responding to pressure from environmentalists and local governments worried about the safety of building on or near capped wells, California lawmakers sought to regulate development.

Under a series of laws and regulations passed in 1986, cities and developers are required to report proposed development within 1,000 feet of an oil well, and to either maintain the well or abandon it in accordance with modern standards, designed to ensure that neither oil nor gas leaks in significant quantities.

In part because of those regulations, which force oil companies to spend millions of dollars a year cleaning and grading oil-stained soil and capping old wells, it costs more than twice as much to produce a barrel of crude oil in Southern California as in the Middle East.

Even in other states, it is about 20% cheaper to produce a barrel of crude oil as in the Los Angeles region, said Richard Baker of the state Department of Conservation’s Division of Oil and Gas.

The result for oil companies is dwindling returns--and a dwindling presence. Of every 10 oil industry workers employed in Southern California in 1980, eight have been laid off since, according to the American Petroleum Institute, a trade group.

“Any time you’re in a [region] with millions of people and you’re trying to run oil fields, it’s going to be tough,” Baker said. Urban planners and city officials applaud the building, saying it can help revitalize older communities otherwise losing out to rapid development in newer areas. They cite hoped-for sales tax revenues from shopping centers and other commercial developments on former oil fields.

“It actually offers some hope to those areas that these lands are opening up for development at this stage, that there are opportunities in older cities beyond redevelopment,” said Mark Baldassare, professor of urban and regional planning at UC Irvine. “It’s exciting that new land is all of a sudden becoming available.

“It’s not like seeing orange groves go. Nobody’s lamenting the disappearance of oil fields.”

In cities that depended more heavily on revenue from oil production, the consequences of big oil’s exit are darker.

In Huntington Beach, which taxes oil companies operating within city limits for every barrel produced, revenues from that tax dropped almost $1 million between 1982 and 1995. Since 1992, city revenues from an assessed tax on mineral rights have dropped $357,000.

Fullerton’s oil tax revenues slid from $93,000 in 1986 to about $25,000 last year. In Yorba Linda such revenues are off by more than half since 1986.

The transformation of oil fields to housing has for the most part met only local opposition. Neighborhood environmental groups have lobbied successfully for the creation of preserves for gnatcatchers and other species. And residents in some communities have questioned the safety of placing houses close to remaining oil wells.

Advances in Cleanup

Aside from coastal areas, where the survival of natural resources such as wetlands is at stake, no county or statewide environmental group has taken a position opposing building on former oil fields.

Environmentalists say that except for former fertilizer sites and other areas where crude oil was refined, leaving toxic residues, oil fields are generally reusable.

“Cleanup of old oil wells has gotten so advanced that the critical issue is no longer in most cases whether it can be cleaned up, but just making sure that it is,” said Cliff Gladstone, president of the Los Angeles-based Coalition for Clean Air, a nonprofit environmental group.

That leaves the carpenters to hammer new homes into place, the land movers to shovel grimy soil out of former oil fields, and the tractors to clean the dirt relatively undisturbed.

“This is still the frontier in some ways,” said Ellis of Fullerton. “They have taken the orange groves out. They took the strawberry fields out, so where are they going to build? Why, the oil fields, of course. It’s not bad, it’s just what you come to expect living here.”