The Derrick Next Door: Suburb Explores a Crude Solution to Its Budget Woes

[question everything]

APRIL 29, 2009

The Derrick Next Door: Suburb Explores a Crude Solution to Its Budget Woes
Whittier, Calif., Hopes to Strike Oil in a Field Chevron Forsook; View From Honolulu Terrace

By NICHOLAS CASEY
WSJ

WHITTIER, Calif. -- The five biggest car dealerships here went belly up in the space of a year. The Mervyns department store was liquidated. And the city is so strapped for cash it has pulled the plug on its Fourth of July fireworks. But now this Los Angeles suburb thinks it has found the answer to its troubles: It's going to drill, baby, drill. A Texas A&M University-trained geologist has come here to dig test oil wells, an environmental review has been launched and city officials are tallying up how much money could be in it for Whittier.

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Indeed, a hundred years ago, the landscape here was dotted with oil derricks. Wells gushed out into pipelines, and fortunes were made. In 1993, Chevron Corp. gave up the ghost and turned the field over to the city. "We go for big oil fields," a Chevron spokesman says, and Whittier just "wasn't economical." Whittier, for its part, saw its legacy in President Richard M. Nixon -- who attended college here when he couldn't afford Harvard -- and the city was glad to be rid of the pumps. But then last year, as tax revenues plunged and oil crept up toward $150 a barrel, Bob Henderson, the town's mayor, had a revelation.

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The epiphany has been bittersweet, and has led this town, founded a century ago by the Society of Friends, otherwise known as Quakers, to do a bit of soul-searching about its own oily past. Some locals distrust slick promises about easy money. "It's noisy, smelly. The guys who work there don't have such great language," says Donna Hollander of Whittier's Honolulu Terrace. The view from her living room is nothing like the shores of Waikiki. There are still some producing oil wells in the neighborhood, too close for comfort, she says. Five doors down from one of those wells, Mary Hanson says, "It's like being next to a volcano. You never know when it is going to erupt." Her husband, Chuck, agrees, but admits Whittier simply "needs money." A retired entomologist, Mr. Hanson, 86 years old, worked in the oil business for two years in the 1950s, but didn't like it much. He left after Chevron had him work on a project killing insects with a product derived from oil. "It just suffocates them," he says.

Just where oil is lurking in modern-day Whittier is anyone's guess. Candace Holley, who runs the archives at local Whittier Museum off Philadelphia Street, boasts a 15-foot stucco diorama of Whittier from about 1900. Tiny homesteads stand in the shadows of mighty miniature derricks. Pointing toward the dusty back corner of the diorama -- around Newlin Avenue and Beverly Boulevard -- she states plainly: "I know there was oil there." Ms. Holley has brought documents. Exhibit A: a driller's map dated 1959. In accompanying notes, a geologist identified as W.J. Hunter boasted of a rock formation from the Miocene Epoch that gleamed with boulders of "tourmaline-actinolite-quartz plutonites."

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Mike McCaskey is a geologist with closely held Matrix Oil Corp., up the California coast, in Santa Barbara. His company, now working with Whittier, specializes in setting up "town lots" -- the art of pulling petroleum straight out of the nooks wedged between people's houses. A thousand feet below Whittier, against a fault and under many sandstone layers, Mr. McCaskey believes, there could be "10 million to 20 million barrels of recoverable oil." Since the California oil booms of the 19th century, the Los Angeles basin has pumped out the better part of a trillion barrels of oil, he says. And there's plenty left. Los Angeles's famed La Brea Tar Pits still bubble on Wilshire Boulevard -- the black goop oozing onto the grass at the adjacent county art museum. Oil is being extracted from the seabed at the Port of Long Beach.

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http://online.wsj.com/article/SB124096173407165939.html (subscription)

Printed in The Wall Street Journal, page A1

[Arctic Dave]

1. Sounds like pie in the sky talk to me.

Ten million barrels may sound like a lot but not when factor in all the cost safely extract it. Even if you can lease a little bitty drilling rig, it is still pretty spendy. Factor in OPEC wanting cut production to drive up price, why would a bank loan money to another oil company when there is sag in demand.

[question everything]

2. When we first moved to SoCal and I was expecting Hollywood glitz

I was surprised to see so many derricks close to the coast.