Sean Belk
Staff Writer–
There was a time when oil was king of the hill.
It started in 1921 at a well famously known as Alamitos No. 1, located at the corner of Temple Avenue and Hill Street in Signal Hill.
Royal Dutch Shell Oil Company had broken through the ground, producing the first “gusher” that made way for one of the most productive oil fields in the world.
The well, which today is memorialized by a plaque, a bronze statue and the name of a nearby park, is recognized as the first major discovery of oil in Southern California that triggered a drilling frenzy that lasted for decades.
At 9:30pm on June 23, black crude erupted 114 feet into the air from the site, an event that took the oil industry by surprise, according to historical records. Two days later, on June 25 the well was completed at a depth of more than 3,000 feet. The well flowed with 590 barrels of oil per day, eventually producing 700,000 barrels of oil.
Before the well was found, oil companies had been skeptical about the hill’s potential.
Union Oil Company began drilling in Signal Hill as early as 1916 at the corner of Wardlow Road and Atlantic Avenue but stopped after the well failed to produce any oil.
The persistence of Shell Oil Company led to the influx of oil speculators, who came from far and wide in search of “black gold.”
The oil boom, which was documented in a novel titled Oil! written by award-winning writer Upton Sinclair, attracted all sorts of people to town.
Shell had acquired about 25 percent of the field before the hill’s acreage became flooded with speculators, and the hill was soon split up among about 130 owners, according to historical records. Those who had owned land before oil was discovered ditched plans for more homes and instead signed contracts for 25 to 30 percent of the mineral rights.
Signal Hill reached its peak production in 1923 with 69 million barrels of oil.
The following year, the City of Signal Hill was born with a population of about 1,800 residents, just surpassing the number of wooden oil derricks that dotted the land at the time.
Residents agreed in 1924 to incorporate as a city, mainly as a way to avoid a per-barrel oil tax sought by the surrounding City of Long Beach, which had a plan to annex the Los Angeles County territory for its revenue potential.
It was no surprise that the footprint of the 2.2-square-mile city nearly mirrored the limits of the oil field. The City of Signal Hill’s own oil-barrel tax produced just enough revenue for the City to build roads, utilities and city buildings.
And it was then that a long-held relationship between the City and oil companies began.
“Signal Hill the oil field and Signal Hill the city have grown up together,” said Dave Slater, chief operating officer and executive vice president of Signal Hill Petroleum, which later took over most oil operations on the hill. “It’s a unique circumstance, and it’s the foundation of a unique relationship that our company has with the community.”
In the early days, however, oil operations were much different from what they are today.
Homeowners, who also owned the mineral rights in and around their properties, were the beneficiaries of the first wells, but the messy operations drove them from their houses.
Black crude, which sprouted up from gusher wells, was caught and collected in dirt berms on the surface of the ground. Oil and large stones often rained down onto homes, making them uninhabitable. In many cases, an insurance company would pay to knock down a house, only to buy the land and put in more oil wells.
For instance, just one year after oil was discovered in Signal Hill, about 7,500 barrels of oil had fallen on an entire city block, bounded by Willow Street, Cherry Avenue, Burnett Street and Walnut Street, according to historical records.
The City, however, was able to survive on oil-barrel taxes for decades.
At the time, Signal Hill was considered the richest city per capita in the country, valued at about $34 million. Besides oil operations, however, the only establishments that existed in town were a few gas stations, a nightclub and restaurants. Also, the oil crowd brought with it illegal activites such as gambling and prostitution.
Major oil fires were also a problem. The largest one was a fire that erupted at the Hancock Oil Refinery in 1958. The fire was so large that it required resources from multiple jurisdictions, including the United States Air Force, to put it out.
The fire prompted the City to join the Los Angeles County Fire Protection District, contracting out fire services to the County, according to city officials. A new fire station was built and transitioned from its previous fire-engine house at the Civic Center on Hill Street that today serves as the municipal library, city officials said.
By the 1960s, however, Signal Hill’s forest of oil derricks began thinning as the oil field began to play out. A headline in a 1965 article in the then Long Beach Independent-Press Telegram read “Signal Hill is losing its ‘5 o’clock shadow.”
In the 1970s, however, the price of oil skyrocketed, and the three major oil operators on the hill— Shell, Texaco and Arco— banded together and made a corporate decision to reinvest in the oil field to create a water flood system.
The system, which became a multi-million dollar investment, involves injecting water into the ground and pumping it back up to skim oil off the top. The field was also divided into three operating units. New technologies made oil drilling a much cleaner and safer process, and old oil derricks were replaced with more advanced rigs.
After oil prices dropped back down again, the oil companies took steps to divest themselves from the field.
By 1984, the Long Beach/Signal Hill oil field had produced more than 1 billion barrels of oil, making it a “super giant” oil field. That same year, a new oil operator came into existence— Signal Hill Petroleum.
Jerry Barto and his son Craig Barto, who both had started a previous oil-operation enterprise after dealing in commercial and residential real estate, founded the company, which went on to purchase all oil holdings from Shell, Texaco and Arco.
At first, Signal Hill Petroleum, which had experience closing down oil wells in Orange County, was in a real estate-development mode, but that changed when the company realized there was still life left in the oil field.
Shell, which at the time was repositioning itself in Southern California and focused more on a major acquisition of oil interests in the San Joaquin Valley, had deep-tested a well in Signal Hill’s central unit but was not successful.
Signal Hill Petroleum, on the other hand, was able to utilize new technology to analyze the reservoir more closely, using 3D seismic-imaging technology.
“To the good fortune of Signal Hill Petroleum, [Shell] just didn’t drill in the right spot,” said Slater, who has worked for Signal Hill Petroleum for 15 years.
The oil operator, however, also continued as an active real-estate company in Signal Hill and was involved in most of the commercial and residential development in the city.
“I like to say ‘oil is our major, and real estate is our minor,'” Slater said.
The first project was a Price Club (now a Costco) on property that was formerly owned by Signal Hill Petroleum, which sold the land to the City, that then used funds from the Signal Hill Redevelopment Agency (RDA) to close down oil wells and help subsidize the construction of a shopping center.
Signal Hill Petroleum was involved in the development of several other shopping centers in Signal Hill that have attracted retailers, from grocery stores and fast-food chains to two Home Depots, generating major retail sales-tax revenue for the City.
The City now relies mostly on retail-sales tax rather than oil-barrel taxes like in the past.
With a tax of about 99 cents per barrel, Signal Hill to this day collects just under $1 million a year in oil-barrel taxes, considered one of the highest oil-extraction taxes for a city in California, said current City Manager Ken Farfsing.
As oil production has subsided while the size of the City’s government has grown to meet the needs of a rising population, oil taxes cover a much smaller portion of the City budget than it first did, he explained.
Today, out of the City’s budget, oil-barrel taxes account for just 5 percent of city revenue. “That wouldn’t be enough to fund one of our smallest departments,” Farfsing said.
While Signal Hill Petroleum continued oil operations by re-drilling wells and searching for new ones, the company has proven how a community and oil operators can coexist in harmony, Slater said.
“We built into the design the criteria for all of the development projects that we were involved in, and that’s one thing we were very successful at,” Slater said. “People believe the only option is that you’ve got to get rid of all the oil wells before you can do anything else, but we blew that paradigm up a long time ago.”
Meeting strict regional and state requirements for oil-well remediation, the company helped to develop retail storefronts that today can be seen strategically placed around oil rigs. Also, oil drilling near residential neighborhoods is limited between the hours of 7am and 7pm, he said.
Slater said the company has partnered with the City over the years to work together on a “community vision,” which is a far cry from the early days of the oil boom.
“We’re really proud of our relationship with the City, city management and the community,” Slater said. “Everybody has worked really hard to build a successful partnership over the last decades, and we’re looking forward to good things for our company and the City of Signal Hill for decades to come.”
