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Energy & Resources
Urban oil drilling
ANWR gets through Senate

Urban oil drilling

In early April, oil prices hit $57 per barrel. At prices that high, fields that were once deemed “uneconomic” and abandoned are becoming more enticing, including in some unexpected places — such as the heart of a city. Smaller, independent oil companies are working in urban environments — Los Angeles and Long Beach, Calif., and Houston, Texas, for example — and producing, in some cases, thousands of barrels of oil a day, despite the unique challenges of the urban environment.

To gain the city of Long Beach’s approval to develop a large oil field beneath it, oil producers had to create a special “facility” for production — four manmade islands in Long Beach Harbor that were designed to look like resorts rather than oil rigs. Photo courtesy of Occidental Petroleum Corporation.

Independent companies have more freedom to take the time and effort involved in producing oil in such a challenging environment, and the oil in these fields is a more important asset for smaller companies, says Andy Lazzaretto with the city of Santa Fe Springs, Calif., in Los Angeles County. While oil has been pumped in California since 1865 and the Los Angeles basin remains productive, few major oil companies remain there. “Why drill in L.A. when you could drill in Saudi Arabia?” Lazzaretto says.

But for Hal Washburn and Randy Breitenbach, founders of BreitBurn Energy, the timing was right in 1988 to develop the old oil fields in Los Angeles: Oil prices were low, and the major companies were leaving the basin. They thought they could revitalize the fields using new technologies, such as subsurface imaging and mapping programs that had recently become available on personal computers, and directional drilling. The fledgling company bought a couple of existing wells in fields in affluent neighborhoods in Los Angeles, including the Beverly Hills field. Over the years, BreitBurn has accrued 10 properties in nine different fields in Los Angeles, producing about 4,000 barrels per day from the L.A. basin.

Operating in these areas is “a lot different” than producing oil in the middle of nowhere, says Dennis Graue, reservoir engineering manager for BreitBurn. “It’s very demanding, very rigorous and we have to be extremely conscious of every little thing we do,” he says. “But for us, it’s a way of life.” Many requirements exist for oil operations in the city, and maintaining the relationship between the neighbors and the company is a balancing act.

For example, in the Beverly Hills field, drilling rigs and wells can’t look like what they are, Graue says. “We operate 40 to 50 wells in the field but you can’t see or hear” any part of the operation. All of the wells are enclosed in a building designed to eliminate noise and emissions, and to match the décor of the neighborhood. “Many of our neighbors don’t even know that they’re living on an active oil field,” Graue says.

The same holds true in the port city of Long Beach on the Wilmington oil field, the fourth largest oil field in the continental United States, first discovered in 1932. After the citizens of Long Beach voted to make oil production illegal in 1956, engineers developed a plan the city would allow: By the time production started in 1965, four human-made islands in Long Beach Harbor had been created where all the production facilities would be located.

The islands look like a resort, with palm trees, waterfalls, sculptures and what look like high-rise condominiums that contain the drilling rigs. “Oil production and treatment operations are thoroughly disguised, camouflaged, soundproofed or placed underground,” says Bill McFarland, human resources manager of Occidental Petroleum Corporation’s operations at Long Beach. Of the wells drilled into the oil field, 300 are inactive, 700 are producing 32,000 barrels of oil and 9 million cubic feet of gas per day, and 400 are injecting water back into the reservoir.

Another challenge facing urban oil developers is the ever-rising cost of property and the fact that oil fields are “pretty much the last open land to develop in Southern California,” says Richard Baker, deputy director for the Southern California region of the California Division of Oil, Gas and Geothermal Resources. Land around the Brea oil field, for example, which first began producing oil in 1880, was sold a few years ago and developed into expensive housing lots that surround the still-operable wells, Graue says. The East Coyote field in L.A. has been developed into a golf course, and BreitBurn still produces oil there.

In Santa Fe Springs in L.A. County, BreitBurn has been both consolidating oil operations and developing the land for housing and industry, Graue says. The oil field beneath the city has been in continuous operation since the 1920s, and many of the wells look like traditional oil wells, unlike those in Beverly Hills, he says. In some development areas, those wells are being moved underground and out of the way for any buildings that will go in. As development encroaches on traditional oil fields, “it’s interesting to watch how the companies adapt,” says Lazzaretto, who has been working with BreitBurn on the redevelopment plans.

In other oil-producing parts of the country, such as Louisiana, the interface between oil production and urban land use doesn’t seem to be an issue, says Bob Sprehe of the Louisiana Department of Natural Resources. Drilling is either offshore or in more rural areas, he says.

In Texas, where the majority of oil production is in the vast open western lands, small producer Ballard Exploration recently started exploring wells in urban areas of Houston that formerly produced oil but had been abandoned since the 1930s, according to a March 2 article in the New York Times. The article said that current oil prices were “luring wildcatters to urban areas written off until recently as uneconomical by the energy industry.”

But since the New York Times article was published, Ballard has “pulled out,” says Wes Johnson, spokesman for the Houston Department of Public Works and Engineering. With so many stringent requirements before a company can even begin to drill in an urban area, such ventures are probably not worth investors’ time and money, Johnson says.

Megan Sever

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ANWR gets through Senate

On March 16, the Senate set the stage for opening the Alaska National Wildlife Refuge (ANWR) for oil exploration and drilling, after accepting the Bush administration’s proposed budget that relies on revenues from lease sales by 2007 from the contested region. The administration and others say that the oil there is necessary in a time of high oil prices and increased dependence on foreign oil imports, but environmentalists question the value of going into what they call the last pristine wilderness in the United States for an uncertain quantity of oil.

While the U.S. Geological Survey (USGS) plans to revise its economic valuation of oil from ANWR this spring, based on oil prices and new drilling technologies, more data would be necessary to update the current assessment, which stands between 6 and 16 billion barrels. “The biggest issue,” says David Houseknecht of USGS, is that data from the only well ever drilled in ANWR 20 years ago is proprietary and therefore unavailable, and the question remains as to what a modern 3-D seismic survey could find.

“One of the wild cards right now,” Houseknecht says, “is what will happen to exploration as permafrost continues to deteriorate” in the entire North Slope. Permafrost is necessary for companies to build roads and other infrastructure for drilling, so its disappearance due to warming climate may actually increase pressure on ANWR, he says — which is smaller and more accessible than the nearby National Petroleum Reserve-Alaska, and therefore faster to explore.

Naomi Lubick

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