An oil rig pumps oil at one of Signal Hill Petroleum’s seven drill sites seen during a public tour of the oil company’s operations conducted by the City in June 2013.
Staff Writer
The Signal Hill City Council this week granted Signal Hill Petroleum (SHP) permission to drill for oil at seven sites in the city for the next two and a half years, in which time the City plans to complete an extensive update to its oil code.
The Council voted unanimously (5-0) to extend the oil company’s conditional-use permit (CUP), which covers all seven of its drill sites, locations where the City has allowed the company to drill new oil wells. The permit had been scheduled to expire on Dec. 31, according to city staff.
City officials note that a majority (80 percent) of SHP’s 347 oil wells are located outside of the seven drill sites and were tapped prior to the City adopting an oil code in 1990, around the time when SHP acquired most oil production in the city from Arco, Shell and Texaco.
Provisions of the oil code include prohibiting drill sites in residential zones and requiring that the drill sites have landscaping and be enclosed with a chain-link fence or solid wall, among other requirements.
The drill sites, which now have a total of 69 oil wells, were consolidated under one CUP in 1998, and only six new oil wells have been added since the City first adopted the oil code, according to city staff.
Though SHP has sought a long-term extension of its CUP that would allow drilling for multiple years, the Council has only granted short-term extensions for the past two years as staff continues to work on completing a comprehensive update to the City’s oil code.
By permitting new oil wells only within drill sites, it was anticipated that oil wells outside of drill sites would become “obsolete and abandoned over time,” eventually freeing up land for development. However, city staff notes that has not been the case.
In 2012, SHP conducted a state-of-the-art geophysical survey to image and map subsurface geology in the field. Given advances in the technology, SHP reported that the life of the oil field was likely “longer than originally estimated,” which back in 1990 was only 25 years, city staff said.
When it was discovered that there might be more life left in the oil field than originally anticipated, the City embarked on an extensive update to its oil code.
City staff has since worked with SHP to collect and analyze data while preparing comprehensive reports on water quality and oil-field operations in addition to conducting public tours of SHP’s seven drill sites.
While water and petroleum technical reports are complete, the City is still working on an environmental analysis, according to city staff.
Additionally, procedural changes implemented by the State Division of Oil, Gas and Geothermal Resources (DOGGR) for oil-well abandonment and re-abandonment prompted the oil-code update as well.
In 2010, the DOGGR terminated its methane-leak testing of wells and its development review, ending a 22-year-old program and leaving cities and developers to complete the process on their own with requirements that they hire third-party petroleum geologists.
Another reason the City is updating its oil code is to establish a replacement for redevelopment, which the State eliminated to fix a budget deficit and was the City’s main tool for providing subsidies to developers for cleaning up abandoned oil wells on vacant land prior to new development.
City staff notes that SHP, which has interests as a developer and an oil operator, has indicated that the minimum size for drill sites as required in the code (200 feet by 200 feet) is “larger than needed.”
SHP has indicated that “a smaller footprint” that could be “expanded occasionally to accommodate routine servicing equipment would be more suitable for everyday operations” while increasing the chance for new development, according to city staff.
Colleen Doan, the City’s associate planner, said in a presentation to the Council that city staff and SHP are working together on a “new model” for future development and oil operations.
“It’s time to develop a new model for the future,” she said. “We need to figure out what the future funding tools will be for development in the city and what would be the role of Signal Hill Petroleum as oil producer and as a developer and how would the City and Signal Hill Petroleum work together on the extension and/or creation of a long-term regulatory permit.”
A city staff report notes that, from the City’s perspective, drill sites are “large and difficult to integrate efficiently into new development, adding that, “more importantly, the number of wells citywide has not been reduced to the extent envisioned.”
In addition, city staff notes that, while the public has expressed concerns about hydraulic fracturing, also known as “fracking,” a controversial oil-extraction procedure that involves using highly pressurized water, sand and chemicals to break through shale rock, SHP has never used the process and is not permitted to by DOGGR.
“Water injection has been safely used by SHP for many years in the Signal Hill oil field,” the staff report states. “Fracking, on the other hand, has never been used by SHP in the local field but has been a topic of controversy in the media.”
Sean McDaniel, vice president of production and operations for SHP, said a long-term permit extension would allow the company to “better plan for the future” while working with the City to provide a “comprehensive plan that would promote growth and revenue and still protect our energy resources.”
He noted that SHP has made landscape improvements, including new fences and painting, to drill sites in recent months, adding that further investments in facilities allows the company to “operate more efficiently under the greatest possible safety for the public and the environment.”
McDaniel added that SHP next year is planning to modify its gas-turbine power plant at Drill Site No. 2 that he said provides gas-vapor recovery for 20 independent producers in addition to SHP, connecting to 64 oil wells and 47 tank farms. He said the system provides a local supply of natural gas to the Long Beach area.
According to city staff, SHP contributes approximately $620,000 annually to the City’s General Fund in business-franchise tax, oil-well permits and oil-barrel taxes.
Meanwhile, it was brought to the Council’s attention that the owner of the Town Center North shopping center on Willow Street that includes a 99 Cents Only store near Drill Site No. 3 is involved in a property ownership dispute with SHP.
Alma D. Barnes, property owner of the shopping center, sent a letter to the City, indicating that SHP has denied access to a 30-foot-wide parcel of land that she claims is owned by Willow LLC, of which Barnes is a representative.
She told the Council that SHP and 2H Construction, which utilizes adjacent property for a trucking yard, have tracked mud onto a parking lot and have “adversely affected” Willow LLC’s property, violating a condition of city code.
City Attorney David Aleshire, however, said the case might be that SHP has surface rights to the land, allowing the company to restrict access, regardless of who actually owns the property. He added that required conditions have nothing to do with determining land ownership.
City staff said that, even though the City is not required to resolve land-ownership disputes, the property owner, SHP and 2H Construction are scheduled to meet with city officials in an effort to resolve the issue on Dec. 18.
The next Signal Hill Council meeting is scheduled for 7pm on Tuesday, Dec. 16 at the Council Chamber.
