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11th-Hour State Bill Opens SoCal Oil Field Redrilling

Amidst the malaise of a two-month-old budget impasse as the California legislature ended its regular session during the Labor Day weekend, a bill was passed under the radar allowing the City of Long Beach and the state to renegotiate a deal with locally based Occidental Petroleum Corp. (Oxy) to redrill the 76-year-old Wilmington oilfield near the Port of Long Beach. The bill needs the governor's action by the end of September.

It caught residents and environmental organizations off guard, according to a report in Tuesday's Los Angeles Times, which quoted an Oxy spokesperson as saying the company will need a much larger share of the potential revenues than allowed in its existing deal with the city and state, which gives only 5% of the revenues to the oil company.

But with $100-plus/bbl oil prices, local officials and industry experts estimate there could be as much as $1 billion in new revenues for the city, state and oil company by applying modern exploration and production technology in the Wilmington field. The field was discovered in 1932 and is considered one of the largest oilfields in the Lower 48 states with an overall production during its life exceeding 2.5 billion bbl of crude.

Earlier this year, newfound interest in the various oil/gas fields in California were reported as oil was then headed for $150/bbl, sparking a new industry strata -- urban drilling.

Prior to the run-up in global oil prices, industry geologists have estimated that it might not be profitable to try to pump out the remaining supplies at Wilmington.

Long Beach Mayor Bob Foster, the former president of Southern California Edison Co., who strongly opposed a now-abandoned liquefied natural gas terminal proposal at his city's port, led the lobbying effort in Sacramento in the waning hours of the state legislative session to get the measure passed. It was sponsored by an outgoing Long Beach member of the state Assembly. The bill still needs to be signed by Gov. Arnold Schwarzenegger, who is currently consumed by the impasse over the state budget.

Even if the bill is signed, the Times report indicated that local activists and the Sierra Club are likely to oppose any efforts to step up drilling in the area that is surrounded by residential and commercial areas on the periphery of the adjacent Long Beach-Los Angeles Harbors. Collectively they constitute the nation's largest port. Two of the state's largest refineries and several smaller ones are located immediate area.

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